As promised, today we give you and third and final installment of our three-part series addressing the new opinion letters issued by the U.S. Department of Labor on July 1, 2019. To read about the other letters issued by the DOL, check out this blog post and this blog post. The final opinion letter, FLSA2019-9, addresses permissible rounding practices for calculating the number of hours worked by an employee.
Scenario: A non-profit organization is subject to the Service Contract Act (“SCA”), which uses principles applied under the FLSA to determine hours worked. The organization utilizes payroll software to calculate wages based on employees’ recorded time entries. Specifically, the payroll software converts the amount of time an employee records in each work period into a numerical figure in decimal form extended out to six decimal points (e.g., 7 hours and 30 minutes converts to 7.50000 hours). The payroll software then totals the converted hours for each work period on each working day to calculate a numerical figure for daily hours (both of these figures are also extended to six decimal points). Next, the software rounds that number to two decimal points. If the third decimal is less than .005, the second decimal stays the same (e.g., 6.784999 hours worked rounds down to 6.78 hours). However, if the third decimal is .005 or greater, the second decimal rounds up by 0.01 (e.g., 6.865000 hours worked rounds up to 6.87 hours). Finally, daily pay is calculated by multiplying the rounded daily hours by the SCA prevailing wage.
DOL Opinion: The DOL concluded that this method of calculating hours worked complies with FLSA regulations, which acknowledge that it is common and acceptable for employers to round time in determining an employee’s hours worked, so long as doing so “will not result, over a period of time, in failure to compensate the employees properly for all the time they have actually worked.” 29 C.F.R. § 785.48(b). According to the DOL, this organization’s rounding practice is neutral on its face, and appears to average out so that it fully pays employees for all of the time that they actually work. Because this practice complies with the FLSA regulations, it was also found to be compliant under the SCA.
Tip for Employers: Employers subject to the FLSA and/or the SCA should be sure to review their practices for calculating the number of hours worked by their employees – especially if they rely upon payroll software to do so! Knowing precisely how that software system calculates hours worked will give you the peace of mind that your calculations comply with applicable FLSA regulations. (Not to mention, it will help you avoid unwanted employment disputes!)
These opinion letters are the latest guidance to be issued by a highly active Department of Labor. Keep your eyes peeled for additional guidance as the second half of 2019 gets underway! And thank you for following along with this three-part series!