On top of making sure a pay policy is consistently applied throughout the entire company, Finance also often has the burden of making sure each and every employee understands the ins and out of that policy.
Otherwise, they could find themselves embattled in frivolous FLSA lawsuits. And as one recent court case shows, if employees feel like they’re being jilted, no amount of pay is too small to justify a lawsuit.
To the nearest quarter hour
Example: In Corbin v. Time Warner Entertainment-Advance/Newhouse Partnership, the company had a policy of rounding employees’ time stamps to the nearest quarter hour.
While the company consistently applied this policy, one employee had a major problem with the system.
His issue: Based on the rounding system, he was losing each and every pay period.
Because of rounding, the employee lost out on $15.02 – albeit over a period of more than a year.
That prompted a lawsuit claiming the company violated the FLSA because the employee was disadvantaged in the net calculations under the company’s time-rounding system.
Luckily, the court shot down the employees’ argument that demonstrating a net underpayment of $15.02 was enough to prove the company had violated FLSA.
The court said that:
“[m]andating that every employee must gain or break even” would “vitiate the purpose and effectiveness of using rounding as a timekeeping method.”
So what can employers take from this FLSA lawsuit?
If you rely on a timekeeping system that rounds employees’ time to the nearest 15 minutes (or smaller increments) – a system that’s perfectly OK under the FLSA – be sure employees are aware they may see slight pluses or minuses in their timesheets due to the rounding.