The most fun you can have in a week with wage and hour compliance!!!

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ImperfectTommy / Edmond Meinfelder [CC BY 2.0], via Wikimedia Commons

What’s better than a three-part series on wage-and-hour compliance? (Other than an apple cider tour with Ned Flanders.)

Don’t answer that question!

Ok, here’s the thing. Most of you are on vacation this July 4th week and won’t read this post.

For the rest of you stuck in the office this week, well, I’m saving my good material for next week. For now, you’re stuck with recaps of three U.S. Department of Labor Wage and Hour Division Opinion Letters, which the DOL released yesterday.

Day 1: The Exciting World of Rounding Practices for Government Contractors

In some industries, particularly where time clocks are used, it makes sense to round employee time by recording the employees’ starting time and stopping time to the nearest 5 minutes, or to the nearest one-tenth or quarter of an hour. That’s legal; provided that, on average, you pay employees fully for all the time they actually work. Here is the proof.

And I’m pretty sure that was what Ratt was singing about. Just play the vinyl backward.

Where employers screw this up is by always rounding down. For example, when employers round to the nearest quarter of an hour, they can round employee time from 1 to 7 minutes down, without counting it as hours worked. However, the company must round employee time from 8 to 14 minutes up and count it as a quarter hour of work time. Otherwise, an employer may violate the FLSA minimum wage and overtime pay requirements.

Yesterday, the DOL explained this in FLSA2019-9, which addresses permissible rounding practices for calculating an employee’s hours worked in a particularly sexy unsexy situation.

It’s the equivalent of farting into your hand, picking your nose, and eating the booger.

FLSA2019-9 involves a situation in which a government contractor subject to the Service Contract Act (SCA) uses payroll software to record working hours in decimal form extended out to six digits (e.g., 7 hours and 30 minutes converts to 7.500000 hours).

(Now may be a good time to chug your coffee. Or consider injecting it. I won’t judge. I’m about to quote directly from the opinion letter. This is going to get more boring in 3…2…)

The payroll software then totals the converted hours (extended to six decimal points) for each work period on each working day to calculate a numerical figure for daily hours, which is also extended out 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); but if the third decimal is .005 or greater, the second decimal rounds up by 0.01 (e.g., 6.865000 hours worked in a work day rounds up to 6.87 hours). Finally, the software calculates daily pay by multiplying the rounded daily hours number by the SCA prevailing wage.

You with me so far? No? I don’t blame you. I’m punching myself in the face. So I’ll cut to the chase:

[T]his particular organization’s method of calculating hours worked complies with FLSA regulations and is therefore compliant under the SCA. Its rounding practice is neutral on its face. The practice also appears to average out so that it fully pays its employees for all of the time that they actually work. Accordingly, the organization’s rounding practice “will not result, over a period of time, in failure to compensate the employees properly for all the time they have actually worked.”

For those of you subject to the SCA who round and use payroll software to record working hours in decimal form extended out to six digits, well, Merry Christmas in July!

For you non-SCA time-rounders, hopefully, you learned something too.

And, for the rest of you who stuck it out this far, I’m sorry.

 

“Doing What’s Right – Not Just What’s Legal”