New Jersey Issues Warning Against "Rounding" Practices; Clarifies Permissible Use of "Punch Window"

Many employers record their employees’ starting time and stopping time to the nearest five minutes, or to the nearest tenth or quarter of an hour. For more than 40 years, the U.S. Department of Labor has adhered to its stated enforcement policy that such a “rounding” practice is acceptable “provided that it is used in such a manner that it 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). The Department of Labor requires only that this arrangement “averages out” over time so that employees are fully compensated for all the time they actually work.

Recently, the Division of Wage and Hour Compliance at the New Jersey Department of Labor and Workforce Development has taken the position that it “does not accept the ‘rounding’ policy” of the U.S. Department of Labor for enforcement purposes under New Jersey law. The Division has taken the position that “if an employer does round off to an increment or a fraction of an hour, it must be to the benefit of the employee.”

While it has been reported that the Division’s position represents a change in its enforcement policy, the Division insists that “this has been the enforcement policy [of the Division] since the New Jersey Wage Payment Law was passed in 1965.”

In correspondence with our firm, a representative from the Division clarified that its real disagreement with the U.S. Department of Labor is not with the use of rounding as a general matter, but rather with respect to the period of time that should be considered when evaluating the impact of rounding on an employee. While the U.S. Department of Labor will assess the impact of rounding “over a period of time,” the Division will evaluate the impact of rounding on a week-to-week basis. Thus, if an employee’s time is rounded by seven minutes to the employee’s detriment on the first day of a workweek, the Division will not assert a violation of New Jersey law so long as the employee’s time during the remainder of that workweek is rounded by at least seven minutes to the employee’s benefit (thereby offsetting the negative rounding from the first day).

The Division also confirmed that the use of a “punch window” remains lawful in New Jersey. Under federal law, employees who punch in during a defined period of time prior to the start of their scheduled shift (or who punch out during a several-minute “window” following the end of their scheduled shift) do not need to be paid for the time spent “on the clock” during the punch window so long as they do not engage in any work during that time. In its correspondence to our firm, the Division confirmed as a matter of enforcement policy under New Jersey law that when employees punch in prior to their scheduled starting time (or after their scheduled ending time), the employer may correct the time to the scheduled time “provided the employee was not actually performing work that benefits the employer” during the punch window. The Division recommended that when an employer utilizes a punch window: (a) it should notify employees in writing that no employee will be paid for time punched prior to or after their scheduled work time without the proper authorization of management; and (b) the notice should be printed on the time card and posted at the time clock. Of course, employers who utilize a punch window should also ensure that employees do not perform any work activities before or after their scheduled shift.

This blog post was authored by Robert Pritchard.


Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.