NJDOL Changes Enforcement Policy: All Rounding Must Be in Employee's Favor

The New Jersey Department of Labor and Workforce Development (NJDOL) has changed its enforcement policy regarding the rounding of employees’ time for wage payment purposes. A recent letter from Theodore Easton, Chief of Enforcement for the NJDOL, confirmed that if a New Jersey employer rounds off any increment of time an employee has worked, it must now be done in the employee’s favor. The enforcement policy change has led state auditors to issue several wage payment violations resulting in substantial back-pay liability and penalties to employers found to be in violation of New Jersey Wage Payment Law, which requires employers to “pay employees for all time actually worked.” N.J.S.A. 34:11-4.2. In the absence of specific New Jersey regulation, the NJDOL previously deemed it acceptable for employers to comply with federal regulations under the Fair Labor Standards Act. These regulations permit an employer to “record the employees’ starting and stopping time to the nearest 5 minutes, or to the nearest one-tenth or quarter of an hour…provided 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. Many New Jersey employers currently round to the nearest quarter hour, i.e., seven minutes or less, the employee is not paid, eight minutes or more they are paid for the full 15 minutes. For example, if an employee ended work seven minutes before the end of his shift, his time would be rounded up. The employees would be credited for working those seven minutes and he would be paid accordingly. Conversely, if an employee left work seven minutes after the end of his shift, those minutes would be rounded down and he would not be paid for working those minutes. The previously acceptable practice allowed New Jersey employers to round off employees’ time so long as it was done even-handedly and monitoring practices were in place to prevent an employer from always rounding off time to its benefit. The practice of rounding down is now prohibited by the NJDOL change in enforcement policy. NJDOL credits advancements in technology for the policy change. It claims that new technology enables an employer to accurately track and pay for actual time worked to the minute. The agency acknowledges that “no law or regulation exists that specifies how the time records must be kept or that prevents an employer from making adjustments if the employer believes that the time records do not reflect the actual time worked by the employee.” However, in order to comply with New Jersey Wage Payment Law, the agency now requires that the rounding of any increment of an employee’s time worked, whether forward or backward, be done in the employee’s favor. While we are currently challenging the NJDOL’s failure to follow the New Jersey Administrative Procedure Act in implementing this new enforcement policy, we believe it is important for NJ employers who engage in rounding to review their practice and policy to avoid an expensive audit result. For more information, please contact James J. McGovern III. This alert is provided for educational and informational purposes only and is not intended and should not be construed as legal advice. It is recommended that readers not rely on this publication but that professional advice be sought for individual matters.