Time Clock Rounding Rules

Rounding is permitted under federal law and has become a serious liability in several states. If your timekeeping system captures the exact minute an employee clocks in and then pays them to the nearest quarter hour, that gap is worth understanding before someone else calculates it for you.

For a product-oriented explanation of payroll rounding guidance, see this guide from Monitask.

Federal timekeeping principles are set out in the hours-worked regulations in 29 CFR Part 785.

General information, not legal advice. This is an actively litigated area and the position differs sharply by state. Take advice from employment counsel.

The federal rule

The rule lives in 29 CFR 785.48(b): employers may round time entries to the nearest 5 minutes, one-tenth of an hour (6 minutes), or quarter hour (15 minutes), provided the rounding does not, over a period of time, fail to compensate employees for all the time they have actually worked.

That remains the federal position in 2026, and the practice is lawful federally provided it does not result in employees being underpaid over time. Rounding that consistently benefits the employer — punches routinely rounded down without corresponding rounds up — may violate the FLSA.

The "seven-minute rule" is not a separate law. It is a nickname for how quarter-hour rounding works in practice: punch in one to seven minutes after the quarter hour and the time rounds down; punch in at eight minutes or later and it rounds up.

Neutrality is the whole test. Rounding only in the employer's favour — rounding start times up and end times down, or rounding only late arrivals — is not neutral and is not defensible.

California has effectively ended it

The federal rule is not the operative rule in every state, and California is the sharpest departure.

Under California law, rounding is allowed only if the policy is neutral on its face and as applied, and does not over time fail to pay employees for hours actually worked. Two limits control: an employer may never round the punches that bracket a meal period, and the California Supreme Court is currently deciding whether neutral rounding survives at all where the employer's system already captures every minute worked.

The case is Camp v. Home Depot U.S.A., Inc. Home Depot's system captured every minute its employees worked, and its payroll system rounded total daily worktime to the nearest quarter hour. Over four and a half years the named plaintiff lost roughly 7.83 hours of pay. Home Depot argued that across the workforce as a whole employees gained more rounded minutes than they lost. The Court of Appeal reversed summary judgment: where the employer can capture, and has captured, the exact number of minutes worked, it must pay for all of those minutes.

Camp dismantled the aggregate-neutrality defence — the argument that a policy is acceptable if it averages out across the workforce. The court held that an individual employee who loses wages relative to their actual recorded minutes has been underpaid regardless of what happened to their colleagues.

Where it stands now. The California Supreme Court granted review, and the case remains pending as of 2026, so Camp is citable only for its persuasive value. Until the Court rules, See's Candy remains the governing authority. A second case, Woodworth v. Loma Linda University Medical Center, extended Camp's reasoning to six-minute rounding and is being held pending the Camp decision.

Meal periods are settled, not pending. Rounding of meal period punches in California is barred by Donohue, and that remains the case whatever happens to Camp.

Other states

Illinois generally limits rounding to 10-minute increments. Washington disfavours rounding and usually requires exact time. Most other states default to the federal rule — but any state can investigate a pattern of always-down rounding.

Washington has adopted the same FLSA-based rounding rule as California and, like California, has not adopted a de minimis rule for wage and hour underpayment — which matters, because the de minimis argument is the fallback employers reach for when the amounts are small.

The argument for stopping entirely

Rounding exists for a reason that has disappeared.

It was designed for mechanical time clocks and manual payroll, where computing exact minutes across a workforce was genuinely laborious. That constraint no longer exists. Modern systems capture exact time and compute exact pay without additional effort.

What remains is the risk. The defence of a rounding policy requires demonstrating neutrality — which means retaining the raw punch data, running the analysis, and being able to show it. Employers have lost substantial cases over spreadsheets showing rounding that went down 52% of the time rather than 50%.

And the amounts are not small in aggregate. Seven unpaid minutes a day across 250 working days is roughly 29 hours a year per employee. Multiply by headcount, add overtime premiums where the hours would have crossed forty, add liquidated damages, add a class.

If your system can capture exact time, the case for rounding is administrative convenience that no longer exists, weighed against a liability that has grown.

If you are going to keep rounding

Then do it properly:

Round to the nearest increment, both directions. Never only down, never only at shift start.
Never round meal period punches. Barred in California and risky everywhere.
Never round in a way that affects the overtime threshold in the employer's favour.
Retain the raw punch data, not only the rounded totals. Without it you cannot demonstrate neutrality, and you have destroyed your own evidence.
Run the neutrality analysis at least annually, per employee and not only in aggregate. Aggregate neutrality is no longer a reliable defence in California and is weakening elsewhere.
Do not round at all in California, Washington, or Oregon, and check Illinois limits.
Document the policy in writing, and apply it consistently.

The uncomfortable check

Take one pay period. Compare each employee's exact recorded minutes against the hours you paid.

If any individual employee is down over that period, aggregate neutrality will not help you — and you have just done the calculation their attorney would have done.

Most employers who run it once decide the exercise is not worth repeating and switch to exact time. That is generally the right conclusion.