Home Depot Adopts New Policy on How It Pays Employees Following Lawsuit

The facade of The Home Depot store is seen in Evanston, Ill., on Feb. 17, 2005. (Tim Boyle/Getty Images)

Home Depot announced a new policy regarding how it calculates employee wages, doing away with its earlier practice of rounding off time spent by employees at work and instead choosing to calculate based on the “nearest minute” spent by workers.

“Our policy has been to round total shift time up or down to the nearest 15 minutes, which has been a common industry practice for many years,” Home Depot spokeswoman Sara Gorman told Business Insider. “As laws, technology, and workplace practices continue to evolve, we’re changing our practice nationwide effective January 16, 2023, to pay hourly associates to the nearest minute based on exact time punches.”

Timesheet rounding, or rounding up or down the time put in by employees, is a practice that is permitted under the Fair Labor Standards Act (FLSA).

Some industries, especially where time clocks are used, round up their employees’ starting and ending time to the nearest five minutes or to the nearest tenth or quarter of an hour.

This arrangement “presumably” averages out so that employees end up getting fully compensated for the actual time they spend at work, according to FLSA.

However, a rounding practice is only accepted if it is used in a manner that will not result in failure to compensate the employees for the time they have devoted to their work, the rule notes.

Compensation Lawsuit

Home Depot’s decision comes after it faced lawsuits from employees who criticized the company’s rounding practices. In one class action lawsuit, plaintiffs argued that Home Depot’s rounding practice had resulted in failure to pay wages.

In the trial court, Home Depot insisted that the rounding policy was neutral. The court agreed and observed that the system was used in a manner such that over a period of time, it will not result in failure to compensate employees properly for their work time.

The plaintiffs appealed the case and the Sixth District California Court of Appeal reversed the decision in October 2022 stating that “if an employer, as in this case, can capture and has captured the exact amount of time an employee has worked during a shift, the employer must pay the employee for ‘all the time’ worked.”

The appeals court also observed that there is a “complete absence of language” in California’s Labor Code or applicable wage order that allows for rounding off time that results in an underpayment of employees.

Home Depot argued that the rounding policy made it easier to generate “verifiable wage statements” and pay stubs that are “easier for employees to decipher.”

However, the court also dismissed this argument stating that “Home Depot cites no provision in California law that privileges arithmetic simplicity over paying employees for all time worked.”

Timesheet Rules

There are some common rules regarding the time tracking of hourly employees that all U.S. states are expected to adhere to.

Timesheet records must always clearly state the date and time when an employee starts and ends work together with the number of daily and weekly work hours.

An employer cannot force an employee to work off the clock. This is considered illegal. If an employee is subject to such requirements, they can file a lawsuit for unpaid wages or complain to the Department of Labor.

Hourly employees should be compensated for every hour they have put in at work. Though employers are allowed to alter a worker’s time card without the person’s knowledge, the business has to ensure that the employee is paid for all the hours worked.