Time Rounding Mistake Leads to DOL Investigation, $600K Payout

Timekeeping failures create costly risks beyond payroll. A federal probe uncovered widespread overtime violations by a construction contractor, forcing the employer to pay nearly $600,000 in back wages and damages. Flawed time rounding and incomplete recordkeeping caused it.

This case warns HR that wage and hour compliance is a fundamental risk embedded in everyday business tasks.

Time rounding often gets ignored, but it directly affects your systems, managers and employee pay. When these aren’t aligned, it can get expensive.

Wage and Hour Enforcement: A $600K Error 

A federal investigation revealed systemic overtime violations tied to time rounding by a construction contractor in Florida.

The DOL found the contractor’s rounding consistently cut recorded hours, causing unpaid overtime. 

Investigators also discovered the contractor failed to maintain complete and accurate records of workers’ wages and hours. 

The result: The contractor had to pay $594,313 in back wages and damages to 419 workers. 

Time Rounding and the FLSA: What HR Needs to Know 

Understanding the legal framework around time rounding is critical for HR leaders managing compliance. While rounding can be a legitimate payroll practice, it has precise boundaries.

The Wage and Hour Division emphasizes that time rounding must be fair and balanced, not skewed to the employer’s advantage. 

“Some employers use a pay method referred to as rounding to produce even and balanced calculations of hours worked,” Orlando District Director Vilma Bell said. “While it can be a useful tool, it is the responsibility of all employers to ensure the use of rounding in their time systems is balanced and does not always round in the employer’s favor.” 

Bell also encourages workers and employers to reach out with questions about their rights and obligations under the law.

When Time Rounding Is Legal – and When It Crosses the Line

The Fair Labor Standards Act lets employers round work time to the nearest five, 10, or 15 minutes – but only if it’s fair. Over time, the rounding has to even out – sometimes up, sometimes down – so it doesn’t always favor the employer and shortchange workers.

If rounding consistently reduces recorded hours or unpaid overtime, it violates the FLSA. This kind of systematic underpayment triggers enforcement actions, especially when overtime is affected.

Recordkeeping Requirements

Accurate records are essential. Gaps increase legal risk and penalties during audits or investigations.

Rigorous FLSA recordkeeping is essential to demonstrate compliance — especially in situations where employers use time rounding.

For additional help, see the DOL’s fact sheet on time rounding practices.

Improving Time Tracking: HR’s Role in Compliance 

Improving time tracking and compliance requires a coordinated, strategic approach.

HR plays a pivotal role in identifying risks, aligning stakeholders and establishing controls that protect employees and the organization.

Start with a Timekeeping Audit

Regular audits of timekeeping systems and rounding methods help uncover inconsistencies and bias. Sampling across departments and pay periods can reveal hidden rounding patterns or recordkeeping gaps that expose the organization to risk.

Reduce Risk with More Precise Tracking

Evaluating current time tracking tools for accuracy and transparency can identify opportunities to minimize rounding reliance. More precise systems reduce errors, improve payroll accuracy and strengthen compliance defenses.

Align HR, Finance and Ops on Time Tracking

Collaborate with Finance and Operations to make sure all departments are on the same page. Shared responsibility supports early detection of discrepancies and promotes alignment on compliance priorities.

Track Overtime Trends in Your Reports

Track overtime trends in regular HR and financial reports to spot discrepancies between scheduled and paid hours. This insight sharpens budgeting accuracy and prevents surprise labor cost spikes.

Prioritize Making Time Accuracy a Control Point

Integrate timekeeping verification into routine internal audits to reinforce compliance efforts. Treat wage accuracy as a core control to catch violations early and prepare the organization for regulatory scrutiny.

Proactive Prep for DOL Investigations

Every DOL investigation is unique, but being prepared can make a huge difference, employment attorney Michael Elkins previously told HRMorning.

Having a well-documented internal audit and organized records ready before an on-site visit helps disarm investigators, Elkins said. Even if compliance gaps exist, demonstrating good-faith efforts to address issues may reduce penalties and smooth the process.

Next Steps: Strengthen Timekeeping and Limit Risk 

Don’t wait for an audit to expose weaknesses. Here’s how HR can close gaps now:

• Audit timekeeping practices for rounding bias
• Train managers and employees on time reporting policies
• Collaborate with Finance and Operations on systems and data
• Monitor overtime trends to manage labor costs
• Embed wage verification in internal audits