Are Your Timekeeping Practices Legal?

by Nancy Owen, PHR

Did you know that the Fair Labor Standards Act (FLSA) requires you to keep track of your non-exempt employee’s hours – regardless of whether you pay them on a salary or time-clock1hourly basis and regardless of whether or not they ever work overtime? The law requires that you keep accurate records of hours worked, wages paid, and other conditions of employment for each of your employees who do not meet the legal requirements to be classified as “exempt”. The laws states that time records should show the date and time a worker’s workweek starts, the number of hours they work each day, and the total hours worked during the workweek.

Employers who fail to maintain proper timekeeping records are violating the FLSA which can lead to criminal or civil sanctions. Improper record keeping will also lead to insufficient evidence should the employer be involved in a wage and hour dispute. Inaccurate or non-existent records force the courts to award damages based on the employees’ statements regarding their time worked. If an employee claims they have been improperly classified as exempt, the employer may owe up to three years of overtime pay. Employers will always fare better if they can produce proper time records.

The law does not dictate how this must be completed, it simply requires that it be done. That actual method is up to the employer, but here are a few ways that organizations keep track of their employee’s time:

Time Cards or Time Sheets – These are a written form of tracking worked hours manually. The employee must fill out this written record on a daily basis and submit them to their supervisors at the end of the work week. Time sheets can be detailed or simple, as long as they include the basics: day of the week/date, the time work begins and the time work ends each day and the total hours for each day.

Time Clocks – Though not required by law, this is one of the more popular forms of keeping track of employees’ time. It is more costly and tends to be used by larger organizations that can absorb the expense without too much heartache. The employees either “punch in” via computer or on the time clock at the entrance of the office or production floor. Employees punch in and out for lunches and breaks and out at the end of the day. The information can be electronically sent to payroll or punch cards are collected and submitted for processing.

Electronically – Employers can also track time electronically by using anything from a simple application on employees’ smart phones to more sophisticated company-wide systems. There are many forms available with a wide range of features and costs. Since the timekeeping records are all captured electronically, there is no need for employees to submit weekly records themselves.

time-clock3The law is also flexible on the form your records take. Though no particular form is prescribed for employer records, the law does require that records include certain identifying information about the employee, as well as accurate data about the hours worked and the wages earned. Below is a list of the basic records that an employer must keep up to date on each non-exempt employee:

1.  Employee’s full name and social security number.
2.  Address, including zip code.
3.  Birth date, if younger than 19.
4.  Sex and occupation.
5.  Time and day of week when employee’s workweek begins.
6.  Hours worked each day.
7.  Total hours worked each workweek.
8.  Basis on which employee’s wages are paid (e.g., “$9 per hour”, “$440 a week”, “piecework”)
9.  Regular hourly pay rate.
10.  Total daily or weekly straight-time earnings.
11.  Total overtime earnings for the workweek.
12.  All additions to or deductions from the employee’s wages.
13.  Total wages paid each pay period.
14.  Date of payment and the pay period covered by the payment.

What do you need to do for Exempt Salaried Employees? The reason for tracking non-exempt employees is because they must be paid a minimum wage, as well as time and one-half of their regular rate of pay for all hours worked over 40 in a defined workweek. On the other hand, exempt employees are paid on a salary basis and based on other qualifying reasons are exempt from overtime wages even if they work more than the designated 40 hours in a defined work week.

So do you track exempt employee time? Some employers do and it is legal. But before you decide which route is best for you here are a few advantages and disadvantages of doing so:

The Disadvantages:

  • There can be the perception that the exempt employee is not truly functioning with discretion and independence that is needed to qualify them as an exempt employee if they have to track their time.
  • This can create a morale issue among a class of employees who find this demeaning.
  • If the employee actually is working a lot of hours, the record you are creating may someday be used against you if you have misclassified the employee.

The Advantages:

  • You can track and compare productivity, efficiency, and attendance among exempt employees.
  • Just as having a record can be used against you, it can also be used to your benefit to show how many hours the employee is working, in case there is ever an issue that you have classified him incorrectly. Employees who claim they have been misclassified as exempt also tend to claim they worked many hours of overtime; if you have records showing that was not the case, you will be at an advantage.
  • It assists in tracking accrual and use of paid leave, and in tracking Family and Medical Leave Act (FMLA) usage.

time-clock2How long do you have to retain these time records?  For payroll records, collective bargaining agreements, sales and purchase records — at least 3 years.  For employee wage computations such as time cards, piece work tickets, wage rate tables, work and time schedules, records of additions or deduction wages — at least 2 years.

Two items that will assist in lowering your organization’s risk:

  1. It is a good idea to have a time keeping policy in your handbook. Best practice would suggest including an objective or purpose, what is included in time worked and in time not worked as well as a clear description of what is required for the employee to keep accurate records of time worked (for example, if your meal breaks are unpaid, you would include “clock in and out at the beginning and end of all meal breaks”). It is also good to remind your non-exempt employees that they are never allowed to work “off the clock”. Be sure to tell them anything else that may be required regarding when and to whom time records are to be submitted.
  2. It is the employer’s responsibility to maintain accurate time and break records for all non-exempt employees. Even if you have the records, there is always the risk that an employee may deny their accuracy, thinking that they actually worked far longer and skipped some of their breaks. You can reduce that risk by requiring your non-exempt employees to verify the accuracy of their records. Have your employees sign off on their hours each week.

So remember: Track your non-exempt employee’s time.  Consider the advantages and disadvantages of tracking exempt employee’s time. Retain those records for the amount of time described by law. In this way you will be doing all you can to comply with the law and to lower the risk to your organization.

If you have questions, please contact our HR team by emailing us at HRhelpline@eastcoastrm.com.

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