There are many ways to run afoul of the federal Fair Labor Standards Act (FLSA). One of the easiest pitfalls to avoid, however, is failure to follow the law’s timekeeping and record-keeping requirements. The FLSA sets relatively straightforward and easy-to-follow timekeeping and record-keeping requirements. Adhering to these requirements is a “must” for anyone managing payroll.
Employers are required to keep accurate records of non-exempt employees’ hours worked. For most non-exempt employees, daily records should show the time the employee arrived for work, the time the employee left for a lunch or other unpaid break; the time the employee returned from the lunch or break; the time the employee left for the day; and the total hours worked for the day.
No particular format or method of timekeeping is required. The U.S. Department of Labor, Wage and Hour Division issued helpful instructions in Fact Sheet #21: Recordkeeping Requirements under the Fair Labor Standards Act (FLSA). According to the Department of Labor (DOL), “[e] mployers may use any timekeeping method they choose.” The DOL suggests that employer may “use a time clock, have a timekeeper keep track of employees’ work hours, or tell their workers to write their own times on the records.” The DOL’s list is not exhaustive; the DOL advises that “[a]ny timekeeping plan is acceptable as long as it is complete and accurate.”
Thus, depending on the employer’s situation and resources, an employer can choose the timekeeping method that makes the most sense. The important thing is that time be kept contemporaneously with the work being performed, to ensure the accuracy and integrity of the records. Automated time clocks or other electronic systems are nice (as long as they are accurate) but are not required. Having employees sign in and out on paper is also perfectly acceptable.
If an employer chooses to have non-exempt employees record their time by hand, the employer should instruct the employees to enter the exact time that they came and went. In other words, instead of just writing in at 8 and out at 5 every day, minus one hour for lunch, the employee should write the exact time, e.g. “in” at 7:58 and “out” at 5:04.
Note that if the employee is only supposed to work from 8 to 5, the employee does not have to be paid for time outside the scheduled workday, as long as the employee does not actually perform any work outside the schedule. So in the example above, if the employee is only supposed to work from 8 to 5, but she spends the first few minutes of her day getting coffee and the last few minutes checking her personal email, she can simply be paid from 8 to 5 (minus lunch). But it is important to record the actual time the employee arrived and left, again, to ensure that the records are accurate as required by the law.
The FLSA also permits employers to round employees’ time to the nearest quarter-hour. (Employers may round to a smaller increment, e.g. 6 minutes or 10 minutes, if they choose.) But it is important that the rounding practice be designed to “average out” over time. In other words, an employer cannot always round down. The employer should choose the midpoint of the rounding window and adopt a consistent practice of rounding down where the time recorded is below the midpoint and rounding up where the time is above it. In other words, if the employer adopts a 15-minute window, minutes 1-7 can be rounded down but minutes 8-15 must be rounded up.
Finally, note that employers should not require exempt employees to record their hours worked each day. One of the requirements to maintain exempt status is that the employee be paid on a fixed salary basis. Deductions from the salary may only be made in limited situations, and must almost always be made in full-day increments. Requiring exempt employees to record hours worked can call the exemption into question and can destroy it if employees are actually paid by the hour instead of on a salary basis.
The FLSA requires that employers keep records of hours worked, total earnings, total overtime and additions to/ deductions from wages for at least two years from the date of the last entry on the time record. Records may be kept in hard copy or electronic form, as long as they are accessible within 72 hours of a request.
In addition to the time records, note that the FLSA also requires employers to maintain the following information for both non-exempt and exempt employees covered under the executive, administrative and professional exemptions: full name; home address; date of birth if under age 19; sex; occupation in which employed; time of day and day of week in which workweek begins; regular hourly rate for non-exempt employees, and salary for exempt employees.
There is no time like the present to ensure that your timekeeping and record-keeping practices comply with the FLSA.