Federal wage-and-hour laws require you to have a reliable system to accurately keep track of employees’ hours and pay. Casual timekeeping systems can easily trigger a back-wage lawsuit.

Companies subject to the Fair Labor Standards Act (FLSA) must keep records for both nonexempt and exempt employees. The regulations don’t say which types of recordkeeping or timekeeping methods you should use, but they do specify the necessary data you need to maintain on all employees.

What's new

Wage-and-hour lawsuits are growing exponentially, according to the fourth Annual Workplace Class Action Litigation Report from national law firm Seyfarth Shaw LLP. The report showed that class actions under the FLSA dominated the legal scene. Another notable trend is the increase in back-wage suits on behalf of higher-income employees, such as those in financial services.

In both types of suits, the key is the time an employee puts in outside regular work hours. Companies should be particularly careful about hourly employees working extra time while off the clock. Even five or 10 minutes worked voluntarily off the clock can add up to a large verdict when multiplied out over a period of years.

Advice: Make it clear to all hourly employees that you prohibit any work over breaks, or before and after shifts.

In one recent lawsuit, a company allowed administrative staff to track their own hours on time sheets. The company also allowed the staff to trade off some hours for comp time. The company had only handwritten time records to rely on when disputes arose over how much time employees had worked, how much the employer owed them and whether some of the comp time should have been overtime. In such cases, the employer loses because it’s the employer’s responsibility to keep proper records.

How to comply 

Your recordkeeping requirements for exempt employees differ from those for nonexempt workers.

Exempt employees: Because you don’t pay exempt employees by the hour, you shouldn’t track the exact number of hours they work on a daily basis. Doing so could make it seem to a wage-hour auditor that you are indeed basing pay on the number of hours worked, which might raise the question of whether the employee is truly exempt.

However, just because a worker is exempt doesn’t mean your company is freed from keeping records on him. With exempt workers, you should keep records that describe the workweek and the wages paid for that period. Specifically, you should keep the following records concerning exempt staff:

• Personal information, including name, home address, occupation, gender, birth date for workers under age 19 and the person’s workplace identification number.
• Time of day and day of the week when the workweek begins.
• Total wages paid each pay period.
• Date of payment and the pay period covered by each payment.

Your records for exempt employees can also track days employees use for sick, vacation and personal leave.

Nonexempt employees: With nonexempt, hourly employees, you need to collect more details. Specifically, records must include:

• Personal information, including name, home address, occupation, gender, birth date for workers under age 19 and the person’s workplace identification number.
• Time of day and day of the week when the workweek begins.
• Regular hourly pay rate for any week when overtime is due. Include an explanation of the way wages are paid—such as per hour, per day, per week, per commission, etc.—plus the amount and nature of each payment that’s excluded from the regular rate.
• Hours worked each day and week.
• Total daily or weekly straight-time earnings (not counting overtime).
• Total overtime earnings for the week.
• Total additions to or deductions from the employee’s wages each pay period, plus an explanation of the nature and dates of those additions or deductions.
• Total wages paid each pay period.
• Date of payment and pay period.

If employees are working under a special certificate that allows you to pay below minimum wage—such as a “training” wage for students—your records must note that fact, too.

Click here to learn more about how to solve the complex records-management problems employers face.