Timekeeping records: Know the rules for exempt & nonexempt staff

As recent rulings have shown, employers with casual timekeeping systems are much more likely to face lawsuits over unpaid wages than organizations with strict record-keeping rules.

While the Fair Labor Standards Act (FLSA) requires you to have a reliable system to accurately track employees’ hours and pay, the regulations don’t say which types of time­­keeping methods you should use—paper, time clock, etc.

Any timekeeping plan is acceptable, the rules say, “as long as it is complete and accurate.”

But the rules do specify the necessary data you need to maintain for both exempt and nonexempt workers.

Pay lawsuits on the rise

Wage-and-hour lawsuits have exploded in the past decade, led by class-action cases (see chart below).

In most cases, the key is the time that nonexempt employees are working outside their regular work hours. Even five or 10 minutes worked voluntarily off the clock can add up to a large verdict when multiplied by several employees over several years.

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

If you do discover employees working off the clock, use suspensions and other discipline—don’t dock their pay for those minutes or hours.

Records to keep for exempt employees

Record-keeping requirements for exempt employees differ from those for nonexempt workers.

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 might appear to a wage-hour auditor as if 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 any records. With exempt employees, 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 also can track the days employees use for sick, vacation and personal leave.

Records for nonexempts

With nonexempt, hourly employees, you need to collect more details, including:

• 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—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 weekly overtime earnings.
• 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 the 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.

Online resource: Record-keeping

To read the pertinent federal regulations on this issue (29 CFR 516, subparts A and B), go to the record-keeping section of the U.S. Department of Labor’s website.