by Nancy Owen, PHR
As Ben Franklin once stated, “Time is Money”. Entrepreneur Brian Tracy says, “Your greatest resource is your time.”
So how do you keep track of your employee’s time?
Keeping track of non-exempt employees’ time is not an option for employers – regardless of whether you pay them on a salary or hourly basis and regardless of whether or not they ever actually work overtime. Federal and state laws require employers to keep records of all hours worked, all wages paid, and other conditions of employment.
Certain records, such as those containing wage dates, hours worked and pay dates, must be kept for at least three years. Records on which wage computations are based should be retained for two years, such as time cards, wage rate tables and work time schedules. These records must be open for inspection by the Department of Labor’s Wage and Hour Division representatives in the event of an audit or a complaint. The records may be kept at the place of employment or in a central records office.
The law does not specify how an employer keeps track of an employee’s time, only that it must be done. Employers have a variety of options when it comes to the method used to keep track of time worked. Here are some of those options.
- Manually with a paper form: Many smaller employers still use paper forms, usually customized to their specifics. The information is written on the form by hand by the employee each day or week and then handed in to their supervisor for approval. This method of calculating time creates much more work for all parties involved, as the numbers will need to be manually entered into a payroll or HRIS system and the risk of human error is therefore much higher.
- On Line Portal: This method is widely used today. The employees go into a website and punch in and out through a computer. One disadvantage of this system is that supervisors have no way of verifying accuracy if employees miscalculate their hours worked.
- Time Clock: This is used quite often today. The cost to employers is less than other systems. Employees either use a pass code or a badge to punch into the time clock. This type of system has a high percentage of time fraud associated with it because employees can piggy back into the site behind other employees and it is easy for one employee to punch in or out for another employee.
- Mobile Devices: Many companies that have a large offsite workforce allow their employees to clock in and out using an app on their mobile device. These employees need to be trusted that they are where they say they are when using this method.
- Biometric Clocks: Biometric time clocks work by identifying employees based on their unique traits such as fingerprints or the iris. Biometric clocks cost more than the other methods, but they are still often the most cost-efficient option. The clocks work seamlessly with the employer’s time and attendance software, leaving little room for human error and minimal chances for missed punches which cost additional time to fix manually. The percentage of time theft is also very small which adds considerable savings for employers.
- Fixed Schedules: Many employees work on fixed schedules that seldom change. The employer may keep a record showing the exact schedule of daily and weekly hours worked and merely indicate that the worker did follow the schedule. When a worker is on a job for a longer or shorter period than the schedule shows, the employer must record the number of hours the worker actually worked on an exception basis.
Whichever method you choose, you will want to have a policy that prohibits falsification of time cards or time clocks. When an employee deliberately records time incorrectly, or punches in or out for another employee, most employers consider this type of action to be a terminable offense. If you are one of these employers, you must inform employees of this standard and enforce the rule across the board. If discipline for this offense is not enforced consistently, it may be used to support a discrimination claim.
Most employers do not require exempt workers to keep track of hours because it’s not required by the law. If you do not require exempt employees to keep a record of hours worked, make sure that there is no question about your employee’s status as exempt from overtime pay. If you have incorrectly classified an employee as exempt, but it is later determined that the employee was non-exempt, that employee might make a legal claim for overtime pay. If there are no records of the employee’s work hours, the employer will have great difficulty countering the employee’s claim as to the number of hours he or she worked. Time sheets for exempt employees should record sick days, floating holidays, vacation time, jury duty, bereavement, and other absences.
The risk to an employer for not keeping time records or for keeping incorrect time records can be high.
The Department of Labor (DOL) sees federal wage and hour claims pour in every day. They come from disgruntled employees, former employees and whistle-blowers. Bad payroll and timekeeping records lead many of these claims to be resolved in favor of the employee, costing employers thousands of dollars.
Regarding wage and hour violations, the stakes are getting higher. In several recent cases, the government has penalized company owners and officers for failing to pay overtime – imposing stiff fines and even imprisonment since wage and hour violations can also lead to personal liability.
In one case, the president of a Minnesota sheetrock company was sentenced to two years in jail and a potential fine of $3.3 million for intentionally underpaying employee overtime and union pension and benefit contributions.
In another recent case, the owners and officers of an Illinois security company were fined over $200,000.00 in back wages and liquidated damages for violating overtime and record keeping provisions.
Walt Disney will pay 16,339 employees back wages that total 3.8 million dollars. The DOL officials found that Disney violated employment law regarding minimum wage, overtime and timekeeping requirements.
Often federal and individual state labor laws are written with a clause that assumes employer guilt in the absence of adequate records. In other words, unless an employer has detailed enough records to prove that a violation did not occur, the employer will usually be found guilty of violating labor laws. To learn more about the timekeeping requirements of the federal Fair Labor Standard Act, read the DOL’s fact sheet about record keeping.
Please remember that in the event of a wage and hour claim, the burden of proof is on the employer to show there was no violation. Proper timekeeping practices and good recordkeeping could save employers thousands of dollars. So why take a chance? Make sure you have a fool proof method for your time keeping.
We have had a lot of questions recently about an employer’s ability to change an employee’s time card. Most of the time, the reason time cards are changed is to correct some type of error made by the employee when documenting hours worked.
Employers can modify a time card without an employee’s knowledge as long as the change is a legal one. Some legal reasons include:
- the employee forgot to punch in or out;
- the employee took paid vacation;
- the employee accidentally double-punched a time; or
- there was some type of glitch in the system and the time had to be manually added in later.
There are times when it would be illegal for a supervisor to modify an employee’s time card. Those instances would include:
- a supervisor reducing the hours on a time card as a form of punishment (including removing overtime hours worked); or
- clocking an employee out for a break or a lunch they did not take or during which they were not freed of all work responsibilities.
Legally, time cards must accurately reflect all hours actually worked. Any change to a time card that fails to do so would be illegal.
If you are an employer with questions, please contact our HR team by calling 724-864-8745.
Disclaimer: The information provided on this web site is for informational purposes only and not for the purpose of providing legal advice. Use of and access to this web site does not create an attorney-client relationship between East Coast Risk Management or our employment attorney and the user or browser.
