FLSA Records Time Bomb?

Many employers have a potential wage-hour liability without even knowing it, Employers often times are not aware of or misunderstand the rules on identifying and recording employee work time.

Employers are under the misconception that:  1) employees only have to be paid for time they are told to work; or 2) that employees can “volunteer” work; or 3) that work employees do “on their own” or “outside of policy” is not compensable; or 4) that employers don’t have to worry about time sheets or time cards once employees sign them.  None of this is true!

Employees subject to the federal Fair Labor Standards Act’s minimum wage or overtime requirements must be paid for all time their employer knows or has reason to know they have worked.  It isn’t enough, for example, just to tell employees that they are not supposed to work overtime, or that they have to get advance permission to do particular work; you generally must pay – even for work done without advance permission.

The FLSA requires employers to keep accurate records of all the time nonexempt employees work each day and each workweek.  Employees and government investigators can and often do claim that more work has been performed than the written record reflects, backing up the allegation by relying on such things as an employee’s own account of the facts, a former supervisor’s supporting recollections, computerized log-on, sign-in, or interviews with other employee’s, and so on.  Employee time-record signatures mean little or nothing in defending against these claims.

Your first step should be to find out exactly what employees are doing that has to be paid for under the FLSA.  Problem areas often include work done before or after a person’s shift “officially” starts or ends (such as “set up” work in restaurants); overlap time worked by the oncoming and off going employees during a shift-change; and time spent in activities relating to opening or closing an establishment (like pre-shift meetings, cleaning up, or reconciling tabs and cash accounts).

Other examples include time spent in going to a bank or to the post office; training time for new workers; some kinds of “on-call” time; time automatically deducted for meal periods when in truth the employee eats in a few minutes and then resumes working; meal periods during which the employee must listen to the day’s instructions and other work-related information; time an employee must spend waiting at the workplace to see whether there is a need for his or her services on a workday.

Problems also arise from management’s assumptions about how long it takes to do something.  For instance, housekeepers or office cleaners are paid based solely upon a fixed, per-room unit of minutes multiplied by how many rooms they cleaned; the theory is that cleaning a room “should” on average take that amount of time.  Employers must be aware how much actual time the housekeepers spend cleaning rooms even if the employees is slow, the Employer must pay either the number of room rates or the hours actually worked.

You must also develop an effective system for properly documenting time worked by nonexempt employees.  Employers are not required to use time clocks or to adopt any particular timekeeping method.  Instead, you may use any timekeeping method you like, so long as it is complete and accurate.

Employer’s must adopt, publish, and enforce clear rules requiring all nonexempt employees to record their work time promptly and accurately.  And it’s critically important for members of lower-level management, especially first-line supervisors, to understand these policies and to realize that enforcing them is one of their most-important duties.

Employers should have someone analyze time records frequently to see whether they seem to be accurate.  For instance, a wage-hour investigators watch for records that show repetitive starting or stopping times day-after-day, week-after-week; do they appear to mirror only scheduled or “expected” hours; are any fractions of hours ever recorded; are there recurring corrections, strike-outs, or white-outs; are there unexplained additions to or subtractions from employee work times; do the times and totals seem to be reasonable in light of employee work patterns, work loads, or unusual situations?

If your impression is that a set of time records does not appear to be accurate, you should quickly find out whether you are right.  If you are, you should promptly take (and document) the appropriate corrective action, such as re-emphasizing your rules and perhaps even disciplining employees or supervisors who have not been following or enforcing those rules.

The Bottom Line

Many industry employers who failed to take these issues seriously have been financially devastated later by the resulting liability, which can easily run into hundreds of thousands of dollars or even more.  Even if you think it won’t happen to you, do everything you can to defuse the bomb by auditing or getting specialized counsel to audit your payroll records now!

If you have any questions regarding the Fair Labor Standards Act, or a specific event that you need guidance on, HR-OneSource can provide help.  Please contact David L. Hansen, SPHR, CCP, hansend@hr-onesource.com or Jack Lipovac, SPHR, lipovacj@hr-onesource.com at (515) 221-1718.