United States: Establishing And Reviewing A Nonexempt Employee Timekeeping System

Federal and state laws require that employers pay employees for all hours worked. The Fair Labor Standards Act (FLSA) defines "hours worked" broadly to include (a) all time during which an employee is required to be on duty, on the employer's premises, or at a prescribed workplace; and (b) all time during which an employee is suffered or permitted to work, whether or not the employee is required to do so. When employees file claims for unpaid time worked, the burden is on the employer to show that all work hours have been properly recorded and paid. One way to establish a record of an employee's time worked each shift is to use contemporaneous time records that show the precise time that the employee started and stopped work for the shift, and took extended duty-free breaks from work, like meal breaks. Companies may want to adopt the important policies and practices below.

Timekeeping Systems: 

• Adopt a system that contemporaneously records the time worked by employees each shift.
• Record the time that the employee starts work and stops work for each shift each day.
• Record the time when an employee stops work to take a duty-free meal break, as well as the time when the employee resumes work after the end of the meal break.
• Record the employee's total number of hours worked each workday and his or her total number of hours worked each workweek.
• Ensure that the company's timekeeping system records are more accurate than other contemporaneous electronic records that the company regularly maintains, including:
  
  
  • employee e-mails;
  • logs of employee access to company facilities; and
  • employee log in times on company computers.
• If an organization uses a rounding system, it can ensure that the system doesn't favor the company by deducting more employee time, on average, over a period of time.
  
  
  • Check the rounding interval the company is using (e.g., 5 minutes, 6 minutes, 15 minutes). Consider switching to the smallest interval practicable.
  • Ensure that the company provides a grace period for late clock-ins that is equal to the rounding interval for early clock-ins. For example, if employees can clock in five minutes early, are they also able to clock in five minutes late without adverse consequences?
  • Calendar regular audits to ensure that the rounding system averages out over a period of time and that the practice doesn't tend to systematically favor the company.
  • Provide a way to track complaints from employees regarding rounding practices.
  • Document the company's rounding practices, including the business reasons for using the rounding practice and the efforts taken to ensure that the rounding practice doesn't systematically favor the company.
• Document the rationale for using systems that don't record actual time worked, like auto-deduction systems for meal breaks and systems that record employees' assigned schedules.

Timekeeping Policies:

• Implement policies that expressly:
  
  
  • require employees to accurately record all time worked;
  • require employees to accurately record all duty-free time (e.g., when they clock out for meal breaks and clock in from meal breaks);
  • prohibit off-the-clock work;
  • prohibit working overtime hours without the express permission of management;
  • require employees to complete attestation forms to confirm that, for each payroll period, the employee accurately recorded all time worked, didn't work off the clock, accurately recorded duty-free meal breaks, and received timely and compliant meal and rest breaks as required by applicable law;
  • require employees to promptly report to human resources any questions or concerns regarding the accuracy of their records of their time worked and duty-free meal breaks taken;
  • prohibit employees from falsifying time records; and
  • prohibit any retaliation against any employee who raises questions or concerns about the employer's timekeeping policy.
• Consider whether certain activities qualify as compensable time, including the following:
  
  
  • setting up tools or supplies;
  • traveling;
  • training;
  • attending meetings;
  • waiting for assignments;
  • taking meal and rest breaks;
  • onboarding;
  • going through security checks;
  • logging in and out of company systems;
  • using company-issued mobile technology;
    
    
    • checking e-mails and voicemails
    • responding to e-mails and voicemails
  • remaining on-call;
  • donning and doffing required uniforms or personal protective equipment; and
  • completing required paperwork.
• Review policies and communications with employees to ensure that employees understand they are allowed to clock in early or clock out late solely for their convenience and shouldn't perform any work outside of their normal schedule without manager approval.

Timekeeping Practices:

• Ensure that all employees receive the company's timekeeping policies and provide their signed acknowledgement of receipt of the policies.
• Train employees on timekeeping policies, including the attestation process and how to report concerns. 
• Train managers on the timekeeping essentials:
  
  
  • Always follow the company's timekeeping policies.
  • Never encourage or require off-the-clock work.
  • Require accurate reporting of time worked.
  • Provide the opportunity to take meal and rest breaks as required by applicable law.
  • Report all employee complaints about timekeeping to human resources or other designated management personnel.
  • Never retaliate against employees for reporting concerns about timekeeping practices.
• Develop and implement an effective complaint procedure through which employees can report timekeeping concerns, and ensure that the procedure includes designated personnel trained to conduct proper investigations, a comprehensive investigation process, remedial measures to correct violations, and a prohibition on retaliation.
• Develop a time-editing procedure that ensures accuracy, requires employee approval of edits, and provides adequate documentation.
• Develop a performance management process for managers and employees who violate timekeeping policies.
• Develop a regular auditing process to review time records and related edits.
• Consider adding a class action waiver in arbitration agreements.
• Designate and train personnel who will handle questions and complaints from employees about the timekeeping system.

Timekeeping Data:

• Learn the reporting or "flagging" capabilities of the company's timekeeping system.
• Create a list of categories of information that a company may want to audit for potential risks, including meal break compliance, early punch-ins, and excessive overtime.
• Designate and train personnel to serve as the point of contact for receiving and escalating concerns identified by the timekeeping system.
• Calendar regular meetings to discuss compliance issues flagged by the timekeeping system.
• Establish how long the company will maintain its timekeeping data, and assign personnel responsible for ensuring its retention and backup.

A version of this checklist was previously published by Bloomberg BNA.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.