The DOL encourages employees to track their own working hours separately from any wage and hour records your organization keeps, and if you don’t have accurate records of your employees’ work time, their records will be used to calculate unpaid overtime. Find out what records you must keep and just how expensive poor recordkeeping can be.
Q: A recent audit of our wage and hour records showed that several of our managers were not keeping accurate records of work hours for nonexempt employees. Should we be concerned about these incomplete records? We are working on correcting the problem.
A: Yes. While many employers may not think of recordkeeping violations as being a big issue, without proper records, you cannot be sure you are paying for all time actually worked, including overtime. As a result, you leave your organization vulnerable both to employee discontent and expensive wage and hour claims. And in addition, you may be creating conditions that expose managers to personal legal liability.
Both federal and state wage and hour divisions take recordkeeping very seriously and are including penalties for recordkeeping violations when they find overtime and other wage and hour problems. In addition, the federal Department of Labor (DOL) has implemented initiatives that make it easier for employees to track their work hours, including a calendar for employees to track their regular work hours, break time, and any overtime hours, so you need to put a priority on getting your recordkeeping in compliance.
Here are some recent DOL settlements that illustrate how poor recordkeeping can factor into an expensive wage and hour investigation:
- The owner of a New York deli was ordered by a New York district courtto pay over $300,000 in back wages and liquidated damages for overtime and recordkeeping violations in August 2015. Among other things, investigators found the deli attempted to use inaccurate and incomplete payroll records to conceal underpayments.
- Owners of several New Jersey gas stations agreed to pay $3 million inovertime, backpay, and liquidated damages to over 400 nonexempt employees in March 2013. The employer was cited for, among other things, requiring employees to work “off the books” and failing to maintain adequate records of work hours.
- A Los Angeles firm agreed to pay $260,000 in back pay and liquidateddamages to 57 nonexempt employees for willful violations of the FLSA’s overtime and recordkeeping provisions in February 2013.
- In November 2011, the DOL completed 46 investigations of pizza andpasta establishments as part of an “ongoing enforcement initiative” in Long Island, New York, and recovered $2,341,507 in back wages for 578 In addition, the agency assessed $202,315 in civil money penalties against employers for willful and repeated FLSA violations, including minimum wage, overtime, and recordkeeping violations.
As the settlements above show, recordkeeping violations can be expensive. So, you need to make sure that you understand your obligations. The Fair Labor Standards Act (FLSA) requires covered employers to maintain basic payroll and other records for each employee, and this is explained in the FLSA regulations at 29 C.F.R. §§516.1, et seq. The regulations do not specify any particular form of records. Below is an overview of the FLSA’s recordkeeping requirements.
In general, employers should retain for at least three years, from the last date of entry, payroll records containing the following information:
- Each employee’s name, as used for Social Security, and theemployee’s identification number or symbol, if used in place of the name on any payroll record;
- Home address and zip code;
- Date of birth for employees under the age of 19;
- Sex and occupation;
- Time and day of the week when the employee’s workweekbegins;
- Regular rate of pay for any week when overtime is worked, hoursworked each workday and total hours worked each workweek, total daily or weekly straight-time earnings, and total overtime compensation for the workweek (this requirement applies only to nonexempt employees);
- Total additions to or deductions from wages for each pay period;
- Total wages for each pay period, date of payment, and payperiod covered by the payment;
- Certain collective bargaining agreements, plans, and trusts;employment contracts; and notices of the Wage and Hour Administrator;
- Sales and purchase records for employees who are subject tominimum wage requirements.
In addition, you also should keep supplementary basic records for all employees for at least two years. These records include:
- Wage rate tables;
- Work time schedules, time cards or sheets, and records of
amount of work produced by each employee;
- Order, shipping, and billing records; and
- Records of additions to or deductions from wages paid.
Note, too, that the record retention requirements stated in the FLSA are minimums. Most HR and legal experts suggest that employers maintain their payroll records through the worker’s employment plus five to ten years to ensure they are available if a claim is filed.
And, just in case you are not keeping accurate records, the DOL encourages employees to keep their own separate time records by providing the “Work Hours Calendar” for employees, Available online at:
The calendar was launched several years ago “to help workers make sure they are properly paid at the end of the work week.” The Work Hours Calendar counsels employees to record when they arrive at work, actually start working, stop working, leave work, take leave, and take meal breaks and other breaks. It closes with what appears to be a call to action to employees to file complaints: “You work hard, and you have the right to be paid fairly. It is a serious problem when workers in this country are not being paid every cent they earn. All services are free and confidential, whether you are documented or not. Please remember that your employer cannot terminate you or in any other manner discriminate against you for filing a complaint with WHD (Wage and Hour Division).” The DOL also has created a free Apple smartphone application for employees to track their hours called DOL-Timesheet.
These employee records could be used to determine overtime and other payment records. If an employer fails to keep proper records of work hours, the DOL often relies on employee testimony to establish the number of hours worked. So, for example, in Brown v. Family Dollar Stores of Ind., LP, 534 F.3d 593 (7th Cir. 2008), ruling in favor of an employee who brought a claim for overtime wages, the court found that she presented evidence that the employer’s records were not in compliance with the FLSA and could not be trusted. The court therefore relied on her testimony regarding the store’s operating hours and the holiday schedule to provide a “just and reasonable inference” of the uncompensated hours owed. And, in Kuebel v. Black & Decker Inc., 643 F.3d 352 (2nd Cir. 2011), the court determined that although the employee falsified his timesheets, he did so at the instruction of his supervisors, and the employer cannot thereby be relieved of its duty under FLSA to keep accurate time records of its employees’ hours of work. The employee was allowed to testify as to his work hours, including overtime work, for the purposes of determining his right to back overtime pay.
As a final point, even if only one employee is alleging a single FLSA violation, it is important to remember that the DOL can – and often will – investigate all of your relevant records to search for other possible violations. And, if you are targeted as part of one of the DOL’s “ongoing enforcement initiatives,” all of your pay records may be fair game. In these situations, you may have to produce payroll and time records from the previous two or three years.
Remember, too, if your organization is found to have violated the FLSA because you have inadequate records and cannot defend against an employee’s own time records, your organization likely would face not only back wage payments but also civil monetary penalties. And, just to make matters more interesting, the FLSA can impose personal liability for decision-makers, including fines and imprisonment for management employees found responsible for the violations. So, make sure your payroll records are in order and accurate.