Repeat after me. Unicorns are NOT real. Unicorns are mythical creatures.
Let’s start by stating the obvious: you need to be recording the work time of your non-exempt employees. That’s nothing you didn’t know, right? But were you aware that the U.S. Department of Labor estimates that 7 in 10 companies are not compliant with wage & hour laws? That’s definitely not a statistic you want to be part of!
According to compliance expert and labor law attorney, Brian Dixon, of the labor law firm Littler Mendelson, U.S. federal labor regulations dictate that tracking non-exempt employee time is a basic, non-delegable responsibility for employers. And while it may sound like a simple enough process, if not done correctly things can get very complicated, very quickly.
Top of mind considerations
Unlike exempt employees, non-exempt employees can only be paid for the exact hours worked, so it is crucial to be able to document their hours accurately. The roadblock companies run into is that they are often unable to record work time correctly if they use a manual time tracking system. In fact, using manual timesheets often forces a company’s Payroll department to waste their time playing detective to sort out who worked which hours, and who is to be paid what. Ask anyone who has been stuck in that position, and they will tell you that grappling with various paper timesheet submissions ― often covered in sticky notes with random changes and comments tacked on them ― is a time-consuming nightmare and a half.
Another thing to keep in mind is that if non-exempt workers say they’re owed overtime pay, or drag you into a legal labor dispute, it’s the employer (not the employee) who bears the burden of disproving the claimed hours worked. This is a tall, if not impossible, task when using manual systems.
Wait, there’s more!
Obviously, it is mission critical to correctly record hours worked. However, there are even more things to consider ― chiefly, that you also have to follow federal and state-specific rules for recording rest periods and meal breaks.
For instance, there are varying rules in different states for how rest periods are regulated. In California, as an example, employers can be penalized one hour of pay if rest periods aren’t provided for non-exempt employees. The challenge for employers, then, is having a flexible way to record each rest period, especially when they are just a few minutes long.
Similarly, there are different rules in each state for documenting meal breaks. New York is very strict about documenting prescribed mealtimes, for example, while Connecticut requires meal break time-in / time-out to be clocked exactly. In California, employers can waive the tracking of meal breaks as long as they provide non-exempt employees with the opportunity to take a thirty minute off-the-clock meal period; otherwise that state, too, requires meal break times to be clocked exactly. Other states have rules allowing an auto-deduct for mealtimes.
As you can imagine, land mines abound. Depending on the state, if someone punches in early after a meal break period, the employer can be penalized for providing too short of a meal period. In the case of waiving the reporting of break times, the danger is that employees can say that the employer discouraged or coerced them to not use their required rest or meal periods, which can lead to labor disputes. And when auto-deductions are used, there is the risk of class action lawsuits if it’s found that there was an employer presumption that the mealtimes were being taken by all non-exempt staff when, in fact, they weren’t.
Another tricky area is rounding time. Some employers employ a system of rounding time to the nearest quarter-hour or half-hour. However, if you round hours worked, meal periods, or rest breaks, the rounding can conceal the actual time spent working, and people may not be getting paid correctly. This is a perfect recipe for a lawsuit.
The best solution is to have an automated way to record work time in order to quell disputes before they arise. Companies that have the ability to accurately record work hours, meal breaks, and rest times for non-exempt employees are much less likely to stumble into expensive lawsuits, or to incur penalties and fines, than companies that still use error-prone, old-fashioned paper time cards. Cloud-based time tracking software, for example, can document actual hours worked, ensure easy access to correctly recorded time entries, enable you to run reports, and then provide an audit trail to the appropriate regulatory bodies, if required.
To learn more about responsibilities and consequences concerning the recording of work time, check out the on-demand free webinar on this subject that was conducted by compliance expert, Brian Dixon, of the global labor law firm, Littler Mendelson.