Let’s state the obvious: you need to record the work time of your non-exempt employees; that’s nothing you didn’t know, right? However, were you aware that the U.S. Department of Labor estimates that 7 out of 10 companies are not compliant with wage & hour laws? This finding is concerning and is not what you expected.
According to compliance expert and labor & employment law attorney Brian Dixon, the U.S. federal labor regulations state that tracking non-exempt employees’ time is a basic and non-delegable responsibility of the employers. While it may sound simple, things can become highly complicated if not done correctly. Such mistakes or oversight can lead to litigations and hefty penalties, not to mention the negative impact on your organization’s reputation. Dealing with lawsuits and settlements can cost you a fortune. Therefore, organizations must record and track accurate hours that non-exempt employees devote to work.
Some Practical Considerations
Unlike exempt employees, employers can only pay non-exempt employees for the exact number of work hours. Hence, it is crucial to document non-exempt employees’ working hours accurately. But the roadblock that companies run is that they often cannot record work time correctly using manual time-tracking systems. In fact, the payroll department of any organization faces numerous challenges when they track work hours using manual timesheets. They lose precious billable work in identifying which employees have devoted how many hours of work. Then, they must calculate the exact wage that the organization must pay. Those stuck in that position will testify that dealing with various paper timesheet submissions ― often covered in sticky notes with random changes and comments tacked on them ― is time-consuming.
Organizations should also consider that if non-exempt workers say they’re owed overtime pay or drag you into a legal labor dispute, the employer (not the employee) bears the burden of disproving the claimed hours worked. Such non-compliance issues and lawsuits can seriously damage your reputation –why manual time tracking data is sometimes misleading and unreliable.
Wait, There’s More!
Correctly recording the employees’ hours worked is critical. However, there is much more to consider. For instance, you must also follow federal and state-specific rules for recording rest periods and meal breaks. Then, different states have varying rules for how rest periods are regulated. In California, as an example, employers can be penalized one hour of pay if they don’t provide rest periods to non-exempt employees. The challenge for employers is to find 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. For example, New York is very strict about entering prescribed mealtimes. In contrast, Connecticut requires employers to clock the exact meal break time-in/time-out. In California, employers can waive the tracking of meal breaks as long as they allow non-exempt employees to take a thirty-minute off-the-clock meal period; otherwise, that state, too, requires meal break times to be clocked accurately. Other states have rules allowing an auto-deduct for meal times.
Organizations face numerous challenges in ensuring strict compliance with state as well as federal wage & hour regulations. Tracking the work hours of non-exempt employees using manual timesheets makes the entire process more error-prone and time-consuming.
As you can imagine, land mines abound. Depending on the state, if someone punches in early after a meal break, the employer can be penalized for providing too short a meal period. In the case of waiving the reporting of break times, employees may say that the employer discouraged or coerced them into not using their required rest or meal periods. This can cause labor disputes. There is the risk of class action lawsuits when organizations use auto-deductions. Employees can sue if 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 use a rounding time system to the nearest quarter-hour or half-hour. However, if you round work hours, meal periods, or rest breaks, it gives incorrect information on work hours. As a result, you may not be able to pay your employees correctly. Again, this is a perfect recipe for a lawsuit.
Modern Solutions to Record Work Time
The best solution is to have an automated way to record work time in order to manage disputes before they arise. Cloud-based time tracking software, for example, can document actual hours worked, ensure easy access to correctly recorded time entries and enable you to run reports. Then provide an audit trail to the appropriate regulatory bodies if required.
Cloud-based automated time-tracking solutions enable organizations to accurately track and record employees’ work hours and rest times. These solutions have an in-built global statutory default pay rules library. This allows organizations to adhere to compliance and labor laws across geographies. A unified time-tracking solution can also help manage time and pay compliance across jurisdictions, even when there’s a statutory update or modification in the existing laws. Thus, automated time tracking enables an organization to avoid legal consequences.
Organizations that have the ability to accurately record work hours, meal breaks, and rest times for non-exempt employees are much less likely to face expensive lawsuits or incur penalties than those that still use error-prone and traditional paper time cards.