Employee Time-Tracking Under the Fair Labor Standards Act (FLSA)

December 16, 2024

The Department of Labor’s (DOL) federal Fair Labor Standards Act (FLSA) does not require employees who are properly classified as exempt to track hours worked, unlike non-exempt employees who are required to track all hours worked per pay period. However, like many federal laws, in some states there are more stringent employee time-tracking regulations. Employers should be mindful of their timekeeping requirements and related pay practices to ensure compliance with state and local regulations in addition to federal law.

State-Specific Time-Tracking Requirements

Unless otherwise specified by state law, employers can set the stage for their expectations with respect to time-tracking for exempt employees and may require employees, regardless of FLSA classification status, to track and record their total hours worked. In addition, employers may set forth employee schedules, including how many hours an employee may work per pay period, regardless of FLSA classification status, so long as state and local jurisdiction regulations for meal periods, rest breaks, and day of rest rules are followed.

As stated above, some states have specific timekeeping requirements that must be met by employers. For example, both Illinois and Rhode Island require employers to maintain daily time-tracking records of hours worked for all employees per pay period covered, regardless of FLSA timekeeping requirements.

Employers should be aware that non-compliance with timekeeping rules could expose them to significant risk, including employee complaints and/or fines. Consistent, accurate tracking of employee time is vital for meeting FLSA timekeeping requirements as well as state and local compliance for maintaining proper payroll records. By establishing clear policies and practices for tracking the total hours an employee works, employers can mitigate the risk of disputes related to overtime pay or other compensation matters.

Maintain Accurate Records

Our clients frequently inquire about the best format for tracking employees’ hours worked. Employers may adopt a timekeeping method in accordance with their business operations and practices. This may include utilizing a time clock, tracking software, digital timesheets, manual timesheets, or mobile apps, just to name a few. It is also allowable to use more than one type of time-tracking system. For example, non-exempt employees may have to punch in and out on a time clock to record all hours worked, while exempt employees may be required to complete manual timesheets. Whichever method your organization is using, consider the administrative burden that multiple tracking mechanisms may create and the importance of maintaining accurate time records.

Employers should also consider the value of accessible and accurate time records in the event of a wage and hour claim. If an employee attempts to recover past wages or final compensation, for example, the burden of proof will be on the employer. Failure to maintain accurate records may impede an employer’s ability to defend such claims, whether the employee is exempt or non-exempt. In addition, many states assess additional fees and/or fines if a wage complaint is found in favor of the employee.

Timekeeping Requirements for Non-Exempt Employees

Accurate time-tracking for non-exempt employees is imperative as they are often hourly workers and generally eligible for overtime pay. Employers must ensure that wages are calculated correctly based on total hours worked, including any overtime. Under the FLSA overtime rules, non-exempt employees must be compensated at a rate of at least one-and-one-half times the employee’s regular hourly pay rate for hours worked in excess of 40 in a workweek. Failure to track an employee’s time accurately can result in underpayment, which can lead to costly back wage claims, penalties, and more. Employers should always verify that payroll records reflect the total wages owed to non-exempt employees, including overtime pay, per pay period covered, and that these payroll records are accessible for auditing purposes.

Permissible Salary Deductions

Although it is acceptable to track exempt employees’ hours worked, it is important for employers to clearly understand that, in most cases, it is not acceptable to deduct from employees’ wages for hours not worked. Under the DOL, there are slim circumstances where an employer can permissibly deduct or reduce an exempt employee’s wages. As such, employers should be mindful of proper and improper wage deductions. In general, an exempt employee’s salary should not be changed based on the number of hours worked during a particular pay period; otherwise, this may be in violation of the FLSA and jeopardize the employee’s exemption status. As the adage goes, “Exempt employees are paid a salary for the job they do, not the hours worked.”

Clear Company Policies Can Help

Employers should consider implementing procedures for reviewing timekeeping data before finalizing payroll. This includes ensuring that all employees have accurately recorded their hours worked, verifying that overtime pay and total wages have been calculated correctly, and addressing any discrepancies promptly. By doing so, employers can avoid costly mistakes and protect both the company and its employees from the consequences of wage and hour violations.

 If we’ve said it once, we’ve said it 100 times and will say it 1000 times more – establishing clear company policies that include and detail the start of the workweek, wage payment schedules, work hours, time schedules, and clock-in/clock-out procedures is essential for effective management. Adopting clear, consistent, and compliant time-tracking policies will not only help employers avoid legal pitfalls but will also foster a fair and transparent workplace. Ultimately, employers who make a concerted effort to track employees’ time accurately and comply with both federal and state wage and hour laws will benefit from a stronger employer-employee relationship and reduce exposure to potential wage disputes.

Employer Best Practices

In summary, the jurisdiction where an employee works is key to following state time tracking requirements. Non-exempt employees should always track their time in accordance with the FLSA, as well as state overtime requirements. Even in the absence of state requirements for exempt employees to track their hours worked, a company may have valid business-specific and operational reasons to request time-tracking.

If you have any questions regarding this Practice Pointer, please email us.