WORKPLACE LAW -
Essential Timekeeping Records

Question:

I read in a human resources management magazine that the Department of Labor and other regulatory agencies have increased auditing of employers. I started as the human resources manager at my company about two years ago, and have never been comfortable with our timekeeping system and documentation. Can you summarize some of the documents that I should have on hand to make sure I could respond to a wage and hour audit?

Answer:

Accurate timekeeping records are essential to ensure that employees are paid correctly, and to defend against a claim for unpaid wages. In California, a seemingly minor systematic timekeeping error can result in hundreds of thousands of dollars in liability, plus potential penalties and attorneys' fees.

Some of the documents that employers must maintain to respond to a wage and hour audit include:

  • Time cards or other records of hours worked. These are the most basic and important timekeeping tools. Both state and federal law require employers to keep accurate records of hours worked in ink or other indelible form. The time records must show when a nonexempt employee begins and ends each work period, and the time the employee goes out and returns from meal period(s). The records must show the actual time the nonexempt employee worked each day. Employers cannot satisfy the recordkeeping requirement by relying on a posted employee schedule. Split shift intervals, sleep time, travel time, and the total number of hours worked each day must be recorded.
  • Total wages paid and hours worked each pay period. The records must contain the value of meals, lodging or other compensation paid to the employee. Timekeeping documents must also show the hours worked and the applicable rate of pay, including, in the case of employees paid on a piece-rate basis, the number of piece-rate units earned by each employee and the applicable piece-rate.
  • On-duty meal agreements. In the rare case when the nature of the work prevents an employee from being relieved of all duty during a meal period, the employer and the employee may enter into a written agreement for an “on duty” paid meal period, which agreement may be revoked by the employee. The employer must keep the written agreement between the parties to document the agreement for the on-the-job paid meal period.
  • Make-up time agreements. California law allows employers to adopt a “make-up time” policy that allows employees to take time off for a personal obligation and make-up the missed work time in the same workweek. If the employer has a written make-up time policy, the hours worked by the employee to make-up the work time that was missed due to the personal obligation is not counted toward computing the total number of hours worked in a day for purposes of the overtime requirements, unless the employee works more than eleven hours in one day or forty hours in a workweek. An employee must request make-up time in writing, and the approved make-up time request form must be preserved by the employer.
  • Wage-deduction authorizations. Generally, employers can only make deductions from an employee’s paycheck when the employer is empowered or required to do so by state or federal law. For all other deductions, the employee must sign a written authorization agreeing to the deduction. For example, deductions from wages for purchases, repayment of loans, and adjustments for non-returned tools or equipment normally require a signed authorization by the employee. The validity of an authorization for wage deductions depends on specific rules and may vary in special situations. The authorizations should be retained to show compliance.
  • Sick leave, paid time off, and vacation records. Employers are not required to provide paid time off, sick leave or vacation benefits to their employees. However, if they do provide these benefits, it is important to maintain accurate records of the accrual and use of each employee’s paid time off, vacation and sick leave benefits. Although an employer is not required to pay an employee his or her accrued but unused sick time at termination of employment, the employer must pay the accrued but unused paid time off and vacation to the employee upon separation. Disputes can arise about the correct amount of paid leave due if the employer does not have accurate records of how much paid time off or vacation time an employee has “on the books” when the employee quits, is laid off or terminated.

Maintaining accurate wage and hour records is essential to properly paying your employees, responding to a wage and hour audit, and defending against wage claims. The time you invest in accurate and complete record keeping is time well spent.
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