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USA Legal Requirements of Employee Time Tracking

employee time tracking

As an employer, one of the most important responsibilities you have is complying with federal and state labor laws and regulations. There are many important laws HR should stay aware of, few are as important as the laws concerning time and attendance.

This includes compliance with the Fair Labor Standards Act (FLSA) which serves to protect hours, wages, and overtime rules for all employees. Although the FLSA does not stipulate the method and manner of managing and tracking employee hours, it does establish a set of employee time tracking requirements for hourly, salaried and non-exempt staff.

This post will cover the record-keeping requirements of employee time and attendance tracking, including rules and regulations for different labor contracts. It will also look at the benefits of using employee time attendance software to effectively maintain FLSA compliance. 

Make sure you are up to date with all-time clock labor laws and requirements for time and attendance tracking to avoid any potential federal penalties and fines.

Federal Law on Time Tracking

Although the FLSA does not specify how data should be collected and managed and whether a time and attendance app should be used, the federal law on time sheets does state that it is mandatory to keep a record of employee working hours for hourly, non-exempt employees as well as exempt and non-exempt salaried employees.

This includes hours worked per day, clocking in and out times, breaks, overtime, wages paid, and other conditions of employment. Failure to comply with FLSA time tracking requirements can lead to fines and penalties so it is vital to determine a system for recording this data. 

Providing all data is monitored and recorded, employers are free to track time any way they choose. Some companies use employee time tracking software, others use a time clock app or an employee timesheet app to effectively manage and track this information. Whichever employee attendance tracker system is used, companies also need to be aware of any state-level employee monitoring laws. 

Employee Time Tracking for Hourly Employees

Although specific time clock rules and regulations differ by state, there are a number of federal requirements that apply to all US hourly employees:

  • The FLSA requires that records state the date and time a worker starts and finishes work, the number of hours worked each day, and the total hours worked each week.
  • Hourly employees must receive payment for all time worked
  • “Off the clock” work is illegal. Employees can file a complaint with the Department of Labor or file a lawsuit for unpaid wages under the FLSA.
  • Under the 7-minute rule, clock-in and clock-out times on timecards are rounded to the nearest quarter of an hour. Many online employee time tracking apps and software (used to speed up the time tracking process) automatically round up an employee’s hours using this 7-minute rule.
  • Employers can modify a time card without an employee’s knowledge providing the employee is paid for all time worked.
  • To meet the FLSA employee time tracking requirements, records must be kept for clock in and clock out times, overtime, and breaks.
  • Many employers make their employees wait until their assigned shift has begun before clocking in. This means that employees cannot be required to perform any duties prior to clocking in.
  • The employer decides how many hours an hourly employee should work. If a non-exempt employee works more than 40 hours in a week, they must be compensated at 1.5 times their regular rate of pay.

hr software

Time Clock Rules for Overtime-Exempt Employees

Not all employees are entitled to overtime. Under the FLSA, an employee is considered exempt from overtime pay if they are paid on a salary basis, the position is paid a minimum of $455 per week, and they perform executive, administrative or professional duties. Whilst all hourly employees are non-exempt, there are both exempt and non-exempt salaried employees.

How are time tracking rules are different when managing overtime-exempt employees?

  • Salaried employees are entitled to receive their base pay regardless of how many hours they have worked in a given week.
  • Salaried employees are expected to complete their assigned duties regardless of how long they take.
  • Employers cannot dock a salaried employee’s pay for less than a full day’s absence. So, if, for example, an employee goes home sick at lunchtime, the time not spent in the office that day cannot be deducted from the employee’s salary.

Non-exempt employees are entitled to overtime pay for all hours worked.

Comply with Federal DCAA Timekeeping Requirements

Businesses with federal contracts are probably already familiar with the stringent DCAA timekeeping rules. DCAA stands for Defense Contract Audit Agency. This agency works with the Department of Defense to make sure that the money from federal grants and contracts is correctly allocated.

DCAA has very specific rules when it comes to employee time tracking. They require that businesses:

  • Create a time off policy
  • Keep employees informed about that policy
  • Track time daily
  • Provide accurate reporting
  • Approve time tracking information
  • Take note of any changes
  • Keep detailed records of information

Those who don’t follow DCAA rules may be hit with heavy fines or miss out on future opportunities with the Department of Defense.

State Laws on Time Tracking 

In addition to federal laws addressing time and attendance, there are also state and local laws businesses need to keep in mind. Here are a few example of relevant state laws:

  • California law does not require the use of an electronic timekeeping system or time card app as paper records are accepted. California Wage Orders require that employers maintain employee time records “in the English language and in ink or other indelible forms.” Although, with more than a few employees, keeping paper copies can become unmanageable. Switching to digital is a better way to manage employee time tracking.
  • Washington law requires employers to pay non-exempt employees 1.5 times their regular rate of pay for any hours worked above the established 40-hour week. 
  • The Texas Payday Law governs employment wage and hour practices. Texas employers must keep adequate payroll records for each pay period and the state’s Payday laws allow employers to use time clocks or time sheets to record work time.
  • Michigan employers must keep records of total daily hours worked, showing the starting and ending times each day, computed to the nearest tenth of an hour or less.

Employee Time Tracking Software 

The Fair Labor Standards Act requires employers to keep accurate time records for all non-exempt employees. However there is no legal requirement, at a federal level, to use time clocks or employee time tracking software for hourly employees.

Having said that, there are many benefits to implementing a time clock system, especially for employers with a large workforce or when employees are assigned to multiple shifts:

  • A time tracker helps managers and employees keep track and take ownership of their workload and duties
  • Time and attendance tracking software helps employers keep track of contractors to comply with budgetary restrictions
  • Data from clock in and clock out software can be used to focus strategic direction and measure the progress of goals
  • Employers can review team and individual attendance and performance in real-time
  • Employers can efficiently manage remote employee time tracking
  • Employee time tracking results in more efficient payroll processes
  • It improves the efficiency of employee schedules and creates individual employee accountability
  • It minimizes potential bookkeeping errors
  • Employee timesheet software can help companies save time and money

Some employers opt for a GPS location system to track their employees. This enables managers to determine in which location employees have clocked in and clocked out (office, home or other).

Although simple attendance templates can be used to keep track of time and attendance, a time tracking app or an automated system can streamline and speed up the process. Using employee attendance software or an app for employee time tracking can also help employers comply with all FLSA record-keeping requirements and organize data so it can be stored for the 3 years required by US law. Aside from legal compliance, a good time tracking app can also help calculate hours correctly (with rounding up and overtime), rendering it a valuable resource for large and small businesses.

Easily track employee hours to ensure FLSA compliance.

Written by Cat Symonds; Edited by Tanya Lesiuk

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