Currently, all U.S. businesses must track the time of all non-exempt employees and keep those records for 2 years to comply with FLSA, thus avoiding unexpected and costly wage and hour lawsuits. In terms of the FLSA, these are some of the most important things every employer and employee should know about complying with the DOL’s FLSA timekeeping.
What is FLSA Working Time Regulation about?
The First Labor Standard Act is intended to protect workers against certain unfair pay practices. According to the Office of Financial Management, this is a “federal law that establishes minimum wage, overtime pay eligibility, recordkeeping, and child labor standards affecting full-time and part-time workers in the private sector and in federal, state, and local governments”.
The FLSA specifies when workers are “on the clock” and which times are not paid hours. There are also elaborate rules concerning whether employees are exempt or nonexempt from the FLSA overtime regulations.
The unbreakable FLSA rules that affect most SMBs
- Minimum wage: The federal minimum wage is $7.25 per hour for workers covered by the FLSA.
- Hours worked: Hours worked are compensable time, meaning you have to pay the employee for worked hours. You must be able to distinguish between working time and non-working time.
- Child labor: In addition to rules for young workers, the FLSA contains provisions on minimum wage, overtime, and recordkeeping. Also, guarantee youth workers receive an education and have safe working conditions.
- Overtime: The FLSA requires overtime compensation (at time and one-half) for all “hours worked” over a prescribed “threshold” (typically 40 hours per week), for “nonexempt” employees.
- Record keeping Every employer covered by the Fair Labor Standards Act (FLSA) must keep certain records for each covered, nonexempt worker.
It’s important to know that those businesses who aren’t compliant with these regulations are vulnerable to lawsuits from employees and fines from the Department of Labor – both of which can ruin even a successful business.
How can I comply with the FLSA?
Knowing the details of the labor legislation system can save you lots of money. FLSA regulations cover not only hourly-paid employees but can be applicable to salaried ones as well. But remember, is important to don’t break the golden rules:
- Employers are required to pay minimum wage.
- Employees are paid overtime for hours worked that exceed 40 hours in a workweek.
- There are restrictions on the employment of children.
- Employers are required to maintain appropriate record keeping.
Who has to comply with FLSA rules and regulations?
According to the U.S Department of Labor, employees who work for certain businesses or organizations (or “enterprises”) are covered by the FLSA. These enterprises, which must have at least two employees, are:
(1) those that have an annual dollar volume of sales or business done of at least $500,000
(2) hospitals, businesses providing medical or nursing care for residents, schools and preschools, and government agencies
What if my business ignores the FLSA Law?
If there is a violation of the law, it is a result of ignorance of its requirements, rather than intentional noncompliance.
The problem arises when an employee makes the decision to contact the DOL to file a complaint.
Once an employee takes that step, your business could receive a notice of a DOL audit. This is not a communication that a small business owner wants to receive.
FLSA overtime claims may involve:
- Employers mistakenly treating employees as “exempt” from the FLSA overtime requirements.
- Employers failing to identify, record, or compensate “off-the-clock” hours spent by employees performing compensable, job-related activities.
- Employers failing to include “wage augments” such as longevity pay when calculating an employee’s overtime rate.
FLSA recoveries can include compensation in the following types of situations (plus liquidated damages and attorneys’ fees):
- Employees may perform a variety of potentially compensable job-related activities during their “off-the-clock” time, such as: taking work home, making/receiving job-related telephone calls at home, working through lunch, working before or after regular shifts, taking care of work-related equipment, job-related “volunteer” work.
- Employees mistakenly classified as exempt (who are really nonexempt) often work regular (“on-the-clock”) hours in excess of the FLSA overtime thresholds, as well as compensable “off-the-clock” hours.
Sometimes employers calculate the overtime rates improperly, by not including in the employee’s regular rate compensation augments such as “longevity pay,” “shift differentials,” nondiscretionary bonuses (e.g., educational stipends).
Determine Exempt vs Non-exempt Employees
The first thing you want to do is conduct a test to make sure you have your employees classified correctly as exempt vs non-exempt employment status.
Make a list of all employees and separate them into two categories: exempt (from FLSA) and non-exempt status.
Certain types of employees, often classified as exempt employees, are not entitled to overtime pay as guaranteed by the Fair Labor Standards Act (FLSA). To add to that, most states have their own wage and hourly-rate laws that have even more requirements in addition to the FLSA.
The FLSA requires that employers pay at least minimum wage for up to 40 hours in a workweek and overtime pay for any additional time unless the employee falls into an exception category.
If an employee is considered exempt (vs. non-exempt), their employer is not required to pay them overtime pay. It is at the employer’s discretion whether or not to pay for hours worked overtime.
In general, to be considered an “exempt” employee, you must be paid by salary (not hourly) and must perform executive, administrative, or professional duties.
A non-exempt employee is entitled to overtime pay through the Fair Labor Standards Act. Also, some states have expanded overtime pay guidelines. Check with your state department of labor website for rules in your location.
Employers are required to pay time and a half the employee’s regular rate of pay when they work more than 40 hours in a given pay week.
Most employees must be paid at least the federal minimum wage ($7.25 in 2020) for regular time and at least time and a half for any hours worked over the standard 40.
Types of Exempt Employees
The Fair Labor Standards Act recognizes the following main categories of exempt workers:
- Outside Sales
These categories are purposefully broad to encompass many types of jobs.
Records For Nonexempt Employees
Federal wage and hour laws require that your records show the following for each nonexempt employee (in other words, those who must be paid at or above the minimum wage, and who must be paid time-and-one-half for overtime):
- Name in full, as used for Social Security recordkeeping purposes, and, on the same record, the employee’s identifying symbol or number if used in place of name on any time, work, or payroll records
- Home address, including zip code
- date of birth, if the employee is under 19 years of age, for child labor purposes
- Gender of the employee (employee’s gender identification is related to the equal pay provisions of the FLSA)
- Occupation in which employed
- Time of day and day of the week on which the employee’s workweek begins (if all
- Regular hourly rate of pay for any workweek in which overtime compensation is due, including:
- An explanation of pay by indicating the monetary amount paid on a per hour, per day, per week, per piece, commission on sales, or another basis
- The amount and nature of each payment that is excluded from the regular rate.
Exempt Employee and Homeworkers Recordkeeping
Different recordkeeping requirements apply to exempt employees, homeworkers, and tipped employees under federal wage and hour law.
Exempt Employee Records
Even though you may have employees who are exempt under the federal FLSA, you are not exempt from keeping.
If your employees qualify as exempt because they are classified as executive, administrative, and professional employees, you must keep the following information on them:
- Home address
- Date of birth, if under 19 (to comply with child labor provisions)
- Gender (to comply with equal pay provisions)
- Time of day and day of the week on which the employee’s workweek begins
- Total wages paid each pay period
- Date of payment and the pay period covered by each payment
Because these employees are not paid by the hour, you do not — and should not — keep track of the number of hours they put in.
A homeworker is any person who produces goods for an employer from a home, apartment, or another residential establishment. Where the homeworker gets the materials–either from the employer or elsewhere–does not change the homeworker’s status.
You must keep the following records on each of your homeworkers:
- Home address
- Date of birth, if under 19, to comply with child labor requirements
- Regarding each job or a lot of work:
- The date on which work is given out to worker and the amount of work given out
- The date on which work is turned in and the amount of work turned in
- Type of articles worked on and the operation performed
- Piece rates paid
- Hours worked
- Wages paid
- Social Security deductions made
- Date of wage payment and pay period covered
- Regarding each week:
- Hours worked
- Wages earned
- Extra pay due for overtime
- Total wages earned each week
- Social Security deduction made
- Record of retroactive payment of wages
What are the FLSA timekeeping requirements?
Every covered employer must keep certain records for each non-exempt worker. The department of labor requires accurate records. The following is a listing of the basic records that an employer must maintain:
- Time and day of the week when employee’s workweek begins
- Time worked each day
- Total hours worked each workweek and pay period
- Total daily or weekly straight-time hours
- Total overtime hours for the workweek
TrackingTime as FLSA compliant timekeeping software
TrackingTime is a time tracking software that provides features 100% compliant with the FLSA requirements to avoid unexpected and expensive wage and hour lawsuits. This timekeeping software is up to date with the surrounding overtime hours, provides an easily accessible audit log for your records.
TrackingTime top Timekeeping features
- Time Tracking: Easily keep track of your team’s working hours with online timesheets.
- Hourly rates: Ideal for employees who get paid by the hour for a project.
- Reports: Keep your data organized, export timesheets for reporting in any format you need (.xls, .csv, .pdf)
- Time cards: Whether you have 1 or 100 employees, TrackingTime automatically creates monthly attendance data for your entire team.
- Weekly reports for breaks, overtime hours, and time off: Set work schedules for your employees and keep track of lunch breaks, overtime hours, and paid time off, based on your own policies.
- Work schedules: Specify the days, hours, and clock in and out times for your employees and make sure they track every hour they work.
- Task management for workweek duties: Assign tasks, delegate responsibilities, and monitor the progress of your projects
The FLSA does not require payment for time not worked, such as vacations, sick leave or holidays (Federal or otherwise). These benefits are matters of agreement between an employer and an employee .
For covered, nonexempt employees, the FLSA requires overtime pay at a rate of not less than one and one-half times an employee’s regular rate of pay after 40 hours of work in a workweek.
The current salary threshold is $23,660 per year. Salaried employees who make more than the threshold in a year are not entitled to overtime pay. The salary threshold is subject to change.
Overtime must be paid to nonexempt employees (hourly or salaried employees who make less than $23,600 per year) at 1.5 times their normal rate of pay, if they work more than 40 hours in a workweek. Certain states have their own overtime rules.