FLSA Timekeeping Compliance: What Businesses Need To Know

FLSA Timekeeping Compliance
FLSA Timekeeping Compliance

FLSA Timekeeping Compliance: What Businesses Need To Know

Business owners in the United States must comply with the Fair Labor Standards Act (FLSA). This federal labor law sets the minimum wage, overtime pay, and provisions related to timekeeping and record keeping.

As a US business, you must understand the rules of the FLSA, how it impacts your business, and what processes you need to put into play regarding the regulations set out by the act.

In this article, we’re going to simplify it for you. Read on to learn what the FLSA is all about, the benefits of FLSA timekeeping, and who is and isn’t exempt from the FLSA.

What is the Fair Labor Standards Act (FLSA)?⚖️

overtime

Source: Time

FLSA is a federal law set by the US Department of Labor (DOL) for part-time and full-time employees in private companies and local, state, and federal governments. It establishes standards for the following:

  • Federal minimum wage laws: The FLSA sets out a minimum wage that all employees are entitled to. The rate is $7.25 per hour as of July 2009. It is essential to understand that many states have their own minimum wage laws and employee protections, which have to be complied with alongside the FLSA regulations.
  • Overtime pay requirements ⏰: Employees working overtime are entitled to pay at a rate of one and a half times their regular rate of pay for any hours worked over 40 hours in a workweek. The FLSA means that employers must keep track of the hours worked by non-exempt employees to ensure that proper compensation is given based on the number of hours over 40 hours they have worked.
  • Unauthorized overtime: Even overtime that has not been authorized must be paid, but employers may take disciplinary action against employees for unauthorized overtime.
  • Recordkeeping requirements for businesses: The FLSA indicates that companies may use any timekeeping method that they prefer as long as records are complete and accurate. The records must include basic employee information, hours worked per day and workweek, regular pay rates, overtime, and the total earnings per period.
  • Timekeeping ⌚: Employers are expected to implement reliable timekeeping methods, like time clocks or electronic timekeeping software, to ensure all worked hours are accurately recorded. These records must be kept for a minimum of two years.

Some employees are exempt from FLSA regulations, meaning that they are not entitled to overtime pay. It is imperative that you have each employee properly classified so that you are complying with FLSA rules.

Benefits of FLSA Compliance

FLSA compliance can ensure that you are not fined or subject to lengthy lawsuits, but there are also other benefits of following these regulations. These include the following.

  • Accurate overtime calculations 🧮 and records so you know exactly who is working more hours and why. This can help you decide when more staff are needed to ensure everyone is getting a good work-life balance.
  • Productivity can be monitored, ensuring you know which employees are the most productive and which are the least. This can help you to implement productivity initiatives to ensure all employees are working optimally.
  • You can assess the need for automation 🤖 in areas where it would be beneficial based on productivity, overtime, and other timekeeping records.
  • You’ll be able to analyze the length of time needed per project based on past instances of similar projects.
  • You’ll figure out the most time-consuming work or client, which can help you plan for the future or even put processes in place to reduce the time spent on said client or project.

Who is Covered by FLSA Regulations?

FLSA regulations cover the following employees.

  • Interstate commerce employees
  • Goods production for commerce workers
  • Domestic service employees
  • Hospital workers 🏥
  • Employees at schools for disabled or gifted children
  • Employees at educational institutions 🏫
  • Public agency workers

FLSA regulations cover the following employers.

  • Those that have $500,000 (or higher) yearly gross
  • Those who operate schools for gifted children
  • Those who operate elementary & secondary schools and institutes with higher education
  • Those who primarily care for the elderly, sick, or mentally challenged people

Who is Exempted From FLSA Regulations?

The FLSA is not applicable to all workers and workplaces. The following workers are exempt from FLSA regulations. 

  • Professional, administrative, and executive employees who earn at least $684 per week
  • Computer workers who are paid not less than $27.63 per hour or $684 per week
  • Outside salespeople who usually are away from the place of business and are typically paid via commissions
  • Apprentices
  • Small farms workers 🧑‍🌾
  • Casual babysitters, seniors’ caregivers, personal companions
  • Newspaper delivery workers 🗞️
  • Seamen or sea women on foreign ships ⚓
  • Employees of recreational businesses or seasonal amusement
  • Employees of local newspapers with a circulation of less than 4000

FLSA Recordkeeping Rules

To comply with the FLSA, employers must adere to the FLSA rules on recordkeeping. These rules cover what must be recorded by employees and are as follows.

FLSA

Additional Records Required for FLSA Compliance

employee

Storage of Records 📦

Records should be accessible for inspection by the Division’s representatives. They may ask the company to make computations, extensions, or transcriptions. The records can be kept in a central records office or at the employment location.

Records which must be kept for at least 2 years include the following.

timecards

On top of this, employers are expected to keep the following records for a minimum of three years.

Payroll

Timekeeping Methods ⏳

The FLSA, while making timekeeping a rule, does not prescribe which method of timekeeping an employer should use. This means that you can use any method you prefer. The following are some options to choose from depending on what suits your business best. 

  • Manual or automated time clock
  • Timekeeper that records all employees’ hours
  • Timekeeping software
  • Manually input timesheets
  • Mobile apps
  • GPS tracking systems
  • Self-reporting

If you’re considering using timekeeping software, then why not check out Tommy for timekeeping? It is a reliable and effective method of keeping track of your employee’s workdays as well as giving insight into productivity and overtime shares. Learn more about it.

FLSA’s Out of Coverage

FLSA does not cover the following:

  • Sick leave 🤒
  • Vacation leave and holidays 🏖️
  • Mealtimes (in some states) 🍽️

Factors not required by the FLSA:

  • Pay raise
  • Higher pay for less desirable hours (e.g., weekends)
  • Reason or notification for firing an employee
  • Immediate pay after the firing of an employee
  • Working limit per day or week, including overtime

Note: Some states have differing employee protection laws which you must comply with too. While the FLSA does not require the above for compliance, the state you operate in may do. This means you will need to check out state laws as well as the FLSA rules.

Violations 🚫

WHD

Source: QuickBooks

The FLSA can be challenging to get your head around. As such, violations may be easy to make, so we have summarized a few of the most common ones to help you get a better understanding of FLSA compliance. Take a look below to learn more.

1. Misclassification of Employees

Employees may misclassify an employee as exempt from FLSA regulations by mistake. However, some employers also misclassify employees on purpose to avoid paying overtime. They do so by changing the job title of the employee.

Employees are classified not on their job title but on their duties and salary instead. If the duties and salary of the employee fall within the bounds of a non-exempt employee, then they must be paid overtime.

2. Mistaken Belief About Salaried and Hourly Employees

It is often mistakenly believed that employees with a fixed salary are exempt from FLSA regulations. However, as stated above, exemptions relate to salaries and duties, not to the way the employee is paid.

3. Unauthorized Overtime Isn’t Paid

While employers are unlikely to want to pay for unauthorized overtime, it still has to be paid. Employers do have the right to discipline employees for working unauthorized overtime, but they still must be paid for it.

4. Waiving of Overtime Rights

Even if the employee signs a waiver that indicates that he/she won’t be paid for overtime, it is considered invalid. An agreement that specifies that only forty hours per week is considered working time is also invalid.

5. Averaging Work Weeks

A business cannot average two or more workweeks to avoid paying for overtime. For example, if the staff works 45 hours in the first week and 35 hours in the next one, the employer might average those weeks to satisfy the 40-hour requirement.

This is a violation of FLSA regulations, and the employee still must be paid 5 hours of overtime for the first week, regardless of the reduced hours in the second week.

6. No Payment for “Off-The-Clock Work"

“Off-the-clock work” refers to any kind of work that takes place before or after scheduled hours or on unpaid breaks. It can include anything from checking work emails to being required to complete training outside of scheduled hours.

Employers are still required to pay employees for this kind of work to be compliant with FLSA rules.

7. On-Call Duty

Employers sometimes ask their employees to be “on-call” when they aren’t supposed to work, which means they have to be ready to go to work at a moment’s notice. Often, employers don’t pay the staff for this time.

Generally, if an employee has to stay on call on or near his/her work premises that they can’t use the time for their own needs, the time is counted as hours worked and should be paid for.

8. Unpaid Training and Meeting

When employees are obligated to attend training or meetings, and it is directly related to their work and will benefit the employer, the employees should be paid for those hours.

9. Meal Times or Breaks That Are Not Paid

When the employee still has work obligations during break time, such as answering work emails or texts, the company should pay them. Hourly employees should also be paid for breaks that are shorter than 20 minutes.

If mealtimes were automatically deducted from employees and they needed to work during breaks, the company should credit back the time to them.

10. Unpaid Final Paychecks

Staff who worked during their final pay period should be given their last paycheck. Even if the employee was terminated or resigned, the employer is still required to give them their final pay.

Final Thoughts

The FLSA governs a range of aspects of timekeeping and overtime pay for US business owners. It works in conjunction with state laws, and compliance is a must if you want to avoid lawsuits and fines.

Mytommy can support a range of small and midsize companies with their timekeeping needs. Our innovative software is a reliable method of timekeeping that will ensure you are FLSA-compliant. Contact us now to learn more about it.

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