Exceptions Timekeeping Is Legal—But It’s a ‘Horrible’ Idea

Employers would be wise to ignore the U.S. Department of Labor’s (DOL) regulations and guidance that permit exceptions timekeeping under the Fair Labor Standards Act (FLSA). The department says that the practice is fine, but experts warn that it sets employers up to violate another DOL mandate: “complete and accurate” time records.

Let’s start with the DOL’s FLSA regulations. The rules state that employers must record an employee’s “[h]ours worked each workday and total hours worked each workweek.” (29 C.F.R. §516.2(a)(7)) When an employee works a fixed schedule, an employer can use “the schedule of daily and weekly hours the employee normally works” and then instruct the employee to report deviations.

But, the employee still has to confirm that he or she worked those hours “by check mark, statement or other method.” (29 C.F.R. §516.2(c)) So, if the employee has to take affirmative reporting action even if he or she adhered to the schedule, is that really “exceptions reporting?”

“It is and it isn’t,” says Kevin McCormick, a partner at Whiteford, Taylor & Preston and an editor of the Maryland Law Letter. And do the regulations refer to total hours worked or do they include start and stop times? Arguably, they don’t require employers to track the latter. But, according to McCormick, tracking only total hours worked could be risky.

After all, the DOL’s Fact Sheet #21: Recordkeeping Requirements under the Fair Labor Standards Act (FLSA) says that the department requires “complete and accurate” timekeeping. And in a sample timesheet provided in Fact Sheet #21, the sample employee’s “in” and “out” times are tracked to the minute.

And then there are the various new guidance documents, blog posts, and even tweets that the DOL released when employers started to panic about the increased timekeeping burden that was coming with the new overtime regulations.

“MYTH: if you’re eligible for #overtime, you have to punch a clock,” the DOL said on Twitter in July, with a link to David Weil, administrator of the DOL’s Wage and Hour Division (WHD), promising the same in a blog post. Tammy McCutchen, former WHD Administrator (and now-candidate for Solicitor of Labor) fired back: “Please stop giving this HORRIBLE advice – electronic timekeeping is the best practice, and you know it! Bad time records = liability.”

“DOL is giving HORRIBLE advice,” McCutchen continued in another tweet. “DOL has collected millions from employers [that] fail to keep accurate time records!”

The DOL also confirmed its stance in two formal documents. In the new Guidance for Private Employers on Changes to the White Collar Exemptions in the Overtime Final Rule, the DOL says it does not require employers to record start and stop times for employees with flexible schedules. “[A]n employer could allow an employee to just provide the total number of hours worked each day, including the number of overtime hours, by the end of each pay period,” it says.

And for workers with a fixed schedule, “an employer need not track the employee’s exact hours worked each day; rather, the employer and employee can agree to a default schedule that reflects daily and weekly hours, and indicate that the employee followed the agreed-upon schedule, if that is true.”

A Q&A that also accompanied the new overtime regulations—and defines this practice as “exceptions reporting”—says the same. For workers with a flexible schedule, the DOL currently takes the position that a total of the hours worked each day is sufficient. But when it comes to those with a fixed schedule, the documents don’t use the same unequivocal language absolving employers from recording deviations from scheduled start and stop times.

So if an employee is supposed to work 9 a.m. to 5 p.m., but he comes in at 9:15 and stays until 5:15, do you and he need to note that? The regulations don’t seem to require that for either fixed or flexible schedules, McCormick said. But such inaccuracies could be a problem later on, he added; at the very least, it may cause a judge or jury to question the reliability of your records.

Employer Takeaway

While an employer may not necessarily violate the DOL’s FLSA regulations by allowing an employee to sign off on a schedule that is correct only in terms of total hours worked, such a practice might not meet the “accuracy” standard, according to McCormick.

Indeed, when asked for clarification on exceptions reporting, a DOL spokesperson told BLR^® that the department allows it when an employee works a fixed schedule but that it also requires “an accurate record of the actual hours worked each day.”

“DOL says you can use total hours, and that’s true. That’s what the regulations say,” McCormick said. You may not necessarily have to require that workers correct 9 [a.m.] to read 9:15 [a.m.], “but I’m telling you, if you’re a little loosey-goosey on that, it could be bad later on.”

Doing the minimum required by the regulations can have dire consequences because complete and accurate records are critical in defending wage and hour claims, McCormick explained. You don’t want to try to defend an FLSA suit—even one without merit—with incomplete records; “more information is better.”

McCormick said that requiring employees to punch a clock is still the best way to keep track of time. But if you don’t want to go that route, perhaps because you’re reclassifying a formerly exempt employee, consider an “attendance sheet.” Have employees record their own time and pitch it as a way to track attendance, he suggested.

But if you’re committed to using the DOL’s “exceptions reporting,” at least ensure that your form makes it easy for employees to report schedule deviations. For example, include a column called “extra work” and encourage employees to note when they work through lunch or answer e-mails from home, McCormick said.

Finally, it must be the employee that signs off on his or her hours. It shouldn’t be a supervisor or anyone else, he said. And if a supervisor makes a change after the employee has signed the form, go back to the employee and resolve the discrepancy.

But again, McCormick says more is better. The weaker your records are, the more likely a court is to rely on the employee’s evidence, especially if you can’t refute it. “The less you do, the worse it can get,” he said. “Even if it’s permissible under the regs, it may not be a good idea.”