1. Maintain accurate and complete employee records.
Employment histories indicating hire date, termination date, dates of any leaves of absence, as well as tracking any changes in job, supervisor, work location, state of employment, work schedule or shift and pay rate are critical. A common issue for employers is understanding the rounding of time records. Federal regulations allow rounding as long as it is used “in such a manner that it will not result, over a period of time, in failure to compensate the employees properly for all the time they have actually worked,” according to the U.S. Code of Federal Regulation at 29 CFR 785.48(b). A review of the pay process may verify that the rounding rules are properly applied, but it’s possible that the net effect of rounding is still negative. For example, if the company’s employees tend to arrive a few minutes early and stay a few minutes late, they may be regularly hurt by the rounding rule. If that is the case, it is advisable to revise the rounding policy to avoid claims of improper rounding.
2. Retain pay records on a weekly basis, regardless of pay schedules.
Although pay is calculated on a weekly basis, oftentimes employer records are maintained at the pay period level (bi-weekly, semi-monthly, or even monthly). Many wage and hour claims involve payment for additional work time. To correctly record the time, it is important to know how many hours were worked in each week so that any relevant premiums (such as time and a half for overtime) can be properly applied. All time records should include accurate daily start times, break times and end times! Without detailed records the benefit of the doubt must be given to the employees.
3. Track edits to time records.
Edits to time records for non-exempt/hourly employees are essential. Keeping track of what changes are made, by whom and why is very important when defending against wage and hour claims. It is useful to have pay edits to time records approved by the employee and documented. Such documentation can negate claims of malicious edits altogether.
4. Preserve key data in electronic format.
Employers are aware of requirements to retain historical time and pay records but they may not be aware of the implications of how such information is stored. In fact, many employers outsource time and pay systems to outside vendors and rely on those firms to maintain the data. It is important to understand how outside vendors store data and the process for retrieving information from them.
5. Conduct Periodic Audits
The best way to avoid costly wage and hour lawsuits is to perform regular audits and reviews of employee job functions and payroll processing. Laws regulating employee pay vary by state and change as new legislation is passed and case law developed. In addition, job duties and compensation structures evolve over time. Either of these scenarios can mean that policies and practices that had been acceptable (such as classifying a group of employees as exempt from overtime under the federal Fair Labor Standards Act and state wage and hour laws) may need to be revised. When it comes to defending against a wage and hour lawsuit, information is KEY.
May 2011, the U.S. Department of Labor (DOL) launched its first application for smart phones, a timesheet to help employees independently track the hours they work and determine the wages they are owed. Ensure that your payroll records are accurate!
Reference: SHRM Online Newsletter,03/10/2011, Deborah Foster, PHD, Welch Consulting
