Employer Recordkeeping Requirements Under the Fair Labor Standards Act (FLSA)

Updated: October 13, 2021

The Fair Labor Standards Act (FLSA) is a federal law that establishes minimum wage, overtime and child labor rules for certain employees.  Generally, FLSA applies to all full and part-time workers unless they are exempt.  Covered employees must be paid at least the minimum wage and receive overtime pay of at least 1.5 times their regular rate of pay for any hours over 40 worked in a given week.  The law also has very stringent recordkeeping requirements.  Employers must comply with these provisions or risk substantial liability.  Outlined below are some of the FLSA requirements and best practices to ensure that employers remain in compliance with the FLSA.

What Employees are Exempt?  

To be considered exempt from FLSA, an employee must be paid on a salary basis and have exempt job duties.

1. Salary Basis. A salary basis means that the employee’s salary is predetermined regardless of how many hours they work.  As of January 1, 2020, the FLSA salary threshold is $36,568 per year ($684 per week).  The FLSA rules allow employers to use nondiscretionary bonuses and incentive payments (such as a commission) that are paid annually to satisfy up to 10% of the standard salary threshold.
2. Exempt Job Duties.For an employee to be considered exempt under the FLSA, their job duties must also be considered exempt under the FLSA.  To determine whether an employee’s job duties are FLSA exempt, the FLSA provides the “duties test.”  Exempt jobs duties under the FLSA will generally fall into five main categories, but there are several other miscellaneous exemptions.  The five primary exemptions are executive, administrative, professional, computer and outside sales employees.  Employees job duties for each of these categories are outlined below:

a.)   Executive.  To be exempt, an executive’s primary duty must be management of the company or a customarily recognized department or subdivision of the enterprise.  The employee must regularly supervise at least two full-time employees, or the equivalent, and the employee must have authority to hire and fire employees (or their suggestions are given weight).

b.)   Administrative.  To be exempt, an administrative employee’s primary duty must be the performance of office or non-manual work that is directly related to the management or general business operations of the employer, and the employee must exercise discretion and independent judgment with regard to matters of significance.

c.  Professional.  To be exempt, a professional employee’s primary duty must be performance of work requiring advanced knowledge in a field of science or learning and the advanced knowledge must be customarily acquired by a prolonged course of specialized study.

d.  Computer Employee.  To be exempt, a computer employee must be employed as a computer systems analyst, computer programmer, software engineer or other similar skilled worked in the computer field.  Furthermore, their primary duty must consist of:

• the application of systems analysis techniques and procedures;
• the design, development, documentation, analysis, creation, testing or modification of computer systems and programs based on and related to user or system design specifications;
• the design, documentation, testing, creation or modification of computer programs related to machine operating systems; or
• a combination of these duties.

e.  Outside Sales Employee.  To be exempt, an outside sales employee’s primary duty must be making sales or obtaining orders or contracts for services, and the employee must be customarily and regularly engaged away from the employer’s place of business.

What Records Must Employers Maintain Non-Exempt Employees?

To comply with the FLSA, employers need to maintain accurate information on each non-exempt worker, including the following details:

• Identifying information. The employer needs to accurate records of the employee’s full name; social security number; address, including their zip code; birth date (if younger than 19) ; gender; and occupation.
• Hours worked. The time and day of the week when the employee’s workweek begins; hours worked each day; and total hours worked each workweek have to be recorded by the employer.
• Wages earned.The basis on which the employee’s wages are paid (e.g., hourly or weekly rate); regular hourly pay rate; total daily or weekly straight-time earnings; total overtime earnings for the workweek; all additions to or deductions from the employee’s wages; and total wages paid each pay period.
• The date of payment and the pay period covered by the payment.

How Long Do Employers Have to Keep Records?

Employers are required to maintain payroll records, collective bargaining agreements, sales and purchase records for at least three years.  Records used to compute wages should be retained for two years.  These include timecards, piece work tickets, work schedules, wage rate tables and additions to and deductions from wages.  Records must be open for inspection by the Department of Labor Wage and Hour Division representatives and kept at the employer’s place of business or in a central records office.

How Should Employers Keep Track of Hours Worked? 

Employers are not required to use a specific manner of timekeeping.  Time clocks, designated timekeepers or employee self-reporting are acceptable so long as records are complete and accurate.

What Are the Rules for Remote Work?

Due to the global COVID-19 pandemic, there has been an inevitable spike in the number of people working remotely.  This significant shift in work culture has raised many questions for employers on how to stay in compliance with FLSA.  In August 2020, the Wage and Hour Division provided guidance to employers on tracking hours and paying wages for work performed remotely.  Essentially, the guidance confirmed that the same rules apply regardless of whether work is being performed in person or remotely.

Under long-standing law, employers must pay employees for all hours worked wherever performed.  This includes work not requested but “suffered or permitted” to be performed.  “Suffer or permit” to work means that if an employer requires or allows employees to work, then the employees are working and consequently, the time spent will probably be considered hours worked.  For example, an employee may voluntarily continue to work at the end of the shift to finish an assigned task or to correct errors.  The reason is immaterial.  In the context of remote work, employers must be careful about employees putting in extra hours without permission or supervision and being required to pay for that time.  However, the key issue in such cases is whether the employer knows or has reason to know by exercising reasonable diligence of the unscheduled additional hours worked.

For recordkeeping purposes, the guidance stated that employers may require non-exempt employees to accurately record and report their time worked.  However, employers cannot merely state that employees are prohibited from doing unauthorized work.  They must make a reasonable inquiry in light of the circumstances to determine hours worked.  For example, employers may have actual knowledge of hours worked based on employee reports or notifications.

Setting up procedures for employees to report hours worked, whether authorized or not, and paying them for all reported hours are best practices that will help ensure FLSA compliance for remote work.  To minimize the risks of paying regularly for unauthorized work, employers can establish policies regarding such work but also promptly review and investigate time records to enforce those policies.

Conclusion 

Employers should consult an experienced employment attorney in developing appropriate timekeeping and recordkeeping procedures to ensure compliance with the FLSA.

Photo by Maksym Kaharlytskyi on Unsplash