Many of the rules of the Fair Labor Standards Act and similar state laws regarding the payment of non-exempt employees are notoriously complex and are often misapplied. Even seemingly minor errors can become costly if they apply to groups of non-exempt employees and become the subject of a Department of Labor investigation or class action lawsuit. In my experience counseling employers and litigating FLSA lawsuits, below are the most common mistakes employers make when tracking work time:
- Failing to track or pay for time that is in fact compensable. The FLSA and similar state laws contain detailed rules on what constitutes time worked by non-exempt employees. Employers must understand these rules—with the assistance of legal counsel if necessary. Common mistakes include failing to track or pay compensable non-exempt employees’ “on call” time, travel time, time spent “donning and doffing” required gear or on other “principal” work activities, time spent in employer-mandated training, and time spent working at home or off-premises.
- Failing to track or pay for work performed outside of the shift, or during meal and rest breaks. Employers cannot simply assume that an employee always works only during her assigned shift. If an employer has reason to know that an employee is performing work outside of regularly scheduled work hours, the employee must be paid for that time—even if she was instructed not to work in such situations or did not have pre-approval. A similar problem arises when work is performed during designated meal or rest breaks—the employer cannot refuse to pay for the break time if it has reason to know that the work was performed. An employer’s potential remedy in these situations is to reinforce its policies and discipline the employee, not refuse to pay the time worked.
- Rounding down but not up. The Department of Labor permits employers to round time to the nearest five minutes or one-tenth, one-quarter, or even one-half hour, but only if the rounding is neutral and averages out so that the employees are being paid for all time worked. This means that it is impermissible for employers to round down to the nearest increment without also rounding up when appropriate. A recent Department of Labor opinion letter addresses this rule. See https://www.dol.gov/whd/opinion/FLSA/2019/2019_07_01_09_FLSA.pdf.
- Failing to have a written policy requiring employees to accurately track time and report underpayments. Such policies educate employees and can help to resolve claims from employees who allege that they were shorted overtime but never brought it to management’s attention.
The Bottom Line for Employers
Making the errors outlined above—especially when they occur as to multiple employees—can lead to significant unpaid overtime liability. Employers should review their policies and practices to confirm compliance with the FLSA and any applicable state wage and hour laws. Because the rules regarding the compensability of certain kinds of time are complex and detailed, employers should consult legal counsel when appropriate.