FLSA Record-Keeping Burden Is On Employer

(Published October 6, 2008)

 

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According to the Wage and Hour Division (WHD) of the U.S. Department of Labor (DOL), in fiscal year 2007, employers paid a total of $180.7 million in minimum wage and overtime back wages as a result of Fair Labor Standards Act (FLSA) violations. When employees are underpaid, it typically signals a problem with the employer’s record-keeping practices, whether the records are incomplete, inaccurate, or non-existent.

 

"Many employers need to be reminded that record-keeping compliance can greatly enhance monetary compliance and save them money and time," stressed Morris Jennings, a wage and hour consultant in Austin (www.flsafmla.com ) and former WHD investigator. The following 7th Circuit Court of Appeals (Illinois, Indiana, Wisconsin) ruling should be "required reading" for HR directors and other managers, he said.

 

The case involved a non-exempt store employee who charged her employer with violating the FLSA by failing to pay overtime wages that were due to her. Because she was unable to identify the hours or even days she'd allegedly worked overtime, the district court initially granted summary judgment in favor of the employer. Said the court: "An employee who brings suit for unpaid overtime compensation bears the burden to prove…that she performed work for which she was not properly compensated."

 

The 7th Circuit reversed the ruling on appeal. Reason: The burden of proof is on the employee only if accurate time records have been kept by the employer. Here, there was evidence that the employer's records were not in compliance with the FLSA and could not be trusted. When an employer fails to keep accurate records of work performed, the employer must bear the consequence of that failure. (Brown v. Family Dollar Stores of Indiana, 7th Cir., No. 06-3529, 2008)

 

DON'T FOLLOW THIS EMPLOYER'S EXAMPLE

 

"This case is a good example of the bad things that can happen to an employer who does not take record-keeping responsibilities seriously," Jennings commented.

When employees claim unpaid overtime, it's their word against yours as to hours worked. Your "word" is your records. Without well-kept records, courts may take the employees' "word" and award damages even though they are approximations.

 

The court allowed the employee's case to proceed based on evidence that the company's records could not have been accurate because they did not conform with the hours she would have had to have been at the store, given the store's hours and her job duties. For example, she regularly opened and closed the store, which required her to do work at least 60-90 minutes before opening and 1-2 hours after closing. Time records often indicated that she clocked out less than 30 minutes after closing. During holidays when store hours were extended, records indicated that she clocked out before the store even closed.

 

FOR THE RECORDS

 

Jennings suggested the following best practices for avoiding FLSA record-keeping errors.

 

• Thoroughly review the FLSA rules on record-keeping and hours worked (i.e., what constitutes compensable time), and arrange for focused training of HR and Payroll staff, as well as department managers.
  
• Express the company's intentions to complydirect employees to accurately record all of their work time, including any work performed outside of scheduled hours.
  
• Do not prohibit overtime work or require prior supervisory approval. There are instances when some work beyond scheduled hours cannot be avoided. Rescheduling hours during the workweek is legal, as is asking an employee to explain why he/she left work late or missed a part of the meal break. "Burdensome prohibitions will only lead to unrecorded hours worked and many difficulties with the DOL and/or the courts," Jennings warned.
  
• Establish an open-door policy, and encourage employees to handle issues in-house (rather than run to the DOL or an attorney).
  
• Audit FLSA compliance periodically, including the completeness and accuracy of relevant records. Retain on file the results of each audit. Take prompt action to resolve any deficiencies discovered.

FLSA CLAIMS ARE HOT, HOT, HOT

 

Still think the state of your company's pay records is not a front-burner issue? Consider that:

 

1. The WHD may step up its investigation and enforcement efforts in response to two July 2008 Government Accountability Office (GAO) reports strongly criticizing the WHD's mishandling of numerous overtime and minimum wage complaints. Also, Jennings noted, the WHD improved its complaint intake procedures in 2007. "By weeding out complaints that will end up being without merit, that saves time that can be devoted to legitimate enforcement efforts."

 

2. FLSA claims are costly. Pay mistakes often affect entire job categories, thus, resulting in a large number of plaintiffs. Also, mistakes in classifying non-exempt employees as exempt often involve well-compensated employees with high back pay potential.

 

3. Employee awareness is up. Recent headline-making, multi-million dollar wage and hour claims involving the likes of Wal-Mart could plant the seeds of a suit with disgruntled employees, as could plaintiffs' attorneys.

 

 

 

Related topic(s): Payroll Management/Overtime; Record-Keeping Documents; Payroll Management / FLSA - Fair Labor Standards Act