Earlier this month, the United States Department of Labor (“DOL”) announced that it had recovered $1 million in unpaid overtime from federal defense contractors in California. This award was based, in part, on the DOL’s finding that the contractors violated the record keeping requirements set forth in the Fair Labor Standards Act (“FLSA”). In particular, the DOL found that the contractors had failed to maintain proper time and payroll records for its workers.
This determination highlights the need for employers to comply with federal and state record keeping requirements. The FLSA, as well as most state wage and hour laws, requires that employers keep certain time and payroll records for non-exempt employees. The DOL has provided that an employer must maintain the following records:
(1) Employee’s full name and social security number.
(3) Birth date, if younger than 19.
(4) Sex and occupation.
(5) Time and day of week when employee’s workweek begins.
(6) Hours worked each day.
(7) Total hours worked each workweek.
(8) Whether the employee is paid on an hourly, salary, or fee basis.
(9) Regular hourly pay rate.
(10) Total daily or weekly straight-time earnings.
(11) Total overtime earnings for the workweek.
(12) All additions to or deductions form the employee’s wages.
(13) Total wages paid each pay period.
(14) Date of payment and pay period covered by the payment.
Notably, the DOL further provides that for a period of three (3) years, an employer must preserve payroll records and collective bargaining agreements. Similarly, records on which wage computations are based, time cards, wage rate tables, records of additions to or deductions from wages, and work and time schedules need to be retained for two (2) years.
The DOL, however, has only provided the minimum requirements for complying with the law, but not necessarily the best practices for an employer to protect itself. First, these record keeping requirements are directed at non-exempt employees. As we have seen over the past several years, misclassification of exempt employees is a hotly litigated issue. The failure by an employer to maintain complete records for exempt employees puts it at a distinct disadvantage in defending such lawsuits. Accordingly, to the extent possible, employers should also maintain the records discussed above for exempt employees. Second, even though the DOL only requires employers to keep time records for two years, employers can be liable for damages under the FLSA for up to three years before the filing of a lawsuit.
Thus, employers can best protect themselves with respect to potential wage and hour lawsuits by implementing a policy of preserving payroll and time records for all employees for at least three years.