Timekeeping and Exempt Employees

June 15, 2005

Recently, the Department of Labor (DOL) issued an opinion letter clarifying confusion about timekeeping and exempt employees. The opinion is supported by the preamble to the new DOL regulations 29, C.F.R. 541.

Under the Fair Labor Standards Act (“FLSA”), employers are required to track and record time for non-exempt employees. The FLSA does not mandate what type of timekeeping device should be utilized for nonexempt employees as long as accurate records of time are kept. Employers can use a variety of methods, such as time clocks, time cards, or timesheets. The employer is ultimately responsible for the accuracy of the time records, even though it is possible for employees to track or record their own time. As long as the employer is able to correctly pay the employee for all time worked, including overtime, then the employer is in compliance with the statute.

How does timekeeping relate to exempt employees? According the FLSA, nonexempt employees must be paid a minimum wage, as well as time and one-half their regular rate for all hours worked over 40 in a defined work week. Conversely, exempt employees are paid on a salary basis and based on other qualifying reasons, are exempt from overtime wages even if they work more than the designated 40 hours in a defined work week. Employers, though, for a myriad of reasons, may still ultimately decide to track the time worked by exempt employees. Some of those reasons include easier payroll administration and benefits management.

Employers should track time for nonexempt and exempt employees differently. Nonexempt employees time worked is calculated by the hour. Calculating exempt employees time can be a bit more challenging. This can be done in different ways. Some employers track the days worked by exempt employees, yet do not track hours. Other employers track time worked by applying any vacation or sick leave. In other words, the assumption is made that an exempt employee will be paid a regular salary unless any vacation or sick leave is utilized. This way, an employer can correctly record the time an exempt employee has worked, calculate any vacation time or sick leave that was used, yet avoid tracking the exempt employee by the hour. As long as the timekeeping method does not conflict with the salary basis test under the FLSA, employers will be in good shape.

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