Q. We keep track of work hours for non-exempt employees using an electronic timekeeping system. For our exempt employees, we really have no records of how many hours they are working each day or week. Are we required to? Even if it's not required, should we?
A. Like many legal questions, the answer is "it depends." The first question is somewhat easier. The FLSA requires employers to maintain accurate records of the hours worked by non-exempt employees, but not for exempt executive, administrative, or professional employees. If your employees work in a jurisdiction that does not have its own additional recordkeeping requirements, then no, you are generally not required to keep records of your exempt executive, administrative or professional employees' work hours.
However, some states do have their own recordkeeping requirements.
For example, effective in August 2014, the Illinois Department of Labor adopted a new regulation (codified at 56 Ill. Admin. Code 300.630(a)) that expressly require employers to maintain time records for their exempt employees:
Regardless of an employee's status as either an exempt administrative employee, executive or professional, every employer shall make and maintain, for a period of not less than 3 years, the following true and accurate records for each employee: the name and address, the hours worked each day in each work week, the rate of pay, copies of all notices provided to the employee as required by subsection (d), the amount paid each pay period and all deductions made from wages or final compensation. Additionally, any employer that provides paid vacation to its employees must maintain, for a period of not less than 3 years, true and accurate records of the number of vacation days earned for each year and the dates on which vacation days were taken and paid.
So for exempt employees in Illinois and other jurisdictions with similar requirements, yes, employers should keep a record of exempt employees' work hours.
But what if such records are not required where your employees work? Is it still a good idea? Maybe. Misclassification lawsuits remain a staple of wage and hour litigation and a significant source of liability for employers. One of the principal headaches of such litigation for employers is figuring out their potential exposure in the absence of any accurate records of how much time the plaintiff employees actually worked. Of course, this could cut both ways: if the records show little or no overtime so much the better, but if they confirm that everyone is working 80 hour weeks, they may simply make the plaintiffs' case.
So, does keeping time records for exempt employees mean that such employees should punch in and out alongside the hourly folks? It might, but it's not necessarily required. Even states like Illinois that require such records don't prescribe a specific recordkeeping method. Rather, the requirement is simply that employers adopt some method of timekeeping that results in an accurate record of hours worked, whatever that is. Federal regulations for non-exempt employees likewise make it clear that timekeeping methods are at the employer's discretion, so long as the results are accurate.
So, for example, for office employees who generally stick to a fixed 9 to 5 schedule, employers may be able to use a "payroll by exception" system wherein employees only report variations from the regular schedule. However, employers who use that approach with exempt or even non-exempt employees need to be careful. All too often, the result is that variances simply go unreported, leaving the employer with an unreliable record that may be as much hindrance as help in the event of any dispute.