While most employers have strict rules about non-exempt employees recording their time, not many employers require exempt, white collar, employees to do so. The lack of timekeeping requirements is often based on concerns about maintaining the exemption as well as the perception that when in a "white collar position" it is not necessary to keep track of time to the minute. The Department of Labor (DOL) recently dispelled the concerns about timekeeping requirements for exempt employees.
In order to qualify for an overtime exemption, employees must meet both a duty and salary test. The "salary test" requires that employees receive a salary - a fixed amount that does not vary based on the quality or quantity of work. In addition, the salary basis test also prohibits certain deductions from an exempt employee's salary. For example, employers cannot make deductions for partial day absences. Given these limitations, employers have long thought that requiring exempt employees to keep track of hours worked was contrary to the concept of a salary that did not vary based on quantity of work. In other words, why else would employers keep track of hours worked if not to adjust "salary?"
The DOL recently issued an opinion letter in response to an inquiry about whether timekeeping requirements for exempt employees violated the salary basis test. The DOL reaffirmed its position that timekeeping requirements for exempt employees do not affect an employee's exempt status. Accordingly, employers may require that exempt employees clock in and out at the beginning and end of the day and at breaks or keep accurate time sheets of the time worked each day.
There are several legitimate business reasons why an employer might want to keep track of an exempt employee's work time. Timekeeping records allow an employer to monitor labor costs in order to measure efficiency and allocate costs to certain areas of its business or projects. In addition, these records allow an employer to manage the performance of exempt employees. Characterization as an exempt employee does not bring with it the ability to disregard attendance rules. Accordingly, while the exempt employee's salary cannot be reduced for arriving 15 minutes late, the employer can use this information to address chronic tardiness or attendance problems. Finally, these time records establish the amount of time worked per week and, therefore, the amount of time available for intermittent FMLA leave for exempt employees.
Employers with timekeeping requirements for exempt employees must be diligent in how they utilize the information. One tool for ensuring compliance with wage and hour laws is a wage and hour audit that reviews exemption classifications as well as other payroll practices to ensure that the salary basis test is maintained.
For more information on any of these topics please feel free to contact any attorney in Waller Lansden's Labor & Employment Practice
. The opinions expressed in this bulletin are intended for general guidance only. They are not intended as recommendations for specific situations. As always, readers should consult a qualified attorney for specific legal guidance.