FLSA RECORDKEEPING

Steven Cesare, Ph.D.

A business owner from Iowa called me the other day to talk about a novel commission plan he was considering for his employees. As such, he and I had a lengthy, complex, and elastic conversation addressing several interesting nuances, shrouded by legal uncertainty. Aspects of the proposal involved his company engaging in an employee lease program with a third-party organization for a percentage of his employees’ workweek to sell services, at an agreed upon commission rate, that would be processed through his company and the leasing agency; with an alternative structure, substituting his W2 employees as 10-99 workers who would in turn provide sales services for his company while being processed through the other organization’s payroll system.

Ultimately, I told the business owner to give me some time to share his proposal with various government agencies fluent in the legal intricacies of the Fair Labor Standards Act (FLSA). During my conversation with the government representative, he made the following comments: “I guess it could work, if…”, “while it sort of sounds okay, there is a lot of inherent liability…”, “Possible. But I wouldn’t do it.”

In turn, I relayed the government representative’s admonishment to the owner who took the cautionary advice to heart and decided to not move forward with the interesting, albeit quixotic, commission plan. That discussion stimulated inquiry into the business owner’s compliance with various FLSA regulations, at which time, I informed him of the legal fundamentals of the FLSA that he should affirm are in place in his organization.

In specific, I reminded the business owner that he must keep the following 14 records for each non-exempt worker (those items below that are designated with an asterisk must also be kept for exempt employees). While the FLSA requires no particular form for the records, it does require that the records include certain identifying information about the employee and data about the hours worked and the wages earned. The law requires this information to be accurate. The following is a listing of the basic legal FLSA records that an employer must maintain:

Employee’s full name and social security number.*
Address, including ZIP code.*
Birth date, if younger than 19.*
Gender and occupation.*
Time and day of week when employee’s workweek begins.*
Hours worked each day.
Total hours worked each workweek.
Basis on which employee’s wages are paid (e.g., “$9 per hour”, “$440 a week”, “piecework”)
Regular hourly pay rate.
Total daily or weekly straight-time earnings.
Total overtime earnings for the workweek.
All additions to or deductions from the employee’s wages.
Total wages paid each pay period.*
Date of payment and the pay period covered by the payment.*

Additionally, each employer shall preserve for at least three years: payroll records, collective bargaining agreements, sales and purchase records. Records on which wage computations are based should be retained for two years (e.g., time cards and piece work tickets, wage rate tables, work and time schedules, and records of additions to or deductions from wages). These records must be available for inspection by Department of Labor representatives, who may ask the employer to make extensions, computations, or transcriptions. The records may be kept at the place of employment or in a central records office.

Also, employers may use any timekeeping method they choose. For example, they may use a time clock, have a timekeeper keep track of employee’s work hours, or tell their workers to write their own times on the records. Any timekeeping plan is acceptable as long as it is complete and accurate.

While thinking “outside of the box” for creative compensation plans is always encouraged, periodic legal review and ongoing procedural audits of a company’s wage and hour program always take priority.

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