FLSA Compliance

All US businesses are required to track time for all non-exempt employees and keep those records for 2 years in order to be FLSA compliant and avoid unexpected and expensive wage and hour lawsuits. Here are the most important things you need to know about DOL's FLSA timekeeping compliance.

FLSA compliant timekeeping software

What is a DOL/FLSA compliance?

The FLSA (Fair Labor Standards Act), on the other hand, are rules set by US Department of Labor (DOL) and they apply to all US businesses. They set minimum wage, overtime pay, recordkeeping, and youth employment standards.

FLSA states that employers may use any timekeeping method they choose: 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.

The FLSA (Fair Labor Standards Act) is in charge of:

Who should follow FLSA rules and regulations

In terms of employees, the FLSA rules and regulations apply to everyone who is:

In terms of companies and enterprises, the FLSA rules and regulations apply to all who:

Setting minimum wage

According to the current FLSA regulation, the minimum wage per hour is:

The minimum wage per hour mustn't be lower than these figures, even for salaried employees.

Setting overtime pay

If the employee is compensation nonexempt

The compensation nonexempt employees receive for overtime work mustn't be less than 1.5 times of their regular rates within a 40-hours work week.

For example: if an employee who works for $9 per hour, works for 46 hours within a work week, the amount the employer is obliged to pay is:

If the employee is paid per commissioned job

If the employee is paid per commissioned job, then the employer divides the amount earned for a week with the number of hours worked, including overtime, to find the hourly rate. In this case, overtime equals one half of the regular rate.

For example: if the employee is paid $352 per commissioned job, and has worked 44 hours within a week, the breakdown goes as follows:

Calculating the regular rate for salaried employees

To calculate the regular rate for salaried employees (those that receive the same compensation no matter the hours worked), you have to divide the salary by the actual hours the employee has worked within a week.

For example: if the employee's actual hours worked differ from week to week, but he or she receives a flat compensation of $450, the breakdown for a 45 hour-week goes as follows:

The hourly rate and the final figure for salaried employees, will vary depending on the total hours worked - the higher the total hours, the lower the hourly rate will be, which will influence the overtime pay.

Exempt and nonexempt employees

When it comes to applying these rules, there is a difference between exempt and nonexempt employees. Strictly speaking, whether someone is exempt or nonexempt may depend on:

Professions that are exempt from overtime payments and minimum wage

For more detailed information on the professions exempt from overtime payments and minimum wages, check out this guide.

Employees who are exempt from overtime payments

Recordkeeping rules for exempt employees

By definition, exempt employees are not paid by the hour, but have fixed salaries. This includes jobs where it's required to:

According to the FLSA requirements, for exempt employees, it's important to keep records on:

Although salaried employees have fixed salaries that are not determined by the hours they've worked, a certain daily routine is expected - the FLSA requires information on when the work begins (e.g. 9AM).

For the same reasons as the above point, it's important to select the day when the work week begins. Some companies work on Saturdays, but not on Mondays, so they start their work week on Tuesdays - it's important to document this and make it official.

For exempt employees, It's also beneficial to keep track of the time spent working, in order to:

  1. Add additional accountability for employees - Salaried employees usually gain higher compensation for their work, than employees paid by the hour, so it's important to track whether they have been productive with their work.
  2. Have accurate information on who worked overtime, and how long that overtime was, in order to:
    • Gain insight in whether you should hire additional employees, to decrease the number of overtime hours for certain salaried employees
    • Gain insight in whether you should include an app to automate some of the processes causing overtime for certain salaried employees
    • Calculate overtime pay, in accordance with the FLSA requirements
  3. Have insight in the number of hours it takes to finish a certain type of project. Also, gain knowledge on the type of work, or client, taking the most out of your employee's working hours

Recordkeeping rules for nonexempt employees

According to the FLSA, all employees that earn less than $11.38 per worked hour (which builds up to $23,600 per year) are not exempt (not salaried), so they must be classifies as hourly. The same rules apply to certain types of jobs: in tech jobs, if the employee is making less that $27.63 per worked hour (which builds up to $57,470 per year), he or she must also be classified as hourly.

This type of employees requires more information to collect, so apart from the information needed for exempt employees:

You also have to provide:

According to FLSA requirements, companies are required to keep records for the following information, for 2 years at minimum:

Apart from this information, it's also vital to keep the following records, for 3 years at minimum:

FLSA timekeeping requirements

In order to be compliant with the FLSA timekeeping requirements, it's important to keep track of employee's hours worked.

When it comes to the timekeeping itself, there are no actual limitations for the timekeeping method used. The only requirement is that you must provide data that is precise, correct and thorough. Each company can choose the method most suited for its workers:

Companies must keep precise and correct records on the hours worked for nonexempt employees. These records must be kept daily and include:

The FLSA allows time rounding, usually to quarter of an hour:

General FLSA timekeeping requirements

If you disregard the FLSA requirements

To be compliant with FLSA, you must always pay at least minimum wages, compensate for all overtime hours, and classify employees properly to exempt or nonexempt.

Otherwise, you risk a wages and hours lawsuit.

Not required and covered by the FLSA

Employers are obliged to make sure their employees are aware of the FLSA rules; the rules must be posted in the workplace for everyone to see.

The matters not required or covered by FLSA are the times spent

The FLSA also doesn't require

Also not prescribed by the FLSA

For further reading, The United State's Department of labor provides additional information on FLSA requirements here.

FLSA compliant timekeeping software

Clockify is a free time tracking software completely compliant with the FLSA requirements.

Clockify FLSA compliant timekeeping software

Timekeeping features in Clockify

Learn more about: Work hours tracking | Time reporting | All features | Calculating payroll