Electronic Timekeeping: Help or Hindrance to Compliance?


Electronic timekeeping systems can encourage trust or introduce problems in the workplace, and employers and the Labor Department could benefit from greater attention to how such systems may affect recordkeeping compliance, a recent study said.

In an age when punch-card time clocks largely are replaced by electronic timekeeping through computer log-on, swipe card or by fingerprint or eye scan, “litigation risk arising from software use (or misuse) may be underestimated or overlooked by employers,” said the study, “When Timekeeping Software Undermines Compliance,” which recently was published in the Yale Journal of Law and Technology.

Generally, electronic timekeeping allows employers to more precisely record employees’ work hours and helps determine appropriate compensation.  However, strong timekeeping systems also may encourage behaviors and processes conducive to a high level of compliance, said the study, which examined 13 commonly used timekeeping programs to identify how software innovation may erode compliance.

The federal Fair Labor Standards Act was enacted in 1938, and the Labor Department’s recordkeeping regulations were last updated in 1987. The department’s recordkeeping rules “place very few constraints on how employers maintain records,” the study said.  

Many employers of hourly workers who may be most affected by the “use, misuse and functionality of timekeeping software,” are covered by the FLSA, Labor Department recordkeeping regulations and states laws governing compensable time, wage payments, overtime and meal and rest breaks. 

For such employers, timekeeping issues may arise because certain problematic timekeeping software “lives in the gap between the 1938 statute, the 1987 recordkeeping regulations, and the 2016 reality of low-cost data generation and compilation,” the study said. 

For example, Labor Department regulations allow employers to round employees’ time worked, which was appropriate before the invention of automated and precise timekeeping systems, but rounding now should be allowed only by employers that manually track and enter time worked, the report said.

The department also should revise its “Field Operations Handbook” to focus on timekeeping accuracy as a procedural as well as a substantive matter, considering whether timekeeping systems were adopted that minimize errors and encourage behaviors and processes conducive to a high level of compliance.

A strong system minimizes “facially neutral features that can be used for either legitimate or illegitimate purposes,” such as those that allow supervisors edit employee entries, which could correct a timekeeping mistake or unlawfully reduce employee time worked to avoid overtime, the study said.

A strong system also lets supervisors accept or reject an employee’s time entry, but only allow the employee to change the time entered, the study said. Employees also should “be meaningfully notified of edits and the reason for those edits,” it said.

The system necessitates that the manager and employee interact “as a form of real-time mutual surveillance, whereby both parties hold each other to their compliance obligations,” the study said.

Other system features identified by the study as worthy of scrutiny include whether reconciliation functionality could compromise data accuracy and whether a system’s automated defaults comply with all relevant state and federal law. The Labor Department also should revise its requirements to more carefully scrutinize employer timekeeping processes and systems and implement measures to improve transparency, the study said.

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