Time Tracking for Exempt Employees: What You Need to Know

Time Tracking for Exempt Employees: What You Need to Know

As an employer, you can require all employees, regardless of whether they are classified as exempt or non-exempt, to track and record their hours worked. In addition, you can set work schedules, including how many hours an employee may work, for both exempt and non-exempt employees, so long you follow state and jurisdiction meal and rest breaks as well as day of rest rules.

 

But there are some things you need to be aware of.

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State Requirements

The federal Fair Labor Standards Act (FLSA), which is enforced by the Department of Labor (DOL), has set no requirements for exempt employees to track hours worked, unlike non-exempt employees who are required to track hours worked. This, however, does not apply to some states.

 

For example, in Rhode Island, an employer must keep an accurate daily and weekly (time in and out) record for all employees. No one, including employees paid on a salary basis, is exempt from this law. Illinois is similar in that an employer must maintain a daily record of hours worked by both exempt and non-exempt employees.

 

Pay Deductions

It is important for employers to clearly understand that, although it is acceptable to track exempt employees’ time, in most cases, it is not acceptable to deduct from their pay for hours not worked. In general, an exempt employee’s salary should not be changed based on the number of hours they work during a particular week; otherwise, this may jeopardize the exemption status. We like the adage, “exempt employees are paid a salary for the job they do, not the hours they keep.”

 

Under the DOL, there are specific circumstances where an employer can deduct or reduce an exempt employee’s weekly salary. These include instances when an employee is out for one or more full days for personal reasons (except for sickness or disability); for absences of one or more full days due to sickness or disability if the deduction is made in accordance with a bona fide plan, policy, or practice of providing compensation for salary lost due to illness; to offset jury or witness fees; for military pay; for penalties imposed in good faith for infractions of safety rules of major significance; or for unpaid disciplinary suspensions.

 

It’s considered an improper deduction to reduce an employee’s salary if the workplace is closed due to inclement weather, or if an exempt employee is out for two days due to a minor illness in the absence of a bona fide sick leave policy, or practice in place. In addition, if an exempt employee is out for personal reasons and does not have any accrued paid time off to apply, deductions from salary can only be made in full-day increments. In other words, if the employee works a partial day, they must receive a full day’s pay. It is permissible to prorate an employee’s salary during their first or last week of employment, or for weeks an employee takes leave under the Family and Medical Leave Act.

 

Jurisdiction is Key

In summary, the jurisdiction where an exempt employee works is key to following state time-tracking requirements. Non-exempt employees should always track their time in accordance with the FLSA as well as state overtime requirements. When there is no state requirement for an exempt employee to record their hours worked, there may be valid reasons to adopt such a practice, which would be unique to your business and operational procedures.

 

Melissa M. Gillespie, Vice President, HR Services, Hilb Group New England, leads the company’s HR Services practice and is dedicated to simplifying the complexities of HR for clients.