Employer Wage Record Keeping Requirements

EMPLOYER WAGE RECORD KEEPING REQUIREMENTS

As our office becomes more involved in wage disputes, and particularly in overtime compensation claims, the importance of employer records for wages becomes more apparent to us. We therefore thought it may be helpful to outline the basic record keeping requirements contained the federal Fair Labor Standards Act (“FLSA”) and New Jersey’s Wage and Hour Act and the regulations promulgated pursuant to each act.
The FLSA requires employers generally to maintain records concerning “the wages, hours, and other conditions and practices of employment” and permits the Secretary of Labor to publish regulations in this area. 29 U.S.C. §211. New Jersey’s comparable statutory requirement is found at N.J.S.A. 34:11-56(a)(20). It likewise directs the Commissioner of Labor to publish regulations for the administration and enforcement of the statute.

Accordingly, the real “teeth” of these statutes are found in the administrative regulations. The federal regulations begin with this basic truth: “The amount of money an employee should receive cannot be determined without knowing the number of hours worked.” 29 C.F.R. §785.1 . Under New Jersey’s administrative scheme employers are required to have records that, at a minimum, which reflect the following information:

Every employer shall keep records which contain the
name and address of each employee, the birth date
if under the age of 18, the total hours worked each day
and each workweek, earnings, including the regular
hourly wage, gross to net amounts with itemized deductions,
and the basis on which wages are paid.

N.J.A.C. 12:56-4.1

The federal regulations are similar but require more detailed information. One reason for these differences is that the records are also used for equal pay enforcement actions. Therefore, employer records need to indicate the sex (use of titles such as “Mr. or “Ms.” will suffice) and job description of employees. Curiously, dates of birth are required for employees under 19 (not 18) years of age. The time of day and date on which work begins also is required in order to determine the work week for overtime purposes. 29 C.F.R. §516.2.

The federal regulation also require that the employer’s records show the hours worked each workday and total hours worked each workweek. A "workday" is any fixed period of 24 consecutive hours and a "workweek" is any fixed and regularly recurring period of 7 consecutive workdays. Ibid.

The records must also reflect the amount of total amount of straight time wage payments for a day or week and the total premium wages paid for a day or week. In order to calculate premium overtime pay, the regular rate for each week in which overtime is earned must be calculated and recorded, along with an explanation of the
basis of pay by indicating “the monetary amount paid on a per hour, per day, per week, per piece, commission on sales, or other basis.” Ibid.

Finally, the records must show the amounts paid each pay period, the date of payment and a description of the pay period, along with any deductions. Ibid.

This may seen to be onerous requirements but there are a number of payroll systems that make this type of record keeping simple and automatic. Notably, New Jersey does not specify any particular type of system. It only requires that the system provides a complete, true and accurate record. N.J.A.C. 12:56-4.2. Also, New Jersey’s administrative code provides that if an employer maintains a fixed schedule with few variations, the employer may keep a record showing the exact schedule of daily and weekly work hours that the employee is expected to follow and merely indicate each workweek that the schedule was followed. However, if an employee works more or less hours, then an individual record is required. N.J.A.C. 12:56-4.3.

There is always a concern about the accurate these records when dealing with the difficulty of maintaining detailed records for many employees who may have differing schedules. The federal regulations make it clear that “insubstantial or
insignificant periods of time beyond the scheduled working hours, which cannot as a practical administrative matter be precisely recorded for payroll purposes, may be disregarded.” 29 C.F.R. §785.47. This sounds encouraging but the next line of the regulation instructs that:

This rule applies only where there are uncertain and
indefinite periods of time involved of a few seconds
or minutes duration, and where the failure to count such
time is due to considerations justified by industrial realities.
An employer may not arbitrarily fail to count as hours
worked any part, however small, of the employee's fixed
or regular working time or practically ascertainable period
of time he is regularly required to spend on duties assigned
to him.

Ibid.

So, the failure to record “insignificant” time is only excused when it happens occasionally and when it involves very small amounts of time.

The federal regulations also discuss the practice of “rounding” numbers, where starting and ending times are “rounded” to five, ten or even fifteen minute intervals. The regulations make clear this is permissible only if the practice “averages out so that the employees are fully compensated for all the time they actually work.” 29 C.F.R. § 785.48. This same section points out that differences between time clock records and actual working hours may be disregarded so long as they are minor and do not deprive employees of compensation when they are actually working, as opposed to just clocking in before the work day begins. Ibid.

The final topic is record retention. The federal rule is three years; the state rule is six years. Common sense dictates that New Jersey employers keep these records for six years.

We hope that this summary of employer record keeping requirements is useful to you. Failure to maintain adequate records can create serious difficulties when defending compensation claims and may even indicate an intention to violate the law, which can lead to increased judgments or settlements. If you have any questions about this specific area of law, please contact Tom Barron at (856) 642 6445 or at tbarron@barpostlaw.com.


Statutes and Regulations

29 U.S.C. §211(c)

Every employer subject to any provision of this chapter or of any
order issued under this chapter shall make, keep, and preserve such
records of the persons employed by him and of the wages, hours, and
other conditions and practices of employment maintained by him, and
shall preserve such records for such periods of time, and shall make
such reports therefrom to the Administrator as he shall prescribe by
regulation or order as necessary or appropriate for the enforcement of
the provisions of this chapter or the regulations or orders
thereunder.

29 C.F.R. § 785.1 Introductory statement.

Section 6 of the Fair Labor Standards Act of 1938 (29 U.S.C. §206)
requires that each employee, not specifically exempted, who is
engaged in commerce, or in the production of goods for commerce, or
who is employed in an enterprise engaged in commerce, or in the
production of goods for commerce receive a specified minimum wage.
Section 7 of the Act (29 U.S.C. §207) provides that persons may not
be employed for more than a stated number of hours a week without
receiving at least one and one-half times their regular rate of pay
for the overtime hours. The amount of money an employee should
receive cannot be determined without knowing the number of hours
worked. This part discusses the principles involved in determining
what constitutes working time. It also seeks to apply these
principles to situations that frequently arise. It cannot include
every possible situation. No inference should be drawn from the fact
that a subject or an illustration is omitted. If doubt arises
inquiries should be sent to the Administrator of the Wage and Hour
Division, U.S. Department of Labor, Washington, DC 20210, or to any
area or Regional Office of the Division.

N.J.A.C. 12:56-4.1 Contents

Every employer shall keep records which contain the name and
address of each employee, the birth date if under the age of 18,
the total hours worked each day and each workweek, earnings,
including the regular hourly wage, gross to net amounts with
itemized deductions, and the basis on which wages are paid.

N.J.A.C. 12:56-4.2 Time keeping system

The employer may use any system of time keeping containing the
items specified in N.J.A.C. 12:56-4.1, provided it is a complete,
true and accurate record.

N.J.A.C. 12:56-4.3 Fixed working schedule

(a) Many employees, particularly in offices, are on a fixed
working schedule from which they seldom vary. In these instances,
the employer may keep a record showing the exact schedule of
daily and weekly work hours that the employee is expected to
follow and merely indicate each workweek that the schedule was
followed.

(b) When the employee works longer or shorter hours than the
schedule indicates, the employer shall record the hours the
employee actually worked.


29 C.F.R. § 516.2 Employees subject to minimum wage or minimum
wage and overtime provisions pursuant to section 6 or sections 6 and
7(a) of the Act.

(a) Items required. Every employer shall maintain and preserve
payroll or other records containing the following information and
data with respect to each employee to whom section 6 or both
sections 6 and 7(a) of the Act apply:

(1) Name in full, as used for Social Security recordkeeping
purposes, and on the same record, the employee's identifying symbol
or number if such is used in place of name on any time, work, or
payroll records,

(2) Home address, including zip code,

(3) Date of birth, if under 19,

(4) Sex and occupation in which employed (sex may be indicated by
use of the prefixes Mr., Mrs., Miss., or Ms.) (Employee's sex
identification is related to the equal pay provisions of the Act
which are administered by the Equal Employment Opportunity
Commission. Other equal pay recordkeeping requirements are contained
in 29 C.F.R. part 1620.)

(5) Time of day and day of week on which the employee's workweek
begins (or for employees employed under section 7(k) of the Act, the
starting time and length of each employee's work period). If the
employee is part of a workforce or employed in or by an
establishment all of whose workers have a workweek beginning at the
same time on the same day, a single notation of the time of the day
and beginning day of the workweek for the whole workforce or
establishment will suffice,

(6)(i) Regular hourly rate of pay for any workweek in which overtime
compensation is due under section 7(a) of the Act, (ii) explain
basis of pay by indicating the monetary amount paid on a per hour,
per day, per week, per piece, commission on sales, or other basis,
and (iii) the amount and nature of each payment which, pursuant to
section 7(e) of the Act, is excluded from the "regular rate" (these
records may be in the form of vouchers or other payment data),

(7) Hours worked each workday and total hours worked each workweek
(for purposes of this section, a "workday" is any fixed period of
24 consecutive hours and a "workweek" is any fixed and regularly
recurring period of 7 consecutive workdays),

(8) Total daily or weekly straight-time earnings or wages due for
hours worked during the workday or workweek, exclusive of premium
overtime compensation,

(9) Total premium pay for overtime hours. This amount excludes the
straight-time earnings for overtime hours recorded under
paragraph (a)(8) of this section,

(10) Total additions to or deductions from wages paid each pay
period including employee purchase orders or wage assignments. Also,
in individual employee records, the dates, amounts, and nature of
the items which make up the total additions and deductions,

(11) Total wages paid each pay period,

(12) Date of payment and the pay period covered by payment.

(b) Records of retroactive payment of wages. Every employer who
makes retroactive payment of wages or compensation under the
supervision of the Administrator of the Wage and Hour
Division pursuant to section 16(c) and/or section 17 of the Act, shall:

(1) Record and preserve, as an entry on the pay records, the amount
of such payment to each employee, the period covered by such
payment, and the date of payment.

(2) Prepare a report of each such payment on a receipt form provided
by or authorized by the Wage and Hour Division, and (i) preserve a
copy as part of the records, (ii) deliver a copy to the employee,
and (iii) file the original, as evidence of payment by the employer
and receipt by the employee, with the Administrator or an authorized
representative within 10 days after payment is made.

(c) Employees working on fixed schedules. With respect to employees
working on fixed schedules, an employer may maintain records showing
instead of the hours worked each day and each workweek as required
by paragraph (a)(7) of this section, the schedule of daily and
weekly hours the employee normally works. Also,

(1) In weeks in which an employee adheres to this schedule,
indicates by check mark, statement or other method that such hours
were in fact actually worked by him, and

(2) In weeks in which more or less than the scheduled hours are
worked, shows that exact number of hours worked each day and each
week.

29 C.F.R. § 785.47 Where records show insubstantial or
insignificant periods of time.

In recording working time under the Act, insubstantial or
insignificant periods of time beyond the scheduled working hours,
which cannot as a practical administrative matter be precisely
recorded for payroll purposes, may be disregarded. The courts have
held that such trifles are de minimis. (Anderson v. Mt. Clemens
Pottery Co.,328 U.S. 680 (1946)) This rule applies only where there
are uncertain and indefinite periods of time involved of a few
seconds or minutes duration, and where the failure to count such
time is due to considerations justified by industrial realities. An
employer may not arbitrarily fail to count as hours worked any part,
however small, of the employee's fixed or regular working time or
practically ascertainable period of time he is regularly required to
spend on duties assigned to him. See Glenn L. Martin Nebraska Co. v.
Culkin, 197 F.2d 981, 987 (C.A. 8, 1952), cert. denied, 344 U.S. 866
(1952), rehearing denied, 344 U.S. 888 (1952), holding that working time
amounting to $1 of additional compensation a week is "not a trivial matter
to a workingman," and was not de minimis;
Addison v. Huron Stevedoring Corp., 204 F. 2d 88, 95 (C.A. 2, 1953),
cert. denied 346 U.S. 877, holding that "To disregard workweeks for
which less than a dollar is due will produce capricious and unfair
results." Hawkins v. E. I. du Pont de Nemours & Co., 12 W.H. Cases
448, 27 Labor Cases, para. 69,094 (E.D. Va., 1955), holding that 10
minutes a day is not de minimis.


29 C.F.R. § 785.48 Use of time clocks.

(a) Differences between clock records and actual hours worked. Time
clocks are not required. In those cases where time clocks are used,
employees who voluntarily come in before their regular starting time
or remain after their closing time, do not have to be paid for such
periods provided, of course, that they do not engage in any work.
Their early or late clock punching may be disregarded. Minor
differences between the clock records and actual hours worked cannot
ordinarily be avoided, but major discrepancies should be discouraged
since they raise a doubt as to the accuracy of the records of the
hours actually worked.

(b) "Rounding" practices. It has been found that in some
industries, particularly where time clocks are used, there has been
the practice for many years of recording the employees' starting
time and stopping time to the nearest 5 minutes, or to the nearest
one-tenth or quarter of an hour. Presumably, this arrangement
averages out so that the employees are fully compensated for all the
time they actually work. For enforcement purposes this practice of
computing working time will be accepted, provided that it is used in
such a manner that it will not result, over a period of time, in
failure to compensate the employees properly for all the time they
have actually worked.

29 C.F.R. § 516.5 Records to be preserved 3 years.

Each employer shall preserve for at least 3 years:

(a) Payroll records. From the last date of entry, all payroll or
other records containing the employee information and data required
under any of the applicable sections of this part, and

(b) Certificates, agreements, plans, notices, etc. From their last
effective date, all written:

(1) Collective bargaining agreements relied upon for the exclusion
of certain costs under section 3(m) of the Act,

(2) Collective bargaining agreements, under section 7(b)(1) or
7(b)(2) of the Act, and any amendments or additions thereto,

(3) Plans, trusts, employment contracts, and collective bargaining
agreements under section 7(e) of the Act,

(4) Individual contracts or collective bargaining agreements under
section 7(f) of the Act. Where such contracts or agreements are not
in writing, a written memorandum summarizing the terms of each such
contract or agreement,

(5) Written agreements or memoranda summarizing the terms of oral
agreements or understandings under section 7(g) or 7(j) of the Act,
and

(6) Certificates and notices listed or named in any applicable
section of this part.

(c) Sales and purchase records. A record of (1) total dollar volume
of sales or business, and (2) total volume of goods purchased or
received during such periods (weekly, monthly, quarterly, etc.), in
such form as the employer maintains records in the ordinary course
of business.

N.J.A.C. 12:56-4.4 Retention period

Records containing the information required by this
subchapter shall be kept for six years.

by Tom Barron