The DOL’s new overtime rule will likely cause lots of currently exempt employees to begrudgingly begin punching a time clock. This may lead to two unintended consequences that could turn into big headaches for Finance.
For starters, the changes to the FLSA’s overtime regulations are likely to exacerbate an already troubling issue for employers: timesheet fraud.
Of course, you want to believe that all employees will be honest about their “hours worked” when it comes to filling out their timesheets. But timesheet fraud is a real problem that can take a huge chunk out of employers’ bottom lines — especially for those in industries and jobs where it’s easy for workers to cheat.
Plus, the DOL’s new overtime rule will likely see a lot of formerly exempt employees punching a timecard for the first time in their careers. And resentment for having to do this may lead some staff to take a few liberties with their timekeeping.
What to watch for
The best way to prevent time sheet fraud – a.k.a., wage theft – is to be aware of how employees can engage in fraudulent timekeeping.
Some ways wage-and-hour attorneys, like John Skousen of the firm Fisher & Phillips LLP, say employees will do this is by:
- engaging in personal activities outside normal breaks while on the clock
- coming in late but recording their time as if they were on time
- recording time falsely for another employee
- taking an extended meal break but recording less time
- falsely recording that a meal period was cut short in order to claim additional work hours, and/or
- claiming off-the-clock work was performed when it actually wasn’t.
‘Perfect storm’ for lawsuits
Another problem: increased wage-and-hour lawsuits.
With more employees becoming non-exempt (the DOL estimates 4.2 million people will be affected by the new rule), employers will have to start tracking hours for a lot more employees. That creates a lot more room for wage-and-hour mistakes and misunderstandings.
Add to that widespread minimum wage hikes and the attention federal regulators are paying to independent contractor classifications — and you’ve what employment law attorney Richard Alfred described to Fortune as “a perfect storm for new lawsuits.”
Alfred, who heads up the wage-and-hour practice at the law firm Seyfarth Shaw LLP, told Fortune he expects the number of overtime lawsuits alone to increase to about 9,000 this year. That would be close to a 10% increase in the number of lawsuits filed in 2015 — a number which stood at 8,160, according to Alfred.
The good news is there are some steps employers can take to prevent timesheet fraud and wage-and-hour missteps that can lead to lawsuits.
- Expand time-tracking systems. If your non-exempt employee population is about to swell, that means you’ll have to expand the systems you use to track workers’ hours to ensure proper overtime pay — as well as the training that comes with those systems.
- Create a strong timekeeping policy. The key to preventing timesheet fraud is a strong policy on what is and isn’t allowed. Some things it should include:
- A description for managers and supervisors of wage-and-hour laws and the need to capture all hours worked accurately.
- A managerial review process. Employees will be tempted to cheat more frequently if managers aren’t reviewing their timecards and asking questions about hours worked.
- A description of the discipline that will be handed down for recording time for another employee and for falsifying timesheets.
- A description of the process and procedures for correcting inaccurate timesheets.
- Revisit remote work arrangements. Non-exempt must be paid for any work they perform from home or after hours that isn’t “de minimis.” That means workers must be paid for checking work email, taking work phone calls after hours, and a whole host of other tasks that may be performed away from the office. Employers will need a way to track this time and create procedures for how employees will report this time. These will not be easy issues to address, so the sooner you start, the better. Get together with your IT folks to start brainstorming practices, procedures and potential equipment purchases. Reminder: You can dissuade or even prohibit non-exempt employees from performing this type of work, but if they do it, you still need a way to track that time and pay them for it.