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Recordkeeping and Retention

Maria Egbuji, CPPAugust 2014

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Where Does It Start?

• Pre Employmento Job Postingso Applicationso Interviewso Offer lettero References/Background Checkso I-9 ( Right to Work)o Drug testingo Confidentiality Agreementso Employee handbook

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Federal and State Wage and Hour Laws

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Fair Labor Standards Act The Fair Labor Standards Act (FLSA) establishes minimum wage,

overtime pay, record keeping, and child labor standards affecting full-time and part-time workers in the private sector and in Federal, State, and Local governments.

FLSA Does not Require:– Vacation, holiday, severance, or sick pay– Meal or rest periods, holidays off, or vacations– Premium pay for weekend or holiday work– A discharge notice, reason for discharge, or immediate payment of final

wages to terminated employees– Any limit on the number of hours in a day or days in a week an

employee at least 16 years old may be required or scheduled to work– Pay raises or fringe benefits

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The FLSA provides for a broad coverage of employers and employees to meet its stated goal of eliminating “conditions detrimental to the maintenance of the minimum standard of living necessary for health, efficiency, and general well-being of workers.” The two test to determine coverage are:

Enterprise Coverage1.At least two employees of the business are employed in jobs closely related and directly essential to interstate commerce or the production of goods for interstate commerce; and2.The business has an annual gross sales of at least $5,000,000.

Individual Employee Coverage:Under the individual employee coverage test, employees are covered by the FLSA if they are engaged in interstate commerce or in the production of goods for interstate commerce. Interstate commerce is any trade, transportation, or communication between one state and another state or a foreign country.

Who is Covered?

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Basic Provisions and Requirements• Minimum Wage- Federal law requires a

minimum wage of 7.25 per hour for all employees of companies subject to the law.

• Exceptions/Exemptions Specific to Minimum Wage:– Business may hire youth workers at 4.25

hourly for the first 90 consecutive calendar days of employment, so long as no other workers are displaced by the youth worker.

– Tipped employees must be paid at least 2.13 an hour, and the combination of the hourly wage plus tips must equal regular minimum wage.

– Employers may pay employees on a piece rate basis as long as they receive the required minimum hourly rate and overtime for hours worked in excess of 40 hours in a workweek.

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Basic Provisions and Requirements cont..

The Act permits the employment of certain individuals at wage rates below the statutory minimum wage under certificates issued by the DOL:

– Student learners (vocational education students)

– Full time students in retail services or services establishments, agriculture, or institutions of higher education

– Individuals whose earning or productive capacities for the work to be performed are impaired by physical or mental disabilities, including those related to age or injury

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Name the four items regulated by the Fair Labor Standards Act.

• Minimum Wage• Overtime Pay• Recordkeeping• Child Labor

Question

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What is the current minimum wage?

•$7.25 hourly (as of July 2009)

Question

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Notices, Posters, Recordkeeping, and Reporting

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Notices and Posters• All employers of employees subject to the

FLSA’s minimum wage provision must post, and keep posted a notice explaining the ACT in a conspicuous place in all of their establishments.

• The FLSA poster is available in English, Spanish, Chinese, Russian, Thai, Hmong, Vietnamese, and Korean. Employers are only required to post the English version.

• Covered employers are required to post the general Fair Labor Standards Act poster; however, certain industries have posters designed specifically for them. Employers of Agricultural Employees and State and Local Government Employees can post either.

• Every employer who employees a worker with disabilities under special minimum wage certificates is also required to post the Employee Rights for Workers with Disabilities/Special Minimum Wage Poster

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RecordkeepingEvery employer covered by the FLSA must maintain certain records for each covered, nonexempt worker. Most of the data is the type that employers would generally maintain in ordinary business practices.

There is no required form for the records. However, the records must include accurate information about the employee and data about the hours worked and the wages earned.

• Employees full name, as used for Social Security purposes

• Address, including zip code• Birth date if younger than 19• Sex and occupation• Time and day of week when employee’s

workweek begins• Hours worked each day and total hours worked

each week• Basis on which the employee’s wages are paid

(e.g., $9 per hour, $440 a week)• Regular hourly pay rate• Total daily or weekly straight time earnings• Total overtime earnings for the workweek• All additions or deductions from the

employee’s wages• Total wages paid each pay period• Date of payment and the pay period covered

by the payment

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Recordkeeping

• Maintain at least three years: – Payroll records– Collective bargaining

agreements– Sales and purchase records

• Maintain for two years (Records on which wages/computations are based): – Time cards and piece work

tickets– Wage rate tables – Work and time schedules– Records of additions to or

deductions from wages

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Reporting• The FLSA does not contain specific reporting requirements; however, records must be open

for inspection by the Wage and Hour Division who may ask the employer to make extensions, computations, or transcriptions.

• The records may be kept at the place of employment or in a central records office.

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Penalties• When the Wage and Hour Division finds violations, they recommend change

in employment practices to bring the employer into compliance, and they request the payment of any back wages due to employees.

• Willful violations may be criminally prosecuted and fined up to $10,000. A second violation may result in imprisonment.

• Employers who willfully or repeatedly violate the minimum wage or overtime pay requirements are subject to civil penalties of up to $1,100 per violation.

• Employers may file an appeal to the determination within 15 days of receipt of the notice. This is referred to an Administrative Law Judge for a hearing a determination as to whether the penalty is appropriate. If no appeal is filed, the penalty becomes final.

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Federal and State Relationship

When both the Act and a state law apply, the law setting the higher standard must be observed. Some

examples include:

FLSA states overtime must be paid at 1 ½ an employees regular rate

after 40 hours in a “workweek.” California law requires overtime

to be paid after 8 hours in a day.

FLSA requires a minimum wage of 7.25

hourly. Some states have a higher minimum

wage (e.g., Florida’s minimum wage is 7.93

hourly).

FLSA does not restrict hours for employees

over the age of 16. If a municipality has curfew

laws that require anyone under the age

of 18 to be home by 12 am, the employee may

not work past these hours.

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Question

How long must an employer keep payroll records?

Two Years

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Question

When an employee is covered by both federal and state laws, which must an

employer follow?

The law that provides the greater benefit to the employee

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Federal Legislation

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Federal Legislation• Civil Right Act of 1964 (Title VII)

o Resumes, application, interview notes, reference checks, test results, job postings, all records related to hiring, promotion, transfers, layoff, terminations; payroll records including rates of pay and other compensation, request for accommodation; and records related to selection for training apprenticeship ( 1 yr. retention)

o The recordkeeping requirements under Title VII are also applies to employers covered by the Americans with Disabilities Act which is administered by Equal Employment Opportunity Commission (EEOC).

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Federal Legislation• Family Medical Leave (FMLA)

o Detailed payroll and employee identification data, records showing dates of FMLA leave taken by eligible employees and, for intermittent leave, hours of all leave taken, copies of al employee notice and documents describing FMLA and polices related to benefits and unpaid leaves, records related to premium payments made by employees on FMLA leaves, copies of requests for leave and notices to employees responding to request for leave and designating leaves as FMLA, records of any disputes regarding the designation of leave as FMLA ( 3 yr. retention)

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Federal Legislation• Immigration Reform and Control Act (IRCA)

o Employee eligibility verifications forms (INS form I-9) completed and signed by each newly hired employee and the employer. It is recommended that employers’ keep copies of supporting documentation presented by each employee as proof of eligibility to work in the United States. Since the US Department of Labor may inspect forms at any time, it is recommended that forms be kept separately from each employee’s personnel file. ( 3 yr. retention after worker is hired or 1 yr. after termination)

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Tips for Better Recordkeeping• Have written policy on recordkeeping that outlines what documents are to

be created, by whom, what records should be retained, for how long and by whom, and where those records are to be stored

• Create a map or index to retrieve records when necessary• Devote time ad resources to implement the policy• Train managers about the recordkeeping policy

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State Requirements

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State Unemployment Insurance

• Must be retained for certain number of years (varies by state)

• Must be available for inspection and copying by state employment security office

• General requirements listed on right but each state may have additional requirements

• Name• Social Security Number• Dates of Hire, separation,

rehire, reinstatement• Compensation by pay period• Pay period start and end

dates• Paydays• Date and reason for

termination• Time lost due to employee’s

unavailability to work

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State Wage and Hour

• Similar to FLSA. Generally maintaino Nameo Addresso Positiono Hours worked daily/pay periodo Amounts of compensation and rates of payo Age (minor)

Retention periods vary by state. If state does nor specify, recommendation is at least 3 years.

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Miscellaneous

• Escheat Lawso Govern unclaimed wages. Abandoned wages must be reported to

state. Requirements vary by state

• Direct Deposit, Electronic Pay Statements & W2so Laws and requirements vary by states

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RETENTION PERIOD

HintsTwo Words/2

YearsTime Sheets

Billing RecordsWage Deductions

Fours Letters/ 3 YearsFLSAIRCAFMLA

Three Letters/4 YearsIRSSSA

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You arrive at work on Monday morning greeted by a US Department of Labor investigator. He demand s he be allowed to inspect your company’s I-9 forms immediately. You believe the Department of Labor does not have the right to interrupt your business operations in the manner without a reasonable notice. Are you correct?

• Yes you are correct. The US Department of Labor and other authorized agencies, must give employers three business days notice prior to an inspection of I-9 Forms

• Employers should ensure that sure forms are properly maintained and easy to locate as any delay in producing the forms at the scheduled inspection is a violation of the retention requirements

Question

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QUESTIONS?