US Employee Time Tracking Laws & Compliance Guide

Ever feel like you're juggling a million things as a business owner, especially when it comes to understanding all the timesheet legal requirements?

Let's simplify one crucial aspect: not just knowing federal law on timesheets, but actually following federal timekeeping requirements and doing it right can not only keep you compliant with regulations, but also reduce risks of time fraud and significantly enrich your business with the insights you’ll get.

The timekeeping rules for employees in the USA are primarily governed by:

⚖️ The Fair Labor Standards Act (FLSA)

⚖️ Various state laws on vacation, workweek, etc.

Who Needs to Track Employee Time

Time tracking isn't just good business practice — employee time card laws are mandatory for most US employers.

Workplaces under the FLSA are required to keep track of their employees’ time. This time clock labor law applies to most businesses with 💰annual sales above $500,000, hospitals, schools, government agencies, and those engaging in interstate commerce.

❗Although FLSA does not specify what method of tracking is used (e.g., time clock, manual timesheet, software), employee records should always be accurate and complete.

Non-exempt employees require time tracking under federal law. They are workers protected by the FLSA’s rules on minimum wage and overtime, which usually apply to those 🪙earning less than $35,568 per year. Generally, such employees (executives, administrators, professionals, and those who meet the requirements) do not have to be tracked under federal law, but in some states, it is required for everyone.

If it concerns part-time, full-time, and contractors, the rules can vary considerably. Employees who are not exempt should log their time, regardless of whether they work full-time or part-time.

🔔Independent contractors don’t have to follow the FLSA since they are not considered employees, but missclassification can result in significant penalties. If a remote worker is non-exempt, time must be tracked for them just as for employees working on-site.

The Fair Labor Standards Act (FLSA)

The Fair Labor Standards Act (that’s a federal law) timesheet requirements imply that employers maintain good records for each hourly employee. It is to keep count of such things as how many hours they work day in, day out, and during a workweek, what they earn per hour, how much they make for regular hours of work as well as any overtime they put in.

The U.S. Department of Labor is responsible for enforcing the FLSA, which sets the guidelines for tracking non-exempt employees’ work hours.

Key Points

• Recording: Under federal labor laws, employers are required to record how many hours non-exempt employees work, as well as overtime and any deductions.
• Overtime Pay: Workers who are not exempt must be paid at a rate of 1.5 times their regular wages for all the extra hours worked each week.
• Tracking Method: Any timekeeping system can be used by employers, as long as it records all the employee’s working hours correctly.

As per FLSA, all non-exempt employees are required to be paid the minimum wage for every hour worked and at a rate of time-and-a-half overtime for hours over 40 in a week. The FLSA allows 16-year-olds and older to work as many hours as they can handle, but they must still be paid for their work.

The starting point for overtime at any work is 40 hours each week. No averaging of hours over more than a week is allowed. Managers can determine their staff’s working week, but may not alter it to dodge overtime requirements.

The FLSA places many responsibilities on employers when it comes to records. They should always have accurate records of:

• The name and Social Security number of the employee should be entered.
• Write in the address, birth date (under 19), sex, and occupation.
• The time and day when the employee's workweek begins.
• Hours put in one day and total hours for the week.
• The method used to pay wages (by the hour, by the week, etc.).
• Regular hourly pay rate.
• Total daily or weekly straight-time earnings.
• All of the earnings from overtime during the workweek
• All additions to or deductions from wages
• How much are employees paid each pay period?
• The date when payment is made and the duration of the pay period must be explained.

Time Tracking Rules for Non-Exempt Employees

As per the requirements, employers are required to record when their staff members begin and finish each day at work.

Any type of timekeeping system works under the FLSA as long as all hours employees work are accurately recorded.

During unpaid breaks and paid rest periods, business owners should identify which time needs to be compensated and which does not.

If employees are completely at ease and do not work while having a meal break, the break may be unpaid. However, any rest break lasting less than 20 or 30 minutes must be included in hours of work and needs to be paid by the employer.

If you do anything during your scheduled break, the time should be counted as work.

For rounding hours and automatic time deductions, the Department of Labor permits rounding employee time to the nearest quarter hour (15 minutes), provided the practice doesn't consistently favor the employer.

Automatic meal deductions are legal but risky—if employees work through designated meal periods, those automatic deductions become improper and could lead to wage violations.

Overall, employers may round employee time for simplicity, but the FLSA permits this only if the rounding policy is neutral and does not consistently favor the employer.

For example:

• Rounding to the nearest 10-15 minutes is generally acceptable.
• Policies that always round down (e.g., denying employees pay for partial hours) are illegal.

Overtime Tracking and Compliance

Non-exempt workers receive overtime if they work more than 40 hours in a given workweek. A time-and-a-half pay rate is required, applying to commissions, bonuses and other rewards. Time spent working, rather than having the day off, counts toward fulfilling the 40-hour rule.

For irregular schedules or fluctuating hours, employers must still track all hours worked and calculate overtime accordingly. The fluctuating workweek method allows employers to pay a fixed salary covering straight-time pay for all hours worked in a week, with an additional half-time premium for overtime hours—but this requires careful documentation and specific legal conditions.

Recordkeeping for overtime pay rates must clearly show how overtime was calculated. Records must show both regular and overtime hours, the regular rate of pay, and how overtime premiums were determined. For employees with multiple pay rates, employers must track hours at each rate or use a weighted average for overtime calculations.

State-Specific Time Tracking Laws

General rules are set by federal authorities.

However, while some states (like Texas and Florida) closely align with federal regulations, other states can put in place more intense regulations for employers.

The Bottom Line: Since each state has its own laws, it can create additional needs above those set by the FLSA.

In California, it is required by law to record every employee’s meal break. In shifts that are five hours or longer, employers are required to offer their workers a 30-minute meal break. All breaks should be noted, and employees need to take them without being assigned any other tasks.

In California, employees get itemized wage statements – they must show the total time they have worked in detail.

Besides, local ordinances (for example, in San Francisco, Emeryville, Berkeley, and Los Angeles) require employers to plan schedules in advance. Employers will have to compensate workers for late changes.

If your work in New York goes past 10 hours, from start to finish including breaks, you will receive an extra hour of pay at minimum wage, according to the spread of hours law.

To do this, you should record precise time frames for the beginning and end of each workday. New York requires manual workers to be paid weekly, within seven days of the workweek's end. Other employees can be paid at least twice a month.

In Illinois, workers should be offered a 20-minute break after 7.5 hours of work and 2 more if the shift is longer than 12 hours. Also, it has a strict law regarding the collection, use, and storage of biometric data (e.g., fingerprints for time clocks)

The Day and Temporary Labor Services Act in this state led to the implementation of accurate timekeeping methods. This law also requires employers in Illinois to keep records of hours worked each week and hand them over when employees request them.

What Employers Are Required to Store

• Required data storage includes comprehensive time records that show when employees start and stop work, total daily and weekly hours, rates of pay, and total wages earned. Additional records like schedules, payroll logs, and documentation of breaks may also be necessary, depending on state law.
• Some records must be kept for a set amount of time. Records for payroll are required to be available for three years and records concerning wages such as timecards and schedules, must be stored for two years under federal laws. In New York, employers must keep employment records for six years.
• Ways to document time records are paper timecards, digital records, spreadsheets and software specifically for tracking time. They must be true, easily checked by the Department of Labor and either at the workplace or in a records office.

How Time Tracking Software Helps You Stay Compliant

Today, modern time tracking makes it much easier for companies to comply with the law. All your hours logged in and out, plus your breaks, are automatically and accurately tracked.

Platforms like TMetric provide automated timesheet management and ensure that employees are not overworking and that the company’s records comply with regulations.

When employees are notified through overtime alerts, their hours and the costs associated with them can be managed more efficiently by managers.

Certain systems block access to employees once they have reached their daily or weekly limit.

Auditing all time recordings and updates ensures that there is a solid record if a dispute or investigation from labor authorities arises.

Software has the ability to make compliance reports that defend against expensive mistakes caused by not following laws.

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