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Auditing and monitoring the timekeeping system for wage-and-hour compliance

Michael R. Rinard II (michael.rinard@mymlc.com) is Corporate Compliance Officer and Katie Wood (katie.wood@mymlc.com) is Corporate Counsel at Mosaic Life Care in St. Joseph, MO.

As organizations face a wide array of compliance issues, one that is often overlooked is the accuracy of employee timekeeping records. The use of electronic timekeeping systems is frequently viewed as a highly efficient means of obtaining indisputable records of employees’ hours worked. As more healthcare organizations update older timekeeping systems in favor of newer time and attendance software, with features marketed as controlling labor costs and keeping productivity levels high, they are presented with the opportunity to customize the software’s settings and functions to better meet their needs.

Although such software can be a very useful tool, organizations must be aware of how their use of customized settings, and even facially neutral features, could “short” employees of their earned pay. Hospitals and other institutions “primarily engaged in the care of the sick, the aged, or the mentally ill” are covered employers under the federal Fair Labor Standards Act (FLSA)[1] and therefore must comply with its minimum wage[2] and overtime requirements.[3] Many states and localities have their own labor laws, as well.[4] In the wake of stiff penalties and threats of class action lawsuits for violations of these wage-and-hour laws, organizations should make compliance a high priority.

Because violations of these federal, state, and local requirements can occur in numerous ways, it is important that an organization maintain a multifaceted approach to compliance in this area. As part of that approach, an organization’s awareness of the unique risks created by the use of certain timekeeping software features will go a long way in ensuring its compliance with applicable wage and hour laws. To manage those risks, the compliance department should work closely with other departmental stakeholders during the initial setup of new time and attendance software, as well to establish a protocol for the regular auditing and monitoring of its use.

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