Tick Tock: Don't Back Off on Tracking Employee's Working Time

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The Obama Administration announced this week that it will give employers with more than 50 but less than 100 employees one more year to comply with the Affordable Care Act’s employer mandate. (But beware: You can’t lay off workers to ensure that you fall below the 100 employee mark!) That means that these employers have until 2016 to provide insurance to full-time employees before being subject to any penalties for non-compliance.

While employers covered by this extension may be breathing a sigh of relief, they shouldn’t forestall putting in place one of the key action items for ACA compliance – the careful tracking of employees’ working hours. The ACA has two requirements that necessitate tracking hours:  (1) to determine whether an employer is subject to the coverage mandate; and (2) if so, to determine which employees have to be offered coverage:

- Are You Subject to the Mandate?  Whenever this requirement kicks in for your company, the ACA mandates that an employer with an average of 50 or more full-time employees per month provide health insurance to employees working more than 30 hours per week. Under the mandate, employers can’t just count regular full-time equivalent employees (FTEs) to figure out if they’re covered by the ACA. Instead, they have to consider the number of employees who, when their hours are combined, add up to an FTE. To determine the number of its FTEs under the ACA, an employer has to consider: (1) the number of full-time employees (meaning employees who work more than 30 hours per week); and (2) the number of hours worked per month by employees who work fewer than 130 hours per month, divided by 120. The number of FTEs of the employer is the sum of these two groups of employees.

- Who Do You Have to Cover?  Employees who work 30 hours a week or more, on average, have to be offered coverage under the mandate. There are detailed rules about crediting part-time, variable-hour, and seasonal employees for their time to determine whether they get coverage.

To determine whether you have a mandate and who is covered by the mandate, you have to know how many hours employees are working per month and you need to know this before your compliance deadline kicks in. So, that means you can’t wait until 2016 to begin tracking hours and determining your ACA coverage obligations.

This may seem pretty basic, but many companies, especially smaller companies who may just bump up against 50 FTEs, aren’t always careful about tracking working time. This is now necessary in light of the ACA. In addition, there are other potential obligations to track working time.  Here are a few:

- When a non-exempt employee claims they’re not getting paid enough overtime.  Wage and hour laws require time records for non-exempt employees. In addition, when a non-exempt employee claims they are owed overtime pay, the burden is on the employer to show compliance with the law. It’s difficult to show that you’re paying an employee appropriately if you don’t know or can’t document how much they’re working.  Of course, the employee has to accurately report his or her working time, but employers should have—and follow—policies that demand accurate time reporting.   You should also manage supervisors and managers who inappropriately expect employees to work off the clock or unilaterally alter employee time records.

- When the Department of Labor comes calling.   You’ll want written time records for non-exempt employees if either the state or federal Department of Labor comes knocking.  Certain industries are at particular risk for Department of Labor audits, including industries that customarily utilize alternative pay methods, like pay for piece work, Belo plans, or similar arrangements that calculate pay for non-exempt employees based on something other than (or in addition to) the number of hours worked.

- Determining FMLA eligibility.  Employees may be eligible for up to 12 weeks of protected leave under the federal Family and Medical Leave Act (FMLA) if they have work for a covered employer for 12 months and worked at least 1,250 hours in the previous 12 month period.  Tracking work time is necessary to figure out whether an employee has put in the requisite time to be FMLA eligible, but it is also needed to determine the amount of an employee’s protected leave entitlement.  “Twelve weeks” of FMLA leave for an employee who is less than full-time is based on their typical part-time schedule and is different than the full 12 weeks of leave available to a full-time employee.
- Tracking worker productivity. Another reason to track non-exempt employee time is to measure productivity.  Are employees showing up on time and getting the job done while at work?  Or, are there folks who incur a lot of overtime, because they’re not efficient during the work day?  Do you have employees who are working off the clock without reporting their hours?  The answers to these questions may be found in accurate time recording and tracking.