I’ve been working with several clients recently in reviewing various timekeeping and payroll systems and am amazed about the limited capability for some of the software being offered to employers.  With employees’ access to computers, point of sale systems, tablets and other technology, timekeeping should be a seamless function within a company in 2021, but surprisingly software companies often over promise on what they can deliver.  Below are five key functions that timekeeping software need to provide to California employers in 2021:

1. Timekeeping software must maintain records in an “indelible” form.

California Wage Orders require that employers maintain the employees time records “in the English language and in ink or other indelible form.”  “Indelible” means that the time entries cannot be erased, removed, or changed.

The Division of Labor Standards Enforcement (“DLSE”) issued an Opinion Letter on July 20, 1995 stating that “storage of records by electronic means meets the requirements of California law if the records are (1) retrievable in the State of California, and (2) may be printed in an indelible format upon request of either the employee or the Division.”

However, the DLSE issued another Opinion Letter on November 10, 1998 advising employers that the electronic time record data could be maintained outside of the State of California “as long as a hard copy of the records was maintained at a central location within California.”  As these two Opinion Letters contradict each other, employers could also look to the Wage Orders.  The Wage Orders require that time records “shall be kept on file by the employer for at least three years at the place of employment or at a central location within the State of California.”

Therefore, employers should consider maintaining a copy of employee time records, either electronically or on paper, within the State of California.

2. Must record required information – especially information about meal breaks.

California Wage Orders require employers keep “[t]ime records showing when the employee begins and ends each work period. Meal periods, split shift intervals and total daily hours worked shall also be recorded. Meal periods during which operations cease and authorized rest periods need not be recorded.”  IWC Wage Order 5-2001(7)(a)(3).

Additionally, Labor Code section 1174 requires employers to keep time records showing the hours worked daily and the wages paid, number of piece-rate units earned by, and the applicable piece rate paid.

It is essential that timekeeping software record the information required by the Labor Code.

3. Meal break attestations should be recorded electronically.

The California supreme court in Donohue v. AMN Services LLC (2021) explained that if an employer’s records do not show a compliant meal break was taken by the employee, it may be possible for the employer to use electronic attestations at the time an employee does not take a full meal break, a late meal break, or misses a break in order to ensure accurate tracking.

In Donohue, the employer’s timekeeping system provided a drop-down menu that prompted the employee to choose one of three options:

  1. “I was provided an opportunity to take a 30 min break before the end of my 5th hour of work but chose not to”;
  2. “I was provided an opportunity to take a 30 min break before the end of my 5th hour of work but chose to take a shorter/later break”;
  3. “I was not provided an opportunity to take a 30 min break before the end of my 5th hour of work.”

The employee was required to choose an option by the end of the pay period, and if the employee selected item #3, they were paid a premium wage for the missed break. The court recognized that this attestation by the employee would be enough to track meal break violations or to establish that the employee was provided a meal break but voluntarily chose to continue to work.

The use of electronic attestations by employers in California to defend against meal and rest breaks is critical.  Attestations shift the burden of proof back to the plaintiff to establish that they did not have an opportunity to take a meal or rest break, even if the time records show that they did not clock out for a compliant meal break.  The timekeeping software should require employees to complete the attestation before clocking out at the end of their shift.

4. Timekeeping software must record edits to time entries.

Timekeeping software needs to record when an employee’s time entry was changed.  It should record who made the change, when the change was made, why the change was made, and what exactly was changed.  The software should be able to print a report of all of the changes made, and should be sortable by time period, employee, and the manager who made the change.  The software should also be able to generate a report for select employees on a batch basis.  This is necessary in wage and hour litigation when a sampling of employee data is sometimes required to be disclosed to opposing counsel.

Being able to access this information quickly and efficiently is critical to defend against wage claims.  For example, a few years ago we defended a claim where an employee alleged that a manager edited time punches in an electronic timekeeping system to reflect less time.  However, upon review of the time entries, and the edits, the net effect of the manager’s changes resulted in an increase in the time the employee worked because the employee forgot to clock in at the beginning of the shift on a regular basis.

5. Retain back-up copies in a usable format that the employer can access, even if the employer is no longer a client of the software provider.

The statute of limitations for many wage and hour class actions in California is four years under Business and Professions Code section 17200 (this is one year longer than under the Wage Orders mentioned above), and employers should consider keeping wage statements and other wage and hour records for four years.  Just as critically important, this data needs to be saved in a manner that is easily accessible and usable.  Records for thousands of employees maintained on paper printouts held in a storage unit are not easily accessible, and create huge costs when these paper records need to be reviewed and potentially relied upon in litigation.  Digital time records that are stored in a common format, such as a data file that is compatible with Excel, save a huge amount of time and costs when needed in litigation, and can ultimately be an advantage in litigation.