Dilemma of the Month: Padding an Employee’s Timecard

Back Q&A Sep 6, 2019 By Suzanne Lucas
I was recently promoted and will be taking over a team that previously reported to my boss. A couple years ago, due to a new law regarding exempt employees, the team was switched from exempt to nonexempt. They were given a nice bonus, $5,000, to help “soften the transition.” Recently, my boss let me know he’s been adding three hours per week to their timecards. Additionally, he allows them to clock out from home after leaving the office. For example, one employee left the office at 4 p.m. but clocked out at 6:15 p.m. I told my boss I would be stopping these practices. Am I micromanaging the team by asking them to clock out when they leave the office? 

Oh, boy, I hate micromanaging, but this is not micromanaging. This isn’t even close to micromanaging. This is managing, and basic managing, like what you would expect from the shift manager at the local fast-food restaurant.

Your boss made a huge mistake, and your employees will be very unhappy when you cut off the gravy train. But cut it off you must. Your boss put the company at risk by padding his team’s paychecks, and continuing this will only make the situation worse. 

The Fair Labor Standards Act has strict rules regarding paying non-exempt employees, and California is even stricter. One of the key components is that employees must be paid for every hour they work. By not keeping accurate hours, your boss has opened the company up to possible disastrous results if someone complains or if the U.S. Department of Labor does an audit.

I’m sure he’ll argue he’s adding to their paychecks, not taking away from them, so there’s not a problem. And it’s probably true that none of the employees are going to complain about extra money in their paychecks.

But that’s not the only problem. Let’s talk about fraud. Let’s talk about theft. Because that is what is going on. Employment attorney Jon Hyman says he probably wouldn’t advise a company to press charges in this situation, but he would advise that the manager be fired. 

He’s put you in a terrible situation. You’ve got to tell employees their paychecks are going to be cut, and you need to report what has been going on to human resources. If you don’t report it, you are complicit in the fraud. And as much as you want to forget this, at least one employee will complain about how you cut pay, so it’s no longer going to be a secret.

1. Report the fraud to HR or to payroll or to your boss’s boss. Any one of those is fine.

2. Meet with HR to discuss salaries for your employees. Make sure they are currently receiving market rate salaries; if they aren’t, create a plan to increase their pay.

3. Sit down and meet with the employees. Normally, tough conversations should be held one-on-one, but because this is the same conversation with everyone, you can do it as a group. Explain that you have to bring paychecks into legal compliance. That means:

  • People clock in when they arrive at work and clock out when they leave.
  • If they work additional hours at home, they must clock in at home and clock out when finished.
  • Lunch breaks will be accurately recorded. Keep in mind, California has strict break laws that you need to comply with, making working through lunch almost always illegal.
  • Employees will be paid for overtime (in California, that’s more than eight hours in one day and more than 40 hours in one week).
  • If you and HR agree that salaries should be adjusted, tell them you’re working on it.

Make sure you express how much you appreciate their work and how excited you are to be working with them. They will probably not be happy, although you may find that some are relieved that the process will be legal now. You will need to be an extra awesome manager to help during this transition, but you’re likely to experience some turnover due to this as well.

The biggest lesson here is how much of a mess things can become when someone ignores the law and best practices in an attempt to be nice.

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