Timekeeping Software Can Disadvantage Hourly Workers

New study by Professor Elizabeth Tippett identifies problematic features in common types of timekeeping software.

Jan 10, 2017

A new study by Elizabeth Tippett of the University of Oregon School of Law finds that timekeeping software for managing employee hours could undermine compliance with wage and hour laws.  The study, “When Timekeeping Software Undermines Compliance,” is published in the Yale Journal of Law and Technology and is co-authored by Charlotte S. Alexander of Georgia State University, and Zev Eigen of Littler Mendelson.

The Fair Labor Standards Act of 1938 is the primary federal law that governs workers’ wages and hours, and its basic minimum wage and overtime protections remain largely intact in the statute’s original form. The regulations for maintaining employee time records were last updated in 1987, when time sheets were largely hand-recorded. However, the technology to record workers’ hours has dramatically changed, including scans of an employee’s fingerprint or radio frequency identification badge, (commonly known as RFID), that can record time to the millisecond.

“Without updated record keeping rules, software makers compete over providing features that automatically modify employee timesheets or that make it really easy for supervisors to make changes.  Employees may not even know that their timesheets have been modified,”  said Tippett, the study’s lead author and faculty co-director of the Conflict and Dispute Resolution program at Oregon Law.

In “When Timekeeping Software Undermines Compliance,” researchers examined video tutorials, technical support materials and promotional information for thirteen commonly used timekeeping programs. Findings include software functionality that automatically rounds employee time and automatically deducts breaks from employee timesheets, both of which could work against employees in the aggregate. The study also includes screenshots of functionality allowing supervisors to easily alter the timecards of their direct reports. Applying insights from psychology and behavioral economics, the study identifies subtle situational cues in the software that could undermine compliance with wage and hour laws.

By contrast, researchers found that audit guidelines applicable to Department of Defense contractors, overseen by the Defense Contract Audit Agency, are better aligned with modern technology use and provide better protections for employees and employers.

“We found that better legal rules seem to influence software design decisions,” said study co-author Alexander. “Perhaps not surprisingly, software marketed to defense contractors includes procedures designed to limit supervisors’ opportunity to cheat by routing time edits back to workers themselves. This feature increases transparency, safeguards workers against wage theft, and potentially avoids future wage and hour disputes.”

Eigen, an expert in timekeeping software systems who co-authored the study shared, “focusing on the software that generates wage and hour data will make it harder for bad-actor employers to intentionally violate the law, and easier for good-actor employers to comply and avoid costly litigation.”

Policy recommendations made by authors of the study include:

Improve data transparency.

  • Provide hourly workers access to their timesheets including modifications made by their employers.
  • Require that employers document the reason for edits to employee timesheets.
  • Require that employers produce a report that describes all automated “rules” that are applied to employee timecards.
  • Require that employers produce a codebook defining each of the variables that appears in its timekeeping software output.
  • Require that employers use software that can be easily exported to standard formats for use by statistical analysis purposes.

Scrutinize employers’ internal controls for maintaining the integrity of time records.

  • Update the Department of Labor Field Operations Handbook related to recordkeeping.
  • Advise auditors to look for processes that maintain record integrity.
  • Advise auditors to credit employers for implementing software features that discourage noncompliant behavior and encourage compliant behavior.
  • Advise auditors to identify practices that erode the integrity of records, triggering further inquiry by the Department of Labor.

Prohibit rounding.

  • Regulations should not permit employers using automated systems to erode the accuracy of those systems through rounding.

The study is published in Issue 19 of the Yale Journal of Law and Technology, available in January 2017. To download the full study PDF, click here.