Never manipulate time sheets to falsely show hours worked

The Fair Labor Standards Act (FLSA) and the California Labor Code both require employers to keep meticulous records to prove employees are properly compensated. Paper records such as time sheets and pay stubs must accurately show what hours employees actually worked and the pay they earned.

Violate those rules at your peril! Don’t even think about paying an employee a set sum and then manipulating his pay stub to reflect a set hourly wage. As the following employer learned, telling a judge with a straight face that the paper records are accurate won’t get you out of the lawsuit. That’s true even if employees sign off on doctored time sheets showing bogus hours and pay.

Recent case: Vladimir Balarezo claimed that his former employer paid its employees on a piece-rate basis. He said there were times when he worked more than eight hours per day and 40 hours per week, and that he wasn’t paid overtime for those hours.

Balarezo claimed he was paid a set amount for each maintenance and landscaping job he performed in the field and did not get meal breaks. He told the court that each paycheck was incorrect, listing an hourly rate he had never agreed on, plus additional payments for mileage and bonuses based on the nonexistent rate. Although he never had a chance to take lunch breaks, the company insisted he list them on his time sheet.

Essentially, Balarezo claimed the company added up the total he earned per week in piece-rate sums, and then arbitrarily set $7 per hour as his pay rate. After multiplying the hourly rate by 40 hours, the company then subtracted that from the total of the piece rates earned for the week and paid the rest of the money owed as a bonus or mileage reimbursement.

The company said its records were accurate and that Balarezo had signed his time slips. It asked the court to dismiss the case.

The court refused and ordered a trial. It concluded that a jury should decide who was telling the truth and whether the company was manipulating its records to avoid paying overtime and providing lunch breaks. (Balarezo v. Nth Connection Telecom, No. C-07-05243, ND CA, 2008)

Advice: Discuss any unusual compensation program with a qualified attorney before implementing it.

Simply put, employees and employers can’t agree to a compensation program and ignore the FLSA and Labor Code. For example, you may be able to create an independent contractor relationship if you want to pay by the job—but such an arrangement is legally complicated and means you would have to give up a great deal of control over when and how the job is done.

A bonus program may be the answer. An experienced attorney can set up the right program—one that creates an incentive while complying with complex regulations.