How Employers Profit from Digital Wage Theft Under the FLSA

Abstract

This study describes three types of digital wage theft, as depicted in 330 cases litigated in federal and state court. The first, known as “rounding,” occurs when employers set their timekeeping software to alter employee punch time in a preset increment (typically moving punches to the nearest quarter hour). The second, “automatic break deductions,” involves subtracting a preset increment of time (usually thirty minutes) from employee hours to reflect their scheduled meal break, regardless of whether the break is taken. Both such practices occupy a legal gray zone under the Fair Labor Standards Act (FLSA). The third, known as “time shaving,” occurs when supervisors alter employee time records to reduce recorded hours. Although more clearly prohibited under existing rules, time shaving cases can be difficult to certify as collective actions beyond a single worksite. Plaintiffs seeking to recover lost wages in these cases face highly uncertain prospects in litigation. Outcomes depend on complex questions of fact and unpredictable judicial rulings that turn on implied notions of fairness. Even in successful cases, employers keep most of the lost wages because damages are only awarded to the small fraction of employees who opted in to the litigation. In sum, this article illustrates how federal rules fail to deter employers from adopting these practices. It concludes by recommending several changes to federal law.