Employers considering a telecommuting program should be aware of the difficulties under the FLSA if a telecommuting employee is misclassified as exempt. While employers covered by the FLSA are required to maintain records of the hours worked for non-exempt employees, there is no such requirement to maintain records of hours worked for exempt employees.

If an exempt employee brings an FLSA claim based on an alleged misclassification, employers likely have no time records for that employee with which to rebut allegations of overtime worked. The employee need only establish a just a reasonable inference of hours worked. The employee may do this solely based on the employee’s credible testimony. Even if the employee only establishes an approximation of hours worked for which overtime is due, the court may award damages.

While case law illustrating a successful rebuttal by the employer is scare, some examples of useful evidence may include supervisor testimony, computer logs, phone logs, or building entry logs, for example. In the case of telecommuting employees, rebutting the employee’s testimony is even more difficult. Telecommuting exempt employees are likely supervised less closely than other employees, and they may use their own computer equipment. Employers with non-telecommuting employees holding the same position as telecommuting employees may be able to apply data, like building entry logs, to telecommuting employees to establish average total hours for the position. However, rebutting credible testimony by the telecommuting employee will be an uphill battle.

The U.S. Department of Labor (DOL) is not making an employer’s rebuttal any easier. The DOL is empowering employees under the FLSA by encouraging employees to keep their own records of hour worked. In May of 2011, the DOL launched a smartphone application to assist employees with tracking the hours worked and therefore, the wages they are owed. Although employees are always free to track their own time, the electronic application may encourage more employees to do so. While courts will likely not accept time records that are inconsistent and anecdotal, a regularly used application paired with credible employee testimony will strengthen an employee’s case.

Before allowing employees to telecommute, employers should conduct an internal audit of exempt and non-exempt positions. Since the employee’s burden to prove hours worked in FLSA litigation is easy to meet, a proactive approach by the employer is the best way to ensure appropriate records are kept.

Employers should also investigate the “homeworker exception” of the FLSA, addressed in 29 C.F.R. § 785.23, by consulting legal counsel. This exception accounts for the difficulty of tracking hours worked for telecommuting employees and stipulates that the parties may form a reasonable agreement regarding tracking hours worked at home. Such agreements should be carefully drafted with legal counsel.

While telecommuting programs are often desirable arrangements for both employers and employees, such programs should be carefully evaluated given the implications under the FLSA. Until more guidance regarding telecommuting situations is provided by the DOL, employers should proceed with caution.