United States: How Employers Can Combat Timecard Fraud And Employee Wage Theft

There is nothing so central to wage-hour laws than the sacred domain of "hours worked." The concept is simple: employees record the time they spend working, and from this data employers generate labor budgets and employee pay checks.

Unfortunately for employers, employee theft through timecard fraud is a real cost that should be added to your labor expenses. This kind of theft is widespread, but especially thrives in those industries where employees entrusted with timekeeping are in a position to cheat.

There are practical solutions for addressing this costly problem, however. Before examining solutions, a closer look at the problem is helpful.

Employees Stealing From The Government

Wage theft occurs both in private industry and the public sector. Not surprisingly, the government is particularly keen against employees stealing its money through false timecards. There are many examples of California public employees paying a steep price after being caught committing wage theft. For example, in the case of People v. Sperl, a California appellate court upheld the conviction of a Los Angeles County marshal for directing his subordinates to falsify time records so that deputies were shown to be working when they were absent.

And in the very recent case of Schroeder v. United States (July 16, 2015), the 9th Circuit Court of Appeals affirmed the trial court's dismissal of a plaintiff's claim under the federal False Claims Act because he himself had been convicted of bilking the government of $50,000 through false time submissions.

Employees Stealing From Private Employers

However, the story is a bit different in the private sector. Unless the timecard fraud involves significant losses, an employer is generally consigned to seek remedies for fraudulent timekeeping without assistance from government agencies.

In fact, most of the California regulations regarding timekeeping are directed toward an employer's obligation to maintain accurate time records, not toward the remedies available to them when employees submit false timecards.

For example, employers are constantly being reminded that they cannot "steal" an employee's wages, and are now being required to disclose to employees the basis for their pay in the Wage Theft Protection Act of 2011. This law requires, among other things, that employers provide detailed written notice to employees at the time of hire regarding a variety of pay conditions, such as whether the basis for pay is per hour, per shift, per day, per week, or by salary, piece, commission, or "otherwise."

Despite the law's focus on employers' obligations as opposed to employee theft, California law does acknowledge that employees do occasionally steal through fraudulent timekeeping in a variety of ways, including:

  • engaging in personal activities outside normal breaks while on the time clock;
  • engaging in disloyal actions that constitute a conflict of interest while on the time clock;
  • coming in late but recording time falsely as "on time;"
  • recording time falsely for another employee;
  • taking an extended meal period but recording less time for the meal period;
  • falsely recording a meal period late or short in order to receive or claim additional meal period premiums; and
  • reporting off-the-clock work that was not actually performed.

Common Types Of Wage Theft

The most common cases of time fraud usually involve a nonexempt employee recording time for a coworker or falsifying a time record to cover up a missed work day, tardy arrival time, or an extended meal period. If you catch the issue within the same pay period as the falsification occurred, you can take disciplinary action and correct the time record before the time is entered and the wages are paid.

If you discover fraud after the wages have been paid, you should seek legal counsel before making a deduction from the employee's wages. Although a deduction may be made unilaterally for an intentional or dishonest act under the Wage Order, these self-help methods could be challenged in California for a variety of reasons.

Most deductions from wages require a written authorization by the employee, subject to various restrictions such as protecting the minimum wage. California also provides additional protections against the recapture of overpayments or debts from a final pay check, even in some situations when there is a written authorization. Any such agreement that violates public policy may be set aside as void by a court.

The practical situation many employers face is weighing the probability of prevailing in a civil action versus the employee against the employee's ability to repay the stolen amounts. In the end, even if you prevail, you still may have to garnish the employee's wages over time, or you may not recover anything at all.

The Oft-Forgotten Duties Of Loyalty And Trustworthiness

One of the more clever ways in which you can seek remedies in cases of wage theft is through the doctrine which requires employees to demonstrate loyalty and trustworthiness. An employer has a statutory right to rely upon employees to perform the ordinary timekeeping function honestly and accurately, as directed and required by the job.

Among other things, California Labor Code section 2856 provides: "An employee shall substantially comply with all the directions of his employer concerning the service in which he is engaged...." Labor Code section 2863 further requires that "an employee who has any business to transact on his own account, similar to that entrusted to him by his employer, shall always give the preference to the business of the employer."

Clearly, an employee who falsifies time records, which includes reporting time working when the employee actually is engaged in disloyal or personal activities, violates his statutory duty of loyalty and violates these laws. In severe cases involving breach of loyalty and fiduciary duty, an employee may actually be required to repay all of the salary and benefits paid while purporting falsely to be working for the employer's interests.

In the 2008 case of Service Employees International Union, Local 250 v. Colcord, an employee was working against his employer, a labor union, by secretly seeking the union's decertification. Once discovered and brought before the court, the employee was ordered, among other things, to repay to the union that portion of his salary and benefits paid during the period of his "breach" or wrongdoing.

The state court of appeal held that neither California nor federal wage and hour law "in any way controls the employer's legal right to recover salary and benefits previously paid to a faithless employee as damages or as restitution in a civil lawsuit for breach of fiduciary duty." Here, the wage fraud involved the more subtle kind, a salaried exempt employee pretending to work for his employer but actually working against the employer's interests.

Practice Points For Employers

In addition to maintaining accurate time records, the California Legislature expects employers to take primary responsibility for monitoring the timekeeping process and for assuring that time records are accurate. Therefore, you should consider the following:

  1. Develop a written policy regarding timekeeping, with specific instructions on the duty of honesty and various prohibitions on timekeeping fraud.
  2. Train your supervisors on wage and hour laws pertaining to timekeeping and on ensuring that all assigned work is captured accurately.
  3. No time should be submitted without a managerial review process, since employees who have direct access to payroll in their time submissions (without supervisory review) will be tempted to cheat more frequently.
  4. Prove you care. Employees who are frequently asked questions about their time records will cheat less, because they will take fewer risks once they see that the time record is being reviewed carefully.
  5. Establish clearly that no employee should be permitted to record time for another employee.
  6. Although a manager may override an employee's time record if falsified, there should be an investigation regarding the time record. While the employee will often agree to most changes supported by an investigation by adding his or her initials, if the employee refuses to cooperate, this should be handled through the disciplinary process after consulting with legal counsel.
  7. Require employees who are entrusted with timekeeping to sign an affirmation each pay period certifying that the time records are accurate, including the times when meal periods are taken.
  8. Implement special procedures for employees who work remotely or in the field to ensure the reliability of the time records, including purchasing equipment and software for electronic time entries, or creating manual logs to supplement a regular time record for certain occasions (e.g., meal periods). GPS technology also may provide safeguards against fraud.
  9. Contact legal counsel immediately when an investigation reveals that time or wage theft has occurred, including an overpayment that an employee has intentionally concealed. You will be advised on actions that can be taken to recover the lost funds and to prevent such losses in the future.
  10. Finally, develop a system where your labor budget is fixed specific to each position so that variances can be quickly identified and investigated. This will only be the beginning of your inquiry, because employees may also commit fraud within a known budget that may not be readily apparent.


Time theft will continue to be a hidden cost that you should address immediately. The above is only a general overview of solutions an employer should consider to prevent timecard fraud and wage theft. We recommend you frequently perform an in-house review and audit regarding timekeeping procedures to maintain an accurate and secure payroll. You should consult with legal counsel in difficult cases, including when terminations or overpayments are involved, and when the ability to find a lawful remedy for resulting losses is uncertain.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.