Two Sets of Timecards? Why “Shadow” Timekeeping Is a Major Compliance Red Flag

If your company has an official timekeeping system—but managers also maintain spreadsheets, handwritten notes, separate overtime records, or other unofficial time records—it may be time for a closer look.

On July 30, 2026, a federal court order required four Detroit-area Leo’s Coney Island franchises and their owner to pay approximately $515,000 in back wages and damages to 143 workers. The Department of Labor alleged, among other concerns, that the defendants maintained two sets of timecards for employees.

For employers, the biggest takeaway is simple: There should be one reliable source of truth for hours worked—and changes to those records should leave an audit trail.

The FLSA requires covered employers to maintain records for nonexempt employees, including information about hours worked and wages paid.

Employers have flexibility in the particular timekeeping system they use. The risk begins when the records no longer reflect reality.

Best Practices for Employers

Start with manager access. Determine who can edit employee punches, why edits may be made, and whether the system records the original punch, the revised entry, who changed it, when it was changed, and the reason.

A manager should never simply reduce hours because overtime was not preapproved. Employers can enforce an overtime-approval policy, but removing time that was actually worked is a different issue.

Pay attention to “shadow systems” as well. Supervisors sometimes create side spreadsheets because they are trying to manage labor budgets, schedules, productivity, or overtime. The spreadsheet itself is not necessarily the problem. The problem comes when an unofficial record shows hours that differ from payroll and nobody investigates the discrepancy.

Employers should also watch for suspicious patterns. Employees who repeatedly clock exactly 40.00 hours despite variable workloads deserve a second look. So do large numbers of manually adjusted punches, automatic meal deductions that are rarely corrected, employees logging into systems before clocking in, or managers routinely editing time just before payroll closes.

What Employers Should Do Next

Ask payroll for a timecard-edit report covering at least several recent pay periods. Look for departments and managers with unusually high adjustment rates.

Next, compare several independent data sources. Scheduling software, point-of-sale logins, building-access records, computer login times, dispatch records, and production systems should not automatically be treated as payroll records, but discrepancies can help identify where further investigation is needed.

Review the company’s timekeeping policy as well. Employees should clearly understand that they must record all hours worked and that they will not be retaliated against for accurately reporting their time.

Finally, make sure payroll has authority to question unusual records instead of simply processing what managers submit.

Good timekeeping isn’t just an administrative function. It is one of an employer’s strongest defenses against wage claims—and one of the first places a government investigator is likely to look when the math doesn’t make sense.