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HR Compliance Alert: Avoid Back-Wage Pitfalls — Lessons from a $162K Court Order

ddepartments

2026-02-04

10 min read

Practical HR action plan to audit off-the-clock work and prevent costly back-wage orders—lessons from a $162K Wisconsin judgment.

HR Compliance Alert: Avoid Back-Wage Pitfalls — A Practical Payroll Action Plan Inspired by a $162K Court Order

Hook: If your payroll team struggles to capture hours when staff do work off the clock — charting after client visits, commuting between appointments, or responding to messages — you are sitting on a compliance risk that can become an expensive court order. The December 2025 Wisconsin judgment requiring a multicounty medical partnership to pay $162,486 for unrecorded hours shows how quickly routine administrative gaps turn into back-wage liabilities. This guide gives department admins a step-by-step, 30–60–90 day action plan to audit overtime, fix timekeeping gaps, and prevent future wage violations.

Quick summary: What happened in Wisconsin — and the core lesson

In a consent judgment entered Dec. 4, 2025, a federal court required North Central Health Care to pay $81,243 in back wages and an equal amount in liquidated damages to 68 case managers after a U.S. Department of Labor Wage and Hour Division (WHD) investigation found they performed unrecorded work, including overtime, between June 17, 2021 and June 16, 2023. The DOL’s complaint cited violations of overtime and recordkeeping provisions of the Fair Labor Standards Act (FLSA).

“Employers must pay nonexempt employees no less than time and one-half their regular rate of pay for all hours worked over 40 in a workweek.” — FLSA guidance (DOL)

Core lesson: Unrecorded work — even short, routine tasks — compounds across employees and pay periods. Liquidated damages can double the employer’s exposure. Department admins must treat timekeeping as a governance priority, not an IT or HR afterthought.

Why this matters in 2026: enforcement and workplace trends

Increased DOL focus — The Wage and Hour Division has continued active investigations and litigation into recordkeeping and overtime in healthcare and public-sector employers through late 2024–2025. Recent settlements show a pattern: recordkeeping gaps + off-the-clock work = significant back wages plus liquidated damages.
Hybrid and mobile work — Case managers, field staff, and remote workers create new time-tracking blind spots (telehealth charting, travel between client sites, post-visit documentation).
Tech & AI in compliance — By 2026, HR teams increasingly use AI-driven anomaly detection and time capture integrations, but poor configuration still yields risk.
State-level scrutiny — Beyond FLSA, many states have tightened recordkeeping and notification rules; multi-county agencies must follow both federal and local law.

Immediate Triage: 7-day checklist (stop-gap actions)

Start here when you learn of potential unrecorded hours — whether via employee complaint, internal audit, or DOL notice.

Freeze policy changes — Pause any payroll, paycode, or timekeeping changes that could alter historical data.
Preserve records — Secure timecards, payroll files, schedules, EHR logs, mobile time stamps, and communications for at least the prior three years. Log chain-of-custody for records.
Notify leadership — Inform HR, payroll, legal counsel, and executive sponsor. Create a small response team with named responsibilities.
Pull a sample report — Select a rolling 6–12 pay period sample of potentially affected job titles (e.g., case managers). Export raw timesheets and EHR access timestamps.
Communicate with employees — Issue a neutral internal notice: you’re conducting a timekeeping review to ensure accurate pay. Invite employees to report unrecorded hours confidentially.

30–60–90 Day Action Plan: Audit, Remediate, Prevent

30 days — Rapid audit and exposure estimate

Scope and sample: Define affected populations (nonexempt case managers, travel-heavy staff). Use stratified sampling: high-risk teams, high-OT weeks, and recent departures.
Data reconciliation: Reconcile EHR login/logout, mobile time stamps, GPS timestamps, and manual time entries to payroll records. Look for systematic gaps like consistent 15–30 minute missing blocks after shifts.
Interview process: Conduct short, documented interviews with a sample of employees and managers about work patterns (post-visit charting, travel between clients, on-call expectations).
Preliminary exposure model: Estimate potential back wages using a conservative multiplier. Use this quick formula:

Back wage estimate = Sum[(Unrecorded hours per week) × (Weeks affected) × (Hourly rate × OT multiplier where >40 hours)]

Include liquidated damages equal to back wages as a scenario (many DOL orders award liquidated damages unless employer shows objective good faith).

60 days — Full audit, calculations, and remediation plan

Full data pull: Export all relevant records for the audit period (timekeeping, payroll, HRIS, EHR access logs, scheduling, mileage records).
Calculate back pay precisely: For each affected employee, compute unrecorded hours and overtime using the regular rate formula (remember to include nondiscretionary bonuses in the regular rate where applicable).
Prepare remediation offers: Draft back-pay calculations for affected employees, including an explanation of how calculations were made, dates covered, and tax adjustments.
Policy and system fixes: Implement immediate timekeeping changes—automated clocks, mandatory pre- and post-shift punch, overtime alerts, and manager approvals. Prioritize systems that provide immutable audit logs and integrate with payroll.
Train managers: Deliver concise training for supervisors on approving overtime, addressing off-the-clock work, and holding regular timecard audits.

90 days — Institutionalize prevention

Policy overhaul: Update the employee handbook and timekeeping policies. Include specific language on travel, documentation time, on-call expectations, and consequences for correction delays.
Tech integrations: Deploy integrated timekeeping that ties into EHR and payroll and provides immutable audit logs. Enable real-time alerts for overtime and schedule deviations.
Continuous monitoring: Establish monthly automated audits: overtime spikes, patterns of manual edits, late entries, and managers who routinely approve off-the-clock claims. Consider small automated apps and templates to streamline the review — see our micro-app template pack for checklist and calculation patterns.
Employee communication plan: Regularly remind staff how to record time, how to report missed pay, and how the organization remedies errors.

Common FLSA Pitfalls — Real examples and fixes

1. Post-visit documentation (charting) not recorded

Why it happens: Charting is treated as “administrative” or skipped in the timeclock. DOL sees it as compensable where the task is integral to the job.

Fixes: Require a short end-of-day punch or permit an automatic 15–30 minute post-visit entry. If charting varies widely, allow employees to record exact time and require manager verification.

2. Travel time between clients

Why it happens: Employers view travel between appointments as non-compensable commuting, but travel during the workday is compensable.

Fixes: Train staff to clock in/out at the first and last worksite of the day and to clock for travel between client visits. Implement mobile time capture with geotags to reconcile location-based disputes — and consider mapping and geofence tools to help validate location-based entries.

3. On-call and off-site availability

Why it happens: Employers assume on-call status is non-compensable; DOL evaluates whether the employee’s freedom to use time is significantly restricted.

Fixes: Define on-call compensation clearly — set an on-call premium or pay for all work performed during on-call periods and log it accurately.

4. Misclassification of exempt vs nonexempt

Why it happens: Titles like “case manager” are sometimes erroneously classified as exempt. Exempt status requires satisfying duties tests and salary-basis rules.

Fixes: Conduct a duties-based test for exemption, document responsibilities, and keep updated job descriptions. When in doubt, classify as nonexempt and control overtime via scheduling.

Case Manager–Specific Scenarios and Guidance

Home visits with documentation after hours: Allow staff to account for both visit time and subsequent documentation on the timesheet. Consider rounding rules that don’t shortchange multiple short entries.
Telehealth sessions: Treat telehealth as work time from the moment the employee logs in for a session until they log out, including prep and documentation if integral — see reviews of portable telehealth kits and practice guidelines for field deployments.
Travel across counties: Reconcile mileage reimbursements and consider travel pay for multi-site days where travel exceeds normal commute.

Tools and Technology (what to invest in, 2026 edition)

Modern timekeeping must do more than capture punches. Look for:

Immutable audit logs: Tamper-evident records for time entries, edits, and approvals. Offline-first document backup tools help preserve audit trails: offline-first backups.
Geo-aware mobile clocking: GPS and geofence options to link time entries to client visits while respecting privacy limits.
EHR and payroll integrations: Cross-reconcile activity logs and payroll data automatically — learn more about integrating time-tracking and payroll systems here.
AI-driven anomaly detection: Tools that flag late-night charting or systemic short-changes across case managers for investigation — explore AI playbooks that can help you design detection workflows (AI strategy examples).
Automated alerts: Overtime thresholds, missed punches, high edit rates.

How to Calculate Back Wages and Liquidated Damages — Sample Calculation

Use a clear template and document every assumption. Here’s a simplified example for one employee:

Hourly rate: $28.00
Unrecorded hours per week: 3.5 (post-visit charting + travel)
Weeks affected: 104 (2 years)

Back wages = 3.5 hrs/week × 104 weeks × $28 = $10,144
If these hours push the employee over 40 in several weeks, calculate OT at 1.5× regular rate for hours over 40.
Liquidated damages (possible) = Back wages × 1 = $10,144
Total potential exposure for employee = $20,288

For an entire group, sum across employees. Document rounding rules and include payroll taxes and withholdings as required. If you need a simple calculation template you can adapt, consider using a lightweight micro-app from the micro-app template pack to standardize inputs and assumptions.

HR Checklist: Immediate and Ongoing Items

Preserve three years of timekeeping and payroll records (best practice: five years) — keep offline backups as part of your legal hold (offline-first docs).
Run monthly automated reconciliation between timekeeping and payroll.
Require manager sign-off on overtime within the pay period.
Implement clear policy language on travel, charting, on-call, and telehealth.
Provide quarterly training for managers and an annual refresher for employees.
Use tech that provides audit logs, GPS capture (optional), and real-time alerts.
Perform an annual exemptions audit and update job descriptions.

When the DOL Comes Knocking: Best Practices

Cooperate but consult counsel: Respond promptly to requests and preserve records; get counsel experienced with WHD matters involved early.
Be transparent: If you find errors in a self-audit, prepare a remediation package with calculations and proposed payments — voluntary remediation can help outcomes.
Document good faith efforts: If remediation is necessary, document the steps you took to identify and correct the problem (policy updates, training, technology investments) — these support a good-faith defense on liquidated damages.

Future Predictions and How to Stay Ahead (2026+)

Automated enforcement tools: Expect regulators to leverage data analysis — employers should use the same analytics to pre-check risk.
Closer scrutiny of field roles: Regulators will continue to prioritize healthcare, social services, and mobile workforces for recordkeeping audits.
Greater expectations for tech controls: Simple spreadsheet timekeeping will increasingly be seen as insufficient in risk-heavy environments.

Final Takeaways — Actionable, Practical, Immediate

Act quickly: A small unrecorded-hour pattern can become six-figure liabilities — preserve records and run a focused sample audit in the first week.
Follow the 30–60–90 framework: Triage, quantify, remediate, and then institutionalize prevention.
Invest in the right tech and training: Integrated timekeeping with audit logs plus manager accountability prevents recurring issues.
Document remediation efforts: If an audit uncovers underpayments, prepare transparent calculations and corrective payments; document your good-faith actions to mitigate liquidated damages risk.

Call to Action

If your department has mobile staff or uses manual timekeeping, start a targeted audit this week. Use the 7-day triage checklist above, run a 6–12 pay period sample for high-risk roles, and schedule a 90-day compliance sprint with payroll and HR. To make implementation simple, download our ready-to-use HR overtime audit checklist and sample back-pay calculation template — or contact an experienced labor counsel for a compliance review.

Protect your department: treat timekeeping gaps as a governance priority today — it’s the difference between a manageable remediation and a costly court order like the Wisconsin case.

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