> "If you're not using a time tracking system, you might be violating the law" was a common phrase.
This seems a reasonable thing to say. If anything it's helpful by perhaps providing the employer with information about requirements they were ignorant of.
> but the offers strongly implied that a having a system like that was necessary to satisfy the legal requirement. Which was not the case.
But coupling it with this is a sleazy sales tactic.
One can nullify the affect though by having at least one person on your staff tasked with being knowledgeable of all of your industry's employment requirements and your company's current state of compliance with them.