Can a boss get into trouble for illegally clocking in her employees?

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My boss has access to all of the employees time clock via the internet. We have to clock in and out though a payroll company via the internet. One of my co workers came on almost an hour and a half late this morning and I saw my boss go into our payroll site and she manually clocked her in and said she was here at 730 and not 850. I think that's illegal but I might be wrong. If it is illegal how do I report this? My boss and co worker are good friends outside work and the boss treats her so much better than she does us other employees and I don't think its fair. And I'm not jealous either. I am here to work not make friends but I be damned if I have to bust my butt off to make my living while my co worker gets free pay.. I'm sure everyone else would be just as upset if it happened in ur workplace. I'm I right to want to report this or shall I just let it be?

Can a boss get into trouble for illegally clocking in her employees?