In all fairness, this is more of a workaround than a fix.
The first part of the problem
For some reason, this is how I organize my work folder:
Where Finder fails short
The problem with Finder is that the date of a file only affects the date of its direct parent. Everything a level up remains unchanged. So this is how you end up with the situation below:
Normally, this is not big issue. But imagine 100 project folders and having to update something you’ve worked on 3 months ago. Adding a new file to that project wouldn’t change the order of the folders at all. And this is where sort by ‘Date Modified’ misbehaves.
As you may have expected, it involves some AppleScript. But also a Unix command: “touch”
Edit: Feel free to comment on HackerNews
Here are some other projects of mine:
Front-End Front – A crowd-curated news website focused on front-end development
PSD Repo – Free quality PSDs available for download
Sketch Repo – Free, high quality Sketch resources