What You Need to Know about DOL Audits
The Department of Labor (“DOL”) has jurisdiction over all federal labor and employment laws and regulations, including the Fair Labor Standards Act (“FLSA”). The FLSA is a cumbersome and often misunderstood law that sets rules for the payment of minimum wage and overtime. All employees, unless exempt under the FLSA, are required to be paid at least minimum wage for all hours worked, and time and one-half for all hours worked over forty in a given work week.
FLSA litigation began to increase about ten years ago, has steadily increased ever since, and is not showing signs of slowing down. In 2010, there was a 12% increase in wage and hour lawsuits. In fiscal year 2011, the DOL collected $224,844,870 in back wages from employers all over the country, which represented the largest amount collected in a single fiscal year in the Department’s history. In 2012, the DOL added 300 new field investigators—a staff increase of more than one-third—to investigate noncompliance on wage and hour issues. The DOL says it intends to continue its beefed-up enforcement efforts in the coming years, targeting employers who: (1) fail to pay minimum wage or overtime; (2) misclassify employees as exempt under the FLSA; or (3) misclassify employees as independent contractors.
Helpful Guidelines to Follow if Your Business is Facing a DOL Audit
Employers should know that the DOL has the authority to audit employers at any time. The most common reason for an audit, however, is an employee complaint. If you receive notice of an audit, the following guidelines will assist you in the process, but should not be considered a substitute for legal representation:
- The DOL may not provide you with much notice, but you are free to ask for extra time to gather documents.
- Call the auditor in advance to find out the purpose and scope of the audit. You will want to know whether the audit concerns overtime pay compliance, minimum wage compliance, or some other reason.
- Gather the relevant records in advance of the audit, if possible, and keep a log of everything you provide the auditor. It is best to make two copies, one for the auditor and one for you.
- Designate a company representative or legal counsel to work with the auditor.
- Be courteous and cooperative with the auditor. It is best to provide a private room for the auditor to work so as to minimize workplace interruption.
- At the conclusion of the audit, ask for a summary or report of the audit. If violations are found, you will need to resolve them promptly, so it will be helpful to know exactly what the auditor thinks you need to correct. This report should be provided to your legal counsel, because sometimes the DOL finds violations that are not actual legal violations.
The best management practice is to be proactive and ensure that if you are audited, no violations will be found. A proactive employer will have up-to-date job descriptions, understand the FLSA classification system, and keep accurate payroll records.
In conclusion, do not fall into the trap of thinking you are too small of a company to be audited. All it takes is one employee complaint to have the DOL knocking on your door.