The Implications of Wage and Hour Audits for Employers
HR Advisor feature article | October 2010
Recently, the Wage & Hour (W&H) division of the U.S. Department of Labor (DOL) has increased its enforcement and audit efforts with employers.
The W&H division wants to ensure workers are fairly paid and employers uphold the law. Unfortunately, businesses that have violated wage and hour laws can face heavy fines and penalties. Many employers often assume a low likelihood of being audited, but they can be targeted, and the likelihood of an audit has been increasing.
Audit Selection. An audit can be announced or unannounced. Usually, it occurs when an employee formally complains to the DOL about wages and/or hours concerns. The W&H division sometimes randomly “targets” specific industries for investigation; for example, the hotel industry has been selected for attention this month of October. In the last few years, the DOL visited a wide array of employers in industries such as agriculture, day care, healthcare, hospitality, restaurants, and temporary staffing agencies.
Non-Compliant Business. Certain employers may be high on the DOL watch list especially for repeat violations including:
- Failure to maintain records and overtime payment to non-exempt employees.
- Salaried employees classified as exempt from overtime without assessment of the performed job duties.
- Unlawful wage deductions for items (e.g. cash register shortages, uniforms, etc.) against employees.
- Inaccurate payment to immigrant workers and minors who receive less than the minimum wage requirement.
- Insufficient tips that do not adequately make up the difference between the minimum wage and the employer's wage obligations.
Employer Readiness. Be ready if ever a DOL representative visits your business to conduct an audit.
Consider the following actions:
- Have an interview room made privately available only between you and the DOL representative.
- Ensure that all required labor law posters are up-to-date, highly visible, and posted in common areas.
- Revisit time-tracking devices or methods to determine the accuracy of actual time worked.
- Review and organize payroll records since the DOL may check up to the last three years of the wage-and-hour records and any documented practices or procedures.
In all, it is best to prepare now instead of gambling and worrying about whether or not random audits or compliance investigations by the DOL may occur. Plan as if an audit will occur. Unless you as the employer can easily afford paying thousands of dollars in fines and penalties, find ways to demonstrate good faith efforts of understanding and effectively resolving any employee complaint about your company’s compliance to wage and hour laws.
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