Monday, November 5, 2012

Surviving DOL Wage and Hour audits

Since we're talking about compliance audits which can result in fines and costly and time-consuming administrative policy changes, let's talk about another agency which can come a'knocking: U.S. Department of Labor (USDOL).

The agency has been stepping up inspections for years, looking for companies which under-pay their workers, going back to the agency's Strategic Plan for Fiscal Years 2006-2011.

I've been through these before and my company passed with flying colors. Like most regulatory and compliance visits you'll encounter, they would be the most fun you've had on the job, but if handled properly - and prepared for beforehand - they're survivable.

But learning what they are, how to handle them, understand the process, and handle paperwork defensively beforehand are the keys to getting on top.

A recent article on the Society for Human Resource Management warned that USDOL audits have often focused upon:

(E)mployers in low-wage industries for wage and hour violations, particularly in the areas of agriculture, day cares, restaurants, garment manufacturing, guard services, health care, hotels and motels, janitorial services, and temporary help.

  • misclassifying employees as independent contractors and failing to secure worker’s compensation insurance;
  • employing illegal aliens (or failing to have proper documentation for employees properly authorized to work in the United States);
  • improperly classifying employees as exempt from federal overtime pay laws;
  • failing to pay minimum wage to employees (remembering that even though some dealership employees are exempt from overtime, they may not be exempt from the minimum wage); 
  • allowing minors to work in inappropriate jobs or during restricted hours; and
  • unlawful deductions from employee wages. 

The first way to prepare for an audit is to be pro-active. If you wait to look for problems until the inspector arrives, they will be found. Paperwork leaves a trail. The SHRM article suggests auditing your files in advance to ensure compliance:

  • Review job descriptions.
  • Understand the differences between federal and state laws and ensure that the laws are correctly applied to employees.
  • Ensure that FLSA classifications are correct.
  • Keep accurate payroll records.
  • Apply policies consistently.
  • Make sure all records are complete and work to resolve any inconsistencies.
  • Determine how to address any areas of concern identified via the self-audit. 

As with any audit, don't expect much advance notice of their visit. Always be sure to cooperate fully,  ask what information the auditor needs and provide it (and nothing more) promptly, stay away from any employee interviews which the USDOL inspector conductors, and ask for a summary of the visit findings. This will help you prepare for what might come next.

This is a bigger challenge for a lot of employers who are realigning and downsizing in the sour economy. All too often, administrative assignments aren't always re-shuffled with much thought, opening employers up to compliance issues. Check your records and make sure people are staying on top of them before you find out the hard way.


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