Navigating a Department of Labor wage and hour audit can be a daunting experience for any employer — but it doesn’t have to be. Whether triggered by a complaint or selected at random, these audits aim to ensure fair labor practices and compliance with federal wage laws. Employers who understand the process, prepare proactively, and cooperate effectively can not only minimize disruption but also demonstrate a commitment to lawful and ethical workplace standards.
A DOL INVESTIGATOR SHOWS UP AT YOUR BUSINESS — WHAT’S NEXT?
The DOL is a federal agency responsible for enforcing labor laws, which can include compliance with minimum wage, overtime pay, record keeping, the Family and Medical Leave Act and child labor laws. While the DOL can choose a business to audit randomly, an audit is most commonly triggered by an employee complaint. However, they also can be triggered by past violations, irregularities in pay practices, high turnover rates or external reports by a third party.
Typically, after the DOL decides to audit a business, the DOL will either send via mail or go to the business in person and provide the company an appointment letter. This letter correspondence outlines the scope of the audit, the information requested, the investigator handling the case and the next steps, including relevant deadlines.
WHAT HAPPENS DURING THE AUDIT?
After making initial contact, the DOL investigator will reach out to schedule the opening conference. The opening conference is an opportunity for the investigator to ask the company questions about its business practices. At the conference, the company is entitled to bring other representatives, such as legal counsel, to advocate and protect the company’s interests. Depending on the scope of the investigation, the DOL investigator may ask questions about payroll practices, meal and rest breaks, clocking-in and clocking-out procedures and the company’s policies. It is important to be able to address these questions to some extent during the opening conference, and it is therefore permissible to include a human resources representative and/or payroll representative who can adequately address these lines of inquiry.
After the opening conference, the company must work with the DOL investigator in providing some of the documentation requested. These documents typically include payroll records, time sheets and employee handbooks within a certain time frame. Most DOL investigators request employee contact information to reach out to employees and ask questions about the company’s practices. This is standard for these audits, so it is important to not interfere with these interviews or to try to coach employees, as that can be seen by the DOL investigator as the company trying to interfere with the investigation, which is prohibited.
The DOL investigator then needs time to review the documents and investigate the allegations that may be the foundation of the audit to determine the company’s compliance. It is therefore not uncommon for these audits to last several months depending on the DOL’s resources. Throughout this time, the DOL investigator may reach out periodically for additional information or may ask for additional clarification. It is helpful to designate either your counsel or a single employee to be the point person for the DOL investigator to reach out to in order to ensure compliance and cooperation.
Once the investigation is complete, the DOL investigator will schedule the closing conference. At this conference, the investigator will communicate the DOL’s findings and issue any sort of recommendations. If the DOL finds a violation, the DOL can order back pay and/or fines to be paid and can issue civil money penalties for failing to comply with the requisite statute. However, if no violation is found, the DOL might make recommendations regarding policies and/or practices and then close the investigation.
WHAT ARE SOME STEPS TO TAKE TO AVOID A DOL AUDIT?
While some DOL audits can be inevitable, they do not have to be painful. If your company is complying with the law, there should be no cause for concern. However, the best way to ensure that that is the case to avoid any surprises from a DOL audit is to take the following steps:
• Make sure your company has an employee record keeping system. Having a centralized and formal record keeping system is one of the best defenses and limits potential compliance issues. This includes a system that employees can record their time in, time out and meal periods, which makes it easier to track hours worked and potential overtime. Moreover, your company should maintain these time records for a period of at least three years, if not longer.
• Conduct an annual internal audit of your company’s pay and time practices. This includes examining payroll records and policies, time sheets and employee classifications to ensure they are compliant with the law. Additionally, ensure all required posters and documentation to provide to employees are up to date and easily accessible. If any issues are discovered, address the discrepancies and ensure that you are compliant.
• Train employees on compliance. Regular training sessions are two-fold in assisting your employees in understanding their rights and obligations under the law and the company’s policies, while also being able to demonstrate to the DOL your company’s commitment to compliance. It is also wise to inform management employees about the audit process itself, including what to do if a DOL investigator reaches out to them, how to comply and how to interact with the investigator.
• Stay proactive. It’s important to ensure compliance with these federal laws to make sure that if/when an audit arises, your company does not have anything to worry about. Hire employment counsel to help navigate and guide your company through prevention and compliance strategies and to assist if an audit ever arises.
While a DOL audit can feel overwhelming, preparation and cooperation go a long way in protecting your business and your workforce. And remember — when in doubt, reach out to your trusted employment counsel for guidance tailored to your specific circumstances and to ensure your rights and responsibilities are fully protected.
Kelsey E. Stegall is an employment and labor attorney at Littler, where she practices in all areas of employment, but has extensive experience in wage and hour compliance and employer-side audits. She regularly advises clients on preparing for investigations, helping them navigate complex regulations and mitigate risk. Stegall also represents employers in litigation and administrative proceedings.