Nothing could be more intimidating than facing an in-house audit by the Department of Labor (DOL) for any business. According to Charles Spinelli, whether the audit is triggered by a random selection, whistle-blowing by employees, or a red flag identified in reporting, business owners must be prepared to prove they stay compliant with federal labor laws.
From worker classification to wage and hour rules and anti-discrimination, when it comes to DOL scrutiny, being adequately prepared is a good start for filtering out the panic, worry, and stress of an audit, as well as preventing any backlash or legal troubles in the form of fees, penalties, and lawsuits.
Know the Reason for the Audit
The primary thing is to know why DOL may conduct the audit. An audit can be triggered by employee complaints, targeted enforcement program initiatives, and sometimes randomly. By identifying the probable cause, a company can pinpoint the areas that the DOL is likely to consider for investigation, such as overtime exemptions, wage and hour practices, or family and medical leave policies.
Sort Employment Records
The first item the auditor will ask for is the firm’s employment records. The employers should ensure that the following records are correct, current, and readily available:
- Employee time and attendance records
- Wage payment history and payroll records
- Job descriptions and employee classifications (exempt or non-exempt)
- Employment contracts and offer letters
- Employee files and disciplinary records
- Records of benefits and leaves, such as FMLA
Additionally, the records must be maintained in a manner that allows the DOL to conduct audits seamlessly.
Ensure Compliance with Wage and Hour Laws
According to Charles Spinelli one of the common issues identified during these audits is wage and hour violations. Employers need to ensure that:
- The employee has been correctly classified as exempt or non-exempt.
- Overtime pay is calculated accurately.
- Minimum wage laws are enforced.
- The law regarding meal and rest breaks (where applicable) is followed.
- Employees are not working off the clock.
Additionally, employers need to explain the timekeeping system used and maintain a record of changes, if any are made to the hours worked or wages paid.
Review Independent Contractor Relationships
Auditors also see employers’ misclassification of employees as independent contractors as a red flag. Employers should make sure that any independent contractors are actually independent from the standpoint of exercising control over work, financial independence, and the nature of the relationship. If the contractors are performing work similar to employees under the direction of the company, it may warrant consideration of reclassifying the workers.
Train Managers and Supervisors on Compliance
Spinelli highlights that frontline supervisors and managers are at the forefront in day-to-day compliance. It is through training them on wage laws, proper documentation, and employee classification that there are fewer errors that might raise audit issues. Knowledgeable leadership ensures consistent practices, protects employee rights, and illustrates the organization’s dedication to compliance with labor law.
Engaging an employment law attorney in combination with an HR manager and management team can be instrumental to ensure that no issues are found in the internal audit, or it is aligned with current employment regulations.
