You shouldn’t wait to prepare for a Department of Labor (DOL) audit until you find out it’s happening. Being unprepared forces you to scramble and can lead to mistakes. Do things right from the beginning, and you’ll be ready for the DOL to come through.
Remember, a DOL audit can happen at a moment’s notice. But typically, audits are preceded by employee complaints – for example, not being paid fairly or missing a paycheck. The more employee complaints, the more conspicuous – and audit-prone – you become in the eyes of the DOL, even if the complaints are unfounded.
So how do you prepare for a DOL audit? Start by using the following tips to understand the audit process and implement proactive procedures.
What do DOL auditors usually ask to see?
The records that the DOL will ask to review depends on the nature of the complaint that triggered the audit.
For example, if the complaint is tied to minimum wage, the DOL auditor may ask for salary information for one person, everyone in that position or every employee in the company.
If you receive notice of an audit, you can reach out to the auditor in advance to try to find out the focus of the investigation, the date range for the records you’ll have to pull and who they will talk to within your company. However, auditors may not provide any details beyond the information provided in the notice.
Mind your recordkeeping
The best way to stay prepared is to keep your employee records and information accurate, organized and up-to-date.
Pay special attention to employees’ I-9 information. When you first process the information, examine the document(s) employees give you to ensure they reasonably appear to be genuine and relate to the person presenting them. You are responsible for noticing blatantly questionable details (like an employee who appears significantly younger than the date of birth on his or her ID).
The Fair Labor Standards Act (FLSA) requires covered employers to keep certain basic records on file for its nonexempt workers, including:
- Employee’s full name and social security number
- Address, including ZIP code
- Birth date, if younger than 19
- Sex and occupation
- Time and day of week when employee’s workweek begins
- Hours worked each day
- Total hours worked each workweek
- Basis on which employee’s wages are paid (e.g., “$9 per hour”, “$440 a week”, “piecework”)
- Regular hourly pay rate (if applicable)
- Total daily or weekly straight-time earnings
- Total overtime earnings for the workweek
- All additions to or deductions from the employee’s wages
- Total wages paid each pay period
- Date of payment and the pay period covered by the payment
Payroll records have to be kept for at least three years. And records on which wage calculations are based should be kept for two years (i.e., time cards and piecework tickets, wage-rate tables, work and time schedules, and records of additions to or deductions from wages) but check your local laws – recent changes may have impacted the time frame for records retention in some locations.
It’s perfectly fine to store your files electronically as long as you keep them for the proper duration and can print them easily in the event of an audit.
Put proactive procedures in place
A few proactive processes will keep you organized and save you from scrambling if the DOL audits you.
- Periodically review your job descriptions, including how much you’re paying people in that role and why. There’s no law that says you must have job descriptions, but there are laws requiring equal pay for equal work. Job descriptions provide proof of that.
- Review your employee handbooks every two years. Policies and handbooks aren’t required by law, but again, when faced with an audit, it can help prove that that your company intends to treat everyone the same. Ensure you’re applying your policies consistently.
- Have a file archival system, whether it’s paper-based or electronic.
- Keep a calendar of how long documents should be maintained.
There’s no reason you should feel unprepared for any HR hurdle that comes your way. Be proactive about HR challenges that can slow your progress.
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