Don’t like the sound of “DOL audit”?
If you own a business in this country, or handle payroll for one, you should know about the labor laws that govern you.
You should also be aware of what happens if you don’t abide by those laws, or if an employee makes a claim against you—which could happen to anyone.
Department of Labor Audits
DOL audits are conducted by the U.S. Department of Labor (hence ‘DOL’). The DOL is a government office that was created in 1884 to oversee workforce-related issues.
The mission statement of the DOL is “to foster, promote, and develop the welfare of the wage earners, job seekers, and retirees of the United States; improve working conditions; advance opportunities for profitable employment; and assure work-related benefits and rights.”
In order to do this, the department of labor enforces labor law compliance by performing audits and administering penalties for potential negligence.
Central to the DOL’s tasks is enforcing the Fair Labor Standards Act (FLSA), which establishes rules about overtime, minimum wage and more.
What is a DOL audit, anyway?
Although there is more than one kind of DOL audit, a common type consists of an investigation of a business by the DOL’s Wage and Hour Division. The Wage and Hour Division conducts audits to enforce federal labor law (namely the FLSA).
During a Wage and Hour Division audit, the DOL investigator will review payroll, employment records, and overall employee rights in the workplace.
The process should confirm employers are following the correct compensation laws for minimum wage and overtime-eligible employees, as well as the correct limitations of work hours and category of jobs for underage youths.
After the investigation, the auditor will determine whether there has been a failure to maintain correct records or any other DOL violations by the employer.
Potential penalties can include the recovery of back wages and liquidated damages, with the possibility of civil money penalties. Criminal prosecution can be enforced in appropriate cases as well, but is typically reserved for cases of willful violation. For those trying to prepare for a future DOL audit, a full comprehensive outline of the audit process is available from the Department of Labor.
Want to know what a DOL audit entails, and the best way to avoid—or handle—one? Download our easy-to-read and informative eBook here.
What prompts a Department of Labor audit?
Department of Labor audits can happen for many reasons—and the DOL can audit an employer at any time—but they are often spurred by an employee complaint.
For an example, an employee might call the DOL hotline to complain that they weren’t paid properly for overtime over the last six months (their complaint, not a fact). Someone from the department would ask them a few questions before deciding to conduct an audit.
Will I be notified in advance of an FLSA audit?
Usually you’ll receive a letter informing you that an audit is coming, although sometimes the DOL will show up without prior warning.
What will the auditor be looking for?
An auditor will be looking to make sure that your records:
- Conform with FLSA requirements
- Reflect the hours an employee has worked and his or her wages
- that you pay all non-exempt employees in accordance with what they worked (including overtime).
If you are keeping proper records and can show it, and the employee’s complaint turns out to be one-off, your fine will probably be small. Ideally, though, proper records every day will keep the auditor away.