DWT Employment
The U.S. Department of Labor (USDOL) performs wage and hour audits of employers by selecting them at random, or because they are in targeted industries (usually low-wage), or as a result of a complaint from an employee or former employee. These investigations have increased significantly over the past few years and can result in orders for back wages and penalties. What steps should you take when USDOL comes knocking (generally with no prior notice)? Read on and you’ll learn!

USDOL may send a letter at the start of an audit and ask for a variety of documentation to perform a “desk audit,” which means they will likely not come into your place of business. You MUST provide all of the documentation sought or negotiate a compromise as to what will be produced. If you do not reach a compromise or produce the documents requested, USDOL can obtain a subpoena forcing you to produce the documents. This usually results in the auditor characterizing the employer as uncooperative, which can result in more aggressive enforcement, including back wages, liquidated damages, “willful” findings, and civil monetary penalties. At that point, you’ve lost your ability to negotiate for less or easier to produce data. 

USDOL does not always initiate an audit with a letter request for information. Sometimes, a USDOL investigator will show up unannounced on your doorstep and ask to start looking at data and interviewing witnesses. How do you deal with these potentially costly, disruptive investigations and requests for detailed pay information? Here’s how.

Step 1: Immediately call your employment law legal counsel. They will know the process and can provide privileged legal and strategic advice. They may know the auditor and be able to provide useful information on the auditor’s “style.” Your counsel can also help you negotiate a more narrow data production than initially requested and get an extension of deadlines, if needed. They can also fill you in on what to expect and where you can “push back.” To reduce your stress, you can request USDOL to go through your counsel for everything related to the audit. The auditors are used to this and will not think you are trying to hide something.

Step 2Analyze the documentation request. Is it overly burdensome? It always looks that way, but often is not. Get your payroll service involved in responding to the requests. Provide the information in useful format, preferably electronic, that the auditor can easily manipulate. If documents truly do not exist or are nearly impossible to provide, explain why and negotiate for alternative information or format that is easier to obtain. Proposing a narrower scope, if there is a rational reason, can be successful. The more cooperative you are, the less likely it is that the auditor will insist upon a personal visit, disrupting your workplace.

Step 3: If USDOL shows up on your doorstep without notice, you do NOT have to let them in—at least not that day. Especially if you have a legitimate reason that the audit will not be effective that day, a delay may be acceptable. Operational issues such as a major project or product deadline that day or week, customer visit so no one is available, inability to access the data that day or quickly or in the preferred format, absent staff who are necessary for the audit are all valid reasons to propose a delay. On the other hand, if you can make time and have some data available, offer it up and cooperate as much as possible. Offer to reschedule the visit so you can be prepared at a more convenient time, or you can often arrange to provide the information to the auditor in electronic or other more convenient format than is available that day. This may preclude the need for a potentially disruptive site visit. 

Step 4Proactively do your own audit of wage and hour issues. But, so the audit will not be accessible by USDOL or a private attorney, these should be done within the framework of the attorney-client privilege which requires a letter from your counsel and some direction. Cross check pay records to ensure that all employees have been paid for all time worked. Look for discrepancies in time records vs. hours paid, changed or missed punches, especially if changes were done by supervisors and not the employee. Have hours been “automatically” reduced by assumptions that all workers took a meal break every day? Ensure that employees are properly classified as exempt or nonexempt. Check to see if salaries for exempt employees have not been improperly reduced for missed partial days. Do you have independent contractors who legally do not qualify for contractor status and should be employees? These are all items that USDOL will investigate, and you should know the answers before USDOL shows up. If you find problems, fix them before the audit or let the auditor know you are in the process of doing so. 

Step 5Be diplomatic! Apologize for any missing information or delay in providing data, do not stonewall and avoid being antagonistic or hostile. 

Step 6: Cooperate with witness interview requests. If the USDOL wants to interview employees, it is your best interest to help set them up on premises so you know who is being interviewed and can prepare them on what may be asked. The auditor may work with you but not always. Some auditors will request a list of all employees with home contact information to reach them off work hours. They will interview a random selection of types of employees, and the employer will not know who is being selected for interviews. You may need to explain to all employees what is going on and that they may be interviewed, but are free to accept or decline. Most employees are nervous and reluctant to participate in interviews. They may want counsel present and you certainly can provide them with counsel; however, USDOL will often refuse such arrangements and you cannot compel them to allow counsel to be present unless it is a manager or supervisor. Counsel can and should be present for any management interviews – insist on it. It is your legal right, even if the auditor tries to tell you it is not allowed or needed. Everyone interviewed should ask for a copy of their statement and then hopefully they will agree to share it with management or counsel. There is no reason you cannot debrief witnesses, as long as they cooperate voluntarily with you.

Follow these steps and you’ll have a much better chance of resolving the USDOL audit successfully without back wages, liquidated damages, a third year of liability, or civil monetary penalties being assessed. 
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