Imagine this: One day you receive a letter from the Department of Labor (DOL), the agency tasked with investigating and enforcing the Fair Labor Standards Act. The letter informs you that the DOL will show up at your business in one week to conduct an audit of your business for wage and hour violations. Are you prepared? What do you do?

First and foremost, contact your employment counsel immediately to help you organize and prepare for the audit. Hopefully, however, your preparation started long before you received the notice letter.

DOL audits can result in significant losses for employers. They often cause major business disruptions by diverting attention and resources away from normal work responsibilities. Additionally, if the DOL finds wage and hour violations, which it frequently does, the employer may be responsible for paying back wages, future wages, liquidated damages, civil fines and court costs.

Proactivity is the single most important way an employer can prepare for an audit. This includes performing regular self-audits to ensure policies and practices are current and compliant with wage and hour laws before you have a reason to believe your business will be targeted. For example, employers should:

  • Review job descriptions and employment responsibilities to ensure that they are accurate and up to date and that the employees are properly classified as independent contractors, exempt employees or nonexempt employees.

  • Review timekeeping records to ensure employees are paid for all hours worked. Educate all employees on the company’s timekeeping policies and procedures and remind them of their obligations to accurately report and record all hours worked.

  • Establish internal “safe harbor” procedures for employees to report alleged wage concerns.

  • Ensure that complete and accurate records are maintained in compliance with state and federal recordkeeping requirements.

  • Train key employees on wage and hour requirements.

  • Develop procedures for responding to an audit to decrease the disruption on normal business activities.

When an audit does occur, it is imperative that employers understand the process and know their rights and responsibilities. The DOL has adopted an aggressive audit campaign. This nerve-racking experience can be made even worse when an employer is unprepared. Do not wait to receive a notice letter before preparing for an audit.