Navigating Red Tape: What Every Business Owner Should Know About Department of Labor Audits

Every day business owners are faced with a wide variety of uncertainties, ranging from financial profitability to compliance with state and federal laws. While maintaining a successful business is a career in and of itself, what would you do if you were faced with a Department of Labor (DOL) audit?

A Wage and Hour audit could strike at any time, without notice. Virtually every business runs the risk of facing a DOL audit. Some audits are the result of employee complaints, while others result from industry wide increases in regulatory oversight. This article provides information regarding violations that cause audits, the audit process, and possible consequences. 

Common Violations

To determine whether your business will be the result of a DOL audit, consider the most common types of violations:

Failure to adequately compensate employees for overtime hours worked

Insufficient break time for employees

Failure to properly respond to discrimination accusations

Misclassification of employees as independent contractors

Insufficient tips that fail to constitute a minimum wage

Misclassification of non-exempt and exempt salaried employees

Unlawful wage deductions

Failure to secure appropriate permits for minor workers

If you suspect that one or more of these violations occurred at your workplace, you should seek legal counsel to determine what, if anything, can be done to prevent a future audit. Legal counsel can assist you with settling potential claims and developing a sound wage and hour employee policy to avoid future issues.

The Audit Process

If you received notification of an audit, you must take this process seriously, as your failure to appropriately cooperate with the investigation could result in undue monetary penalty. Consider the following steps to begin the preparation process:

Find a private area in your workplace suitable for you and the auditor. If no such area exists, temporarily commandeer an office for this purpose;

Determine whether all labor law notices are properly posted and current;

Ensure that employees are adhering to your workplace policies;

Communicate with your employees regarding the status of the audit to ensure that they will be on their best behavior;

Evaluate time-tracking measures to ensure accuracy and compliance; and

Organize all books and payroll records to prepare for a smooth review. 

Consequences of DOL Audits

DOL audits can result in several different outcomes. The best case scenario is that nothing happens or that the employer receives a refund from overpayment of taxes. These scenarios occur few and far between. Violations of the Labor Law could result in fines, imprisonment or both. These ramifications range in severity and are dependent upon the violation. Financial penalties can “stack” meaning the civil money penalty for Labor Law violations can reach up to $10,000 per penalty. These penalties are in excess of administrative fines, imprisonment, or injunctions. 

In their discretion, auditors may also refer cases to criminal prosecutors for review. Employers who have willfully violated the law may be subject to additional criminal penalties. Employers may also be liable to employees for paying back wages, curing insufficient wages, or other remedies in civil court should the employee file a lawsuit. 

Contact SHALOM LAW, PLLC to Strategize and Prepare.

DOL audits can be notoriously aggravating. If you are the target of a DOL audit, or want to prevent becoming a future target, contact Jonathan Shalom, Esq. at SHALOM LAW, PLLC to learn about your rights and responsibilities. Preparing for an audit can be similar to preparing for a deposition or trial.

You want to be certain that you are familiar with all job titles and responsibilities, and that you can explain how and whether each role complies with state and federal regulations. In any event, do not attempt to comply with the audit until securing legal representation. The best way to avoid unnecessary fees and penalties is through proper planning. If you would like to learn more about, contact SHALOM LAW, PLLC at (718) 971-9474 for a consultation. SHALOM LAW, PLLC may guide you through the intricacies of the law so that you can get back to running your business. SHALOM LAW, PLLC may also consult with you regarding workplace disputes, employment law issues, and general legal business services.

 By Jonathan Shalom, Esq. 

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Jonathan Shalom, Esq., a duly admitted attorney representing and counseling clients with all Employment and Healthcare law matters in New York State. Mr. Shalom may be contacted at 718-971-9474 for a free consultation.