Posted on July 30th, 2018
Your business just received an FLSA audit. I know you heard Darth Vader music in your head right now and obviously, the word audit is never fun for any business owner to hear. But if you know what to expect, an audit will seem far less intimidating.
Today we have some key information for California business owners about to go through an FLSA audit.
If you’re a business owner in California, there’s little you dread more than a visit from a Department of Labor investigator. One of these visits might be prompted by a complaint filed with their offices, or maybe you’re in an industry that is targeted specifically by the Department of Labor.
Usually, in order to conduct an FLSA audit, the DOL will visit your office. As long as someone at the office gives permission to the interviewers, your employees can be interviewed by the DOL without your knowledge or preparation.
In order to survive this kind of investigation, you have to prepare your employees early for the possibility of a visit from the DOL. You must educate them to respond the right way.
That’s why we wrote this article for you. We cant answer for all of the issues that an FLSA audit can cause, but we can let you know what you should do if that happens.
Federal Wage and Hour Laws Overview
First, you might be wondering whether the DOL is allowed to enter your business and investigate without a subpoena.
The answer is both yes and no.
Federal agents are allowed to enter places of employment to inspect records and question employees.
However, the Supreme Court has held that the Fourth Amendment limits the right of federal agents to enter the workplace when the employer has an expectation of privacy.
This basically means that the DOL will have to place an administrative subpoena to get your records.
Many employers fall into that category, but not all of them do. For example, if your company involves the sale of alcohol, you may have waived the opportunity to assert your company’s Fourth Amendment rights.
Basically, you don’t have to cooperate with a DOL investigation, but you cant interfere with it. R
emind your employees that talking to the DOL is voluntary and that they should be cooperative, but not speak before a company representative is there for the interview.
What is the FLSA?
The FLSA is the Fair Labor Standards Act of 1938. This act controls minimum wage requirements, overtime pay, prohibits child labor and enforces record-keeping requirements. This involves every employer in the US and protects both full and part-time employees.
In order to prepare for a DOL investigation, you have to understand the difference between a salaried worker and an hourly worker. Also, understand how the DOL interprets work time or “hours worked.”
Record Keeping
First, the Department of Labor will ask to see your employment records. Your company has an obligation to retain records under the FLSA.
It requires you to retain:
- Every employee’s full name
- Every employee’s home address
- Every employee’s date of birth (if the employee is under 19)
- The time of day and day of the week that the employee workweek begins
- Hourly rate of pay in any week you pay overtime
- Basis of pay
- Total daily or weekly pay excluding overtime
- Total overtime pay
- Total additions or deductions from employee’s wages
- Dates, amount, and nature of items that make up those additions and deductions
- Total wages paid during a wage period
- First date of payment
- Pay period covered
Also, the FLSA requires that you retain records that reflect the calculation and payment of wages in general.
This includes time cards, wage rate tables, work time schedules, and records that explain the wage differentials.
You must keep all records for two years and if you’re found to be lying or destroying the records, you could deal with a penalty as high as $10,000.
Also, you must have a poster in a conspicuous spot that describes the minimum wage rate, the training wage rate, the company’s anti-child labor policy, and the provision that applies to tipped employees. Also, it must include enforcement provisions of the FLSA.
Equal Pay Act
The FLSA contains a different provision known as the Equal Pay Act. This act requires that both male and female employees are paid equally for work that requires the same skill, effort, and responsibility.
An FLSA audit can bring questions about any disparity between wages paid to men and women for work that is equal. And unlike minimum wage and overtime, there are no exemptions from the Equal Pay Act requirement.
When you look at your own records, correct any possible Equal Pay Act problems. But also be aware that corrective measures you take could also cause problems.
If you decide that your company has an issue with the Equal Pay Act, be cautious of how you fix it.
You can never fix that problem by lowering anyone’s rate of pay.
Minimizing Risk
In order to minimize your company’s risk, make sure that all of your employees understand their wages and have compensation agreements in writing. This can help to avoid contested wage claims.
Also, make sure that when they are questioned about wages and employment policies, they know they are never supposed to guess.
It’s a good idea to seek the advice of an attorney before the DOL even appears at your door. If your company faces an FLSA audit, all of these issues and a bunch of others will be addressed.
FLSA audits can be very expensive, especially when you consider potential back-pay and administrative penalties you could incur.
Surviving an FLSA Audit
FLSA Audits are never fun. There are often so many different laws and regulations that it is hard to keep up.
But the best way to make sure that you deal with an audit appropriately is to do an audit on your own business BEFORE there is an issue with a skilled employer defense attorney.
We can come to your business and spend a few hours there detailing every potential issue you might have with a real FLSA Audit.
For more information about having a highly skilled employer defense attorney audit your California business for you at an affordable price contact us today.
