FLSA Audit Tips

Posted on 29-Nov-07 by The Timekeeper

For some reason there’s a lot of talk lately about wage and hour audits. Not that this is a bad thing — if more businesses conducted regular FLSA audits (and acted upon the results), there would be a lot fewer lawsuits. So listen up!

The latest I’ve come across is this article in the HR Daily Advisor newsletter offering some useful tips related to FLSA audits.

Wage and hour lawsuits are on the rise. According to the article, there are several reasons why:

Lots of gray areas in the law — plenty of places for employers to get tripped up if they’re not careful.
The DOL is aggressively pursuing cases.
Attorneys are migrating to the wage and hour field from other areas of the law, and some are actively trolling for clients.

Why are attorneys flocking to wage and hour law? For the same reason robbers hold up banks: it’s where the money is. Not to mention that wage and hour suits are relatively easy to prosecute — which makes for a very attractive combination.

I’ve said it here before, and others have said it elsewhere, but given the number of cases I see in the news every day, it apparently bears repeating: a smart employer will conduct regular FLSA audits.

You don’t have to take just my word for it. How about some good advice from Victoria Donati and Jason Kim, attorneys with Chicago law firm Meal, Gerber & Eisenberg LLP? Here are just a few of the benefits they’ve identified of conducting an FLSA audit:

Allows you to identify and correct problems before they get to the lawsuit stage.
Demonstrates your good faith. If the DOL finds you weren’t operating in “good faith” your penalties can be doubled.
Makes sure you’re prepared for any potential DOL investigations.

The ideal is to audit once a year. For small businesses, of course, that might not be feasible, or even possible. At the very least, they recommend you consider a partial audit whenever:

you get a complaint about your pay practices.
you’ve changed your organizational structure or made major changes to employees’ job classifications, duties, hours and/or pay.
the law or DOL regulations change.
there’s an FLSA settlement or lawsuit related to your industry or business practices.
you’re facing a union organizing campaign.

The only thing is, be sure if your audit uncovers any problems, fix them, fer cryin’ out loud! Otherwise, you’re just asking for trouble. See, if the DOL becomes aware you knew about issues but did’t correct them, your violation becomes “willful,” which makes it a lot more expensive.

And the point of conducting an audit is to help prevent problems, not cause bigger ones!