It can happen to any business, at any time. A knock at the door, and suddenly you’re facing a team of Department of Labor (DOL) investigators demanding you produce your payroll and tax records. It can be a scary situation! What can help: having a plan in place ahead of time, so you know what to do and how to respond.

Why Is This Happening?

In a situation like this, you probably can’t help but wonder why the investigators have singled you out. The fact is, they may not have targeted you specifically. The DOL is conducting “sweeps” of certain businesses in various parts of the country, specifically focusing on low-wage industries or those they suspect have a high degree of non-compliance. According to DOL statistics, in fiscal year 2015 over 42% of their investigations were “agency-initiated.”

Of course, it’s also possible they may have received a “tip” from a disgruntled current or former employee, they may have been referred by another enforcement agency, or a competitor or labor union might have complained.

Pro Tip: Because of the possibility of retaliation, and to prevent a tainted investigation, the DOL inspectors will not identify who complained. They won’t even tell you if the investigation was prompted by a complaint or if it was “agency-initiated.” In fact, asking the question could actually serve to arouse suspicions. “Do you have a guilty conscience? What have you been doing to make you think someone must have complained?” So save yourself a ton of headaches and don’t bother asking.

Be Prepared

The Boy Scouts’ motto is a good one to follow here. First, if you don’t have a designated wage and hour advisor (preferably an attorney who specializes in employment law), get one! You don’t want to find yourself scrambling to find a representative at the last minute — and you certainly don’t want to face the DOL alone.

Second, make sure your records are in order and complete. You are required to collect and maintain accurate time records for overtime-eligible employees, and keep payroll records for all employees. Generally speaking, you need to retain wage and hour records for a least three years, but your wage and hour advisor will be able to help you determine specifically which records you need to keep and how long you need to keep them to satisfy the legal requirements.

Pro Tip: This is a situation where automated software such as timeQplus®, or a cloud-based solution such as AcroTime®, can make your life much easier. By storing the records electronically, they take up much less space, are generally more secure and are easier to retrieve than paper records.

Third, make sure that everyone who might come in contact with the investigators has been trained on how to respond. Be sure that everyone knows to be courteous and polite, but not to volunteer any information. Wait for the arrival of your wage and hour representative before discussing any aspect of the investigation with the DOL personnel.

Do This Immediately

When they arrive, the investigators should immediately identify themselves and present official credentials.

At this point, your main responsibility is not to panic. You’re surprised, you’re a bit scared, and you might be feeling a little defensive. In this situation, the best defense is not a strong offense. Being belligerent, curt or rude to the investigators will not start things off on the right foot, and certainly won’t help your case later.

Courteously inform the team leader that you need to contact your wage and hour attorney, who will arrive promptly to assist the investigators. (This is why it’s important to have a wage and hour representative already waiting in the wings.)

Then show the team to a comfortable, secure location, such as a conference room, to wait for the arrival of your attorney. There’s no need to go overboard with the hospitality, but it might not hurt to offer them coffee or other beverages.

Pro Tip: You do not have to allow the DOL immediate access to your records without a subpoena. Wait for your attorney to arrive before you discuss any aspects of the investigation or turn over any documents.

When Your Representative Arrives

Your wage and hour attorney should also verify the investigators’ credentials, then talk with the inspectors to determine what exactly the DOL is investigating. It’s important to clarify the focus of the DOL’s inquiry to ensure you give them everything they need, but only what they need. Your attorney can help you identify specifically what you should turn over to the DOL to satisfy their requirements.

Pro Tip: Get it in writing! Your attorney should ask the DOL to provide written requests for the specific documents they want to review and for employee interviews. This will help clarify the scope of the investigation.

A good thing to keep in mind is that — while you must cooperate with the investigation — you have the right for it to be conducted in a way that doesn’t disrupt your normal business operations. So, for instance, your attorney should be able to negotiate a period of time to produce the necessary records.

During the Investigation

Once you’ve got a list of the documents and records that the investigators want to inspect, and you have a due date for when they want to see them, set about immediately to gather the required records. You definitely do not want to miss the deadline or turn in partial documentation — that’s just a red flag for the investigators that you have something to hide.

Don’t be like the owner of an auto glass shop in Albuquerque, New Mexico. I wrote about this incident on our blog. It took him over a year, a subpoena and at least two court dates to turn in some of the documentation requested by the DOL. When he showed up at his “last chance” hearing without all the requested documents, the judge ruled he was in contempt of court and sent him directly to jail.

Pro Tip: While it’s important to be complete and timely in turning over the documents the investigators ask for, remember you are not required to give them any documents that were not specifically requested. If the investigators ask for your payroll register for teh past two years, giving them access to your entire personnel files and all wage records going back five years will not win you brownie points. It might even alert investigators to issues they hadn’t previously identified.

It’s a good practice to create a document control log. List all the records the DOL has requested, and use the log to track the date you retrieved the document and the date you turned it over to the DOL. Keep the originals of all documents in your files.

Remember that the investigators have the right to interview employees in confidence. They can conduct these interviews at your facility or off-site, during or after business hours, as long as they don’t disrupt your normal business operations. Be sure all your supervisors and managers are aware of this. You cannot forbid your employees from talking to the inspectors, nor can you instruct the employees on what to say. Threatening or retaliating against employees for talking to the inspectors will only make the situation worse and will result in larger fines and penalties for you.

The Follow Up

After they’ve completed their investigation, the DOL team will ask to meet with you. It’s important to remain courteous and cooperative at this stage of the process. If you don’t trust yourself to maintain your temper and your tongue, let your attorney handle the meeting.

It might be good to keep in mind it’s possible the inspectors will tell you everything is OK. In agency-initiated investigations during fiscal year 2015, investigators found no violations at all in 21% of cases, and only minor issues in many others.

If the inspectors have found any violations, they will tell you what they found and how to correct the issues. If you owe back wages or penalties, they will request payment. Depending upon the amount owed, you can potentially negotiate a payment due date rather than writing a check or handing over cash on the spot. Whatever you do, don’t miss the payment due date! The DOL will go to court to compel payment if you drag your feet.

Some unscrupulous employers think they can “pay” employees the back wages they’re due, then force the employees to give back the money once the DOL inspectors have left. This scheme rarely works. All it takes is one disgruntled employee to blow the whistle and the employers find themselves in court, subject to additional penalties and fines and even possible jail time. For example, the company owner and two managers at Sands Mechanical, Inc. of Bristol, PA all went to prison because of just such a scheme. In another instance, the owner of the “Senor Tequila” restaurant group in Charleston, SC is facing a possible $250,000 fine and up to five years in prison, after he tried to force three employees to return to him back wages he owed them, while telling the DOL he had paid the wages.

Conclusion

If the DOL shows up at your door:

  • Remain calm and polite.
  • Call your wage and hour attorney immediately.
  • Provide all the records the DOL auditors request, by their deadline…
  • …But avoid offering extra documents they didn’t request.
  • Don’t interfere with the inspectors if they want to interview your employees.
  • If you are assessed back wages or penalties, pay promptly by the due date — and fix whatever problems they identify so you don’t run into the same trouble again in the future.

Of course, if you don’t have the wage and hour records to start with, it’s going to be hard to comply with the inspectors’ demands. Installing, properly configuring and using a good time tracking system can go a long way toward avoiding the kinds of issues that can lead to a DOL audit in the first place.

Acroprint offers one of the most complete lines of time tracking products in the industry — including traditional time recorders, time and attendance software and a cloud-based workforce management suite — all of which fulfill the requirements of the Fair Labor Standards Act. You’re sure to find an ideal solution to meet your business needs. Visit our web store today to see the complete selection and purchase your new time tracking solution.

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