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Avoiding and Surviving a DOL Audit

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Avoiding and Surviving a DOL AuditAudit.

A small word that’s associated with great dread. And with good reason. An audit initiated by the Department of Labor can be costly, time consuming, and generally unpleasant. And the statistics are stacked against you. If you receive notification from the DOL of an audit, they’re likely to uncover some sort of problem. Nobody’s perfect after all.

According to the DOL, the purpose of an audit is “not to rehash past mistakes, but to look at past events with a view toward improving future performance. Findings from an audit can be used as a basis for adjusting policies, priorities, structure or procedures in order to make operations as efficient, economical and effective as possible.”

Sounds pretty positive, right? While the DOL may take an optimistic approach, you’re best to be proactive to avoid one altogether.

How to Avoid a DOL Audit

  • Keep meticulous records. A human capital management (HCM) system like Balance Point’s cloud-based solution Orange that includes time and attendance, payroll, and HR will significantly streamline and automate the record-keeping process.
  • Improve communications with employees. While the DOL has in the past targeted employers in low-wage industries for wage and hour violations, an audit is likely to be initiated by a complaint from a current or former employee. Make sure you are sensitive to employee concerns and respond in a timely way to all questions to avoid retaliation from a disgruntled worker.
  • Educate managers. Daily compliance is usually the responsibility of managers and supervisors. Make sure they are aware of basic compliance requirements.
  • Self-audit other human resources processes such as employee job descriptions, Fair Labor Standards Act (FLSA) classifications, and ensure compliance with federal and state employment laws. Make sure all records are complete and work to resolve any inconsistencies.

If, despite your good intentions you are contacted by the DOL, don’t panic. The DOL typically provides little advance notice of an audit, but there are measures you can take to make the process as smooth as possible. SHRM provides the guidance below to prepare employers in the event of an audit.

How to Survive a DOL Audit

  1. Contact the auditor to find out specific information about the audit. Key questions to ask are the focus of the investigation (e.g., overtime pay compliance, exempt vs. nonexempt classification, minimum wage compliance), the time period for records the auditor wants to view, and the names of any employees that may be interviewed.
  2. Gather the records in accordance with guidance provided by the auditor. Be prepared to provide documentation related to the company compensation policies and procedures. Keep track of exactly what information was provided. Do not provide records other than what the auditor requests.
  3. Designate one or two company representatives to work with the auditor. Some employers choose to designate their company’s legal counsel; other employers will designate senior managers. The representatives will have the duty to provide documents requested, arrange for any additional records to be provided to the auditor (if necessary) and coordinate employee interviews.
  4. During the audit, be courteous to and cooperative with the auditor. It is a good practice to provide a quiet area for the auditor to work in.
  5. At the end of the audit, ask the auditor to provide a summary of the results of the investigation. This information will help an employer review options for resolutions if any violations are found. If violations are found, employers are encouraged to consult legal counsel before any settlements are reached with the DOL.

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