There’s an Auditor in my Coffee

04 May There’s an Auditor in my Coffee

If you’re a manager with a busy day ahead, you don’t want to look over the rim of your coffee cup on a Monday morning and hear a Department of Labor auditor say, “I’m here to perform a wage and hour compliance audit.” Whatever plans you had that day are now pushed aside to make room for an in depth audit requiring pulling several years’ worth of pay records, time records, employee files, compensation agreements, bonus calculations, etc.

The auditor always says, “We sent a letter announcing our intention to be here today,” but I’ve never had a client who actually received that letter in advance of the audit. Even if you’ve done everything right, you might be required to respond to employee complaints about improper pay practices. Do you know what improper pay practices are?

The Society for Human Resource Management announced, “Thomas Perez won Senate confirmation July 18, 2013, to lead the U.S. Department of Labor (DOL), where he has promised to focus on enforcing wage and hour laws.” How does that affect you? As a manager who might track, enter, and approve time for payroll, you’re setting yourself up for an uncomfortable situation if you aren’t staying on top of wage and hour laws or getting training from your Human Resources department. I’ve assisted companies with wage and hour audits before, and the tone of the audits has changed recently. I asked a DOL auditor what her field instructions were, and she said, “They told me to keep looking until I find something wrong.” Translation: find something that requires the company to write a check!

The low-hanging fruit for DOL auditors includes:

  • Calling workers independent contractors when they’re really employees;
  • Using comp time to avoid paying overtime;
  • Failing to track and pay overtime correctly for non-exempt positions;
  • Classifying positions as exempt when they should be non-exempt;
  • And more.

 

If you understand what’s required by federal and state laws (a challenge, I know), classify positions and contractors correctly, track and pay time properly for non-exempt positions, and don’t make improper deductions from the pay of employees in exempt positions, you’re way ahead of most growing companies. If you’re compliant, you don’t have to worry about an audit. It will be a hassle, but it shouldn’t result in embarrassment, financial penalties or back-pay checks.

If you’re not confident in this area, come back and keep reading. I’ll be posting a series of practical tips to help you get it right before the DOL knocks on your door and ruins your morning cup of coffee.

 

Scott Mastley, SPHR, MBA, is the Vice President of Human Resources for Resource Alliance. Scott is a consultant, not an attorney, so he shares his opinions, not legal advice, about increasing performance and limiting liability.