Preparing For a DOL Audit of Your Workforce: FAQ
The Department of Labor (DOL) enforces federal laws and regulations governing the workplace and workers’ rights. Its reach is broad — it covers roughly 150 million workers and 10 million workplaces, enforcing over 180 different federal laws. With such wide responsibility, there are a number of ways the DOL could subject an employer to an investigation.
But a DOL audit doesn’t have to be as daunting as it sounds — if you know what’s coming. Here’s an overview of the audit process, as well as a common workforce audit that a healthcare facility could face, and steps you can take to be prepared.
What Is a DOL Audit?
When the DOL is investigating the labor practices and the workplaces of private employers, the agency has subdivisions that take the lead. For a workforce audit, the agency’s Wage and Hour Division (WHD) conducts the investigations that focus on the labor rights of workers, especially those related to pay and employee status. One of the major laws covering workers’ rights is the Fair Labor Standards Act (FLSA).
The FLSA was intended to be broad in scope and while it generally applies to businesses that have at least $500,000 in annual sales, there is no financial threshold for hospitals or organizations that are primarily engaged in caring for the sick, aged, mentally ill, or disabled.
The FLSA provides specific authorization for the DOL (using its Wage and Hour Division) to “investigate and gather data regarding the wages, hours, and other conditions and practices of employment” and to “enter and inspect” workplaces, request and review business records, and interview employees to uncover violations involving:
- Minimum wage
- Employee classification
- Hours worked
- Child labor
Some of the most common violations involve workers not being paid at least the minimum wage or required overtime, and workers being improperly classified as independent contractors. When an audit is complete, any violations can be typically resolved through a settlement with the employer on a per violation basis. This can happen before or after a case is brought to a federal court by the DOL.
What Triggers a Department of Labor Audit?
A workforce audit by the WHD can happen at any time and with little to no notice for a facility. However, here are the most common triggers:
- Employee complaint. The DOL typically handles these complaints confidentially and won’t disclose the identity of the complainant(s) or even the nature or existence of the complaint. It’s important to know that if an employer is aware of the complainant’s identity, it may not retaliate against them because of the complaint. Also, even when triggered by a complaint, an investigation can go further and focus on other employees and practices not addressed in the initial complaint.
- Industry or region-specific investigation. In some cases, the WHD may target specific regions or industries with a history of serious or repetitive labor violations. For example, in 2020 the DOL coordinated with other agencies to focus on the home care and nursing care industries, finding violations in 89% of its investigations and recovering over $16 million in back wages and damages.
Regardless of the reason for a DOL workforce investigation, it will be conducted based on established policies and procedures.
Is There a DOL Audit Statute of Limitations?
Generally the FLSA has a two-year statute of limitations for non-willful violations, but this expands to three years for willful violations. Keep in mind that this applies to the FLSA but there are other laws that are enforced by the WHD and the DOL in general that can have different statute of limitations periods. There are several factors that can determine the statute of limitations in any specific case, so you should consult with an attorney if you have questions.
What Records Can Be Reviewed During a Workforce Audit?
Although DOL regulations don’t require any particular order or format for business records, they do specify the types of records that must be kept by employers that would be subject for review during a DOL audit. For example, here are a few categories of records that must be kept:
- Employee information. This includes records that contain basic information about employees, such as their names, addresses, birthdates (if 18 or under), sex, and occupation.
- Payroll. This includes records relating to employees’ workweeks and pay periods, the hours they work each workday and pay period, their hourly rate of pay, and the total additions and deductions from wages each pay period.
Depending on the type of records, DOL regulations require that they be preserved for either two or three years and kept in a safe and accessible location at your facility or at an established recordkeeping office. If these types of records are requested during a DOL investigation, they must be made available within 72 hours, unless additional time is granted.
If you utilize a nurse staffing agency to fill your shifts, you should ensure that your contract clarifies responsibility for record keeping, as you’ll need to have quick access to records in the event of an audit. This is where the type of agency can make a difference as one that utilizes 1099 nurses may have less oversight, control, and documentation than a W2 staffing partner, which would be the employer of record for any nurse in your facility.
What Can You Expect During a DOL Audit of Your Facility?
While you may have little to no advance notice of a DOL workforce investigation, you can still be prepared by understanding how the process works. Here’s an overview of the major phases of a DOL workforce audit.
Assignment of Investigator
Once named, a WHD investigator must first determine what laws apply and whether the DOL has authority to investigate. How much advance notice you receive can depend on the investigator, but once you become aware of an audit, you can make a request for additional time to collect records and can also ask about the focus of the investigation.
Examination of Records
This is typically broken down into two parts. The first involves a review of records to determine what laws or exemptions may apply and whether the DOL has jurisdiction. The second involves a review of payroll-related records to identify potential violations and to prepare for employee interviews.
During this phase, select employees (current or former) can be privately interviewed on your facility’s premises or, in some cases, by phone or mail. The focus here is to verify data obtained during the records examination process and obtain any additional information to assist in the investigation. Investigators may also interview any contract workers at your facility to determine whether they have been improperly classified.
After reviewing records and interviewing employees, the investigator will meet with the employer to discuss findings, any evidence of violations, and corrective actions that can be taken. An employer can still present additional facts and evidence in response to the Department of Labor investigation results. At this stage, the investigator may request payment of back wages as a way to remedy any violations, but this can also be part of subsequent settlement negotiations.
How Can You Prepare for a DOL Audit?
There are detailed DOL audit checklists you can use to develop your internal procedures even if you’re not facing an audit, but as you start the process to improve your audit preparedness, here are four important steps you can take.
- Review your record-keeping system. Ensure that you have a consistent, accurate, and documentable time-keeping system in place. If you’re still using paper records, or a mix of paper and electronic, consider making the full transition to electronic for ease of storage, retrieval and review. Payroll and time records are at the heart of any WHD investigation, so having accurate, complete, and easy-to-access records will speed up the process and may give the investigator more confidence in the information you provide. One thing to keep in mind is that the scope of an audit can expand at any time, especially when an auditor identifies discrepancies in your records.
- Conduct an Internal Audit. Bring your administrators, HR professionals, and payroll managers together as a joint team to audit your books — or bring in a professional consultant to assist you. Have them review and make recommendations on how to update your hiring, management, and record-keeping practices and procedures, HR policies, compensation structures, and job descriptions and titles. They should also ensure that all required employee notices and posters are current and placed in visible areas for your workforce. When conducting an internal workforce audit it wouldn’t hurt to also keep an eye on other areas of compliance, such as workplace safety and OSHA training requirements.
- Train your management team. Having a well-trained management team can not only help you to efficiently gather the information and records you’ll need for a DOL audit, but it can also help you prevent one. Managers who know how to resolve pay issues and respect the rights of their workforce are the best deterrent to employee complaints and workforce audits. The DOL offers a number of free management training resources to use with your team.
- Designate an audit response team. Identify representatives who will manage your interactions and communications with an investigator should you face a workforce audit. Consider pulling from your internal auditing team, as they may be in the best position to ensure that consistent and accurate information is provided.
Want to Reduce the Likelihood — and Stress — of a DOL Audit?
Facing a workforce audit takes its toll on facilities and, ultimately, the care of your patients. Having effective staffing and workforce management strategies in place is the key to audit preparedness, but also audit prevention. As a true staffing partner, IntelyCare’s legal and auditing experts can get you free workforce insights when you need them most.
Legal Disclaimer: This article contains general legal information, but it is not intended to constitute professional legal advice for any particular situation and should not be relied on as professional legal advice. Any references to the law may not be current as laws regularly change through updates in legislation, regulation, and case law at the federal and state level. Nothing in this article should be interpreted as creating an attorney-client relationship. If you have legal questions, you should seek the advice of an attorney licensed to practice in your jurisdiction.