Throughout 2013, numerous landscapers have contacted me regarding proper procedures associated with their companies being audited by the Department of Labor (DOL). The DOL has expansive reach to investigate myriad employment laws including the Fair Labor Standards Act (FLSA) and minimum wage, overtime, misclassification of employees as independent contractors, hours worked, record keeping and unlawful wage deductions. In short, landscapers should always be prepared for a DOL audit.
Preparation. Landscapers should develop an audit response program that is thorough, wide-reaching and contemporary to ensure its effectiveness. Key elements of this program include:
- Verifying that all past and present 1099 workers satisfy the criteria found in IRS Form SS-8.
- Ensuring all job descriptions are current, accurate and legal.
- Validating the company’s payroll system with government regulations. Examples include: Non-exempt employees must be paid for all hours work including pre-shift, post-shift, and during meal periods; no automatic time deductions for non-exempt employees’ meal periods; and not paying employees in cash.
- Affirming all wage and hour policies and procedures are legally compliant; and training response-team employees on the entire DOL audit process.
They’re Here. Once the DOL arrives for its initial visit, all response-team employees must understand their roles and responsibilities, as well as the expectations and implications of the audit. First, the company team leader must request a copy of the auditor’s business card, require the auditor to define the precise scope of the audit. The rule of thumb is that a company can have up to 72 hours to make its records available.
Upon subsequent return, the formal audit typically begins with an opening conference. During this conference, the auditor should clarify what he is investigating, how long it will take and ask for company records and procedures. He will likely request interviews with relevant employees.
During this conference, the company team leader must introduce the response team to the auditor, seek clarification for any ambiguity, and request the DOL make its document and information requests in writing. The leader should also set up a meeting with the auditor at the end of each day’s visit and take detailed notes of all topics discussed.
Document Production. The company must only provide copies of the documents requested by the auditor. Do not give additional documents or any original documents to the auditor. All document copies given to the auditor should be labeled “Confidential and Proprietary.” Keep a copy of every document given to the auditor. Never volunteer any information to the auditor.
On-site Inspection. The auditor may conduct a workplace inspection to observe potential violations, discuss DOL services and issues with employees and make suggestions regarding legal compliance. The company team leader must accompany the auditor at all times during this inspection and take detailed notes regarding who was interviewed, questions asked and comments made.
Interviews. The auditor will typically request interviews with non-exempt and exempt employees. A company representative can only attend interviews with exempt employees, not private interviews with non-exempt employees.
Give your employees an overview of the audit, a review of their job description and company payroll procedures. Tell them to always tell the truth, not to sign anything and to only answer the question being asked with first-hand information. Never speculate on an answer. Employers must never retaliate against any employee who is interviewed or refuses to be interviewed by the auditor.
Closing Conference. At the end of the audit, a closing conference will be scheduled, during which the auditor will review the results with the team leader and seek agreement to resolve the issue. The team leader should defer a response until all of the findings, violations and calculations have been verified. Employers are not required to agree to payment demands. Reconsideration of the auditor’s findings may be sought and settled through an administrative process.
Summary. Landscapers should take a proactive position by conducting self-audits to ensure their wage and hour procedures are legally compliant, and by being prepared ahead of time to withstand a DOL audit.
Steve Cesare is an industrial psychologist with the Harvest Group, a landscape consulting group. www.harvestlandscapeconsulting.com; firstname.lastname@example.org.