Every year employers should be taking steps to avoid a DOL audit. However, it’s especially critical in 2022. An employee complaint to the Department of Labor (DOL) could create serious financial consequences for an employer, whether regarding wage and hour violations, the Family and Medical Leave Act (FMLA), employees not being properly classified, etc. MP’s HR compliance experts share three reasons employers should focus on ensuring compliance and avoiding an audit process with the DOL investigators in 2022.

3 Reasons to Avoid a 2022 DOL Audit

1. The DOL has announced they’ll be conducting significantly more audits this year.

In two separate announcements, the DOL has stated that they’ll be performing more wage and hour audits, as well as FMLA audits this year. One of the DOL’s press releases noted they’d be more focused on warehouse and logistics industries, but this doesn’t mean that other businesses shouldn’t take this warning seriously. Employment lawyers and HR experts are already noticing a stronger, more aggressive DOL than the one under the Trump administration. This warning is also a call to action for workers. With increased support from the DOL, employees are likely to feel more comfortable making complaints to the DOL about noncompliance with federal or state pay practices, independent contractor classifications, etc. If employers violate federal or state wage and hour laws or FMLA regulations, they may incur steep penalties, back pay, and interest. It’s also critical to remember that once the DOL investigates an employer for one violation, they can examine all the employer’s practices. An investigation for a wage and hour violation may lead to penalties for multiple violations, creating financially devastating consequences for an organization.

2. Reduce legal risk and exposure.

Employers will benefit from preparations to avoid a DOL audit because they’ll also reduce their legal risk and exposure. In the last few years, wage and hour lawsuits have become the fastest-growing kind of litigation. These lawsuits are often based on:

• Whether employees are correctly classified as exempt or non-exempt under the FLSA
• Employees encountering pressure from their manager/supervisor [employer] to work off the clock
• Unpaid wages or overtime based on oversight regarding on-call pay, shift premiums, travel, training, and mealtime
• Claims over improper overtime calculation
• Overtime pay due to commissions, multiple pay rates, bonuses, other lump-sum payments

Liability for employers may be steep. Employers can owe doubled back pay to employees and former employees for up to a two to three-year period. Additionally, employers may have to pay attorney fees for the plaintiffs (as well as their own). Since these cases often involve multiple employees, they can be costly. It’s important to note that legally, employers and aggrieved employees (or former employees) cannot agree to their own settlement amount. Thus, employers may not have the option to settle for a reduced amount. They’re also not legally protected if their violation was an “honest mistake” or unintentional.

3. Protection for the employer brand.

Especially in 2022, in the midst of The Great Recession, employer brand is critical for an organization’s success. When a business is embroiled in legal action or a DOL audit for not compensating their employees appropriately, it can gravely impact ability to attract and retain top talent. Employees and former employees may post about these legal actions or audits on sites for job seekers such as Glassdoor, Indeed, or LinkedIn. Additionally, employers may also be mentioned in the press or, in a worst-case scenario, a DOL press release for wage and hour or FMLA violations.

To prevent a DOL audit or legal action, employers should:

Work with legal counsel or an HR expert (such as those at MP) to ensure they understand both federal and state law. They should:

• Perform an internal wage and hour audit
• Conduct an internal FMLA audit
• Develop a plan to address areas of concern identified via the self-audit
• Keep accurate payroll records
• Apply policies consistently
• Ensure all records are complete and work to resolve any inconsistencies
• Have a file archival system (paper-based or electronic)
• Keep a calendar for document maintenance
• Update job descriptions
• Update employee handbook(s)
• Check that all employees (exempt employees, non-exempt employees, independent contractors) are properly classified

Another critical step is to create a user-friendly, non-intimidating process for employees to make wage and hour or FMLA complaints internally. For more guidance on avoiding FMLA audits, read this MP article.