Most employers know that the U.S. Department of Labor (DOL) oversees compliance with the Fair Labor Standards Act (FLSA) and other statutes that protect workers. What many employers may not be aware of, however, is that the DOL has the authority to conduct inspections of workplaces and bring enforcement actions against employers found to be in violation of the FLSA and related statutes
governing wage payments. Employers may be investigated, inspected, audited, or visited by the DOL Wage and Hour Division (“WHD”) without explanation. Most often, complaints prompt DOL visits, though the existence of a complaint is not always disclosed to the employer. It is critical for employers to prepare for and understand their rights during inspections, investigations and audits. The following highlights some key points to prepare you and your team for a U.S. Department of Labor investigation.
- Pre-inspection preparation. Before a government investigation begins, there are preventive measures that employers should take.
a) Check current and past 1099’s going back several years to review job duties to ensure proper classification of independent contractors vs. employees.
b) Review timekeeping systems to ensure that non-exempt employees are being paid for all work performed (including overtime).
c) Ensure that all required payroll records and written policies and procedures are current, accurate and complaint and updated regularly, keeping on top of applicable laws and regulations.
d) Train managers with key concepts of Wage Hour Law (exempt vs. non exempt).
e) Familiarize all employees with the basics of overtime and record keeping under the FLSA.
f) Familiarize key employees with DOL inspection procedure and appoint an employee representative for WHD inspector interviews.
- Opening Conference & Preliminary Inspection. The inspection begins with the arrival of the investigator who will likely identify him or herself. The investigator will either present their credentials or an employer may request them. The investigator will request to meet with the employer or representative. An opening conference is conducted, which is when the employer is informed of the purpose of the inspection and the investigation process is explained. Some tips:
a) Clarify the scope of the investigation. Know exactly what they are looking for and don’t provide more than what is asked.
b) Consider your option to demand a subpoena vs. consenting to an investigation.
c) Know that the DOL must give the employer 72 hours to respond to demands and conduct the investigation during reasonable hours not to interrupt normal business operations.
d) Expect the DOL to request and be prepared to provide copies of at least the previous three years of payroll records, and all written policies, practices and procedures (i.e. timekeeping requirements
e) It is not unreasonable to request additional time to prepare the requested documents, although not all investigators will comply with this request.
- Document Production. The investigator may request records for examination. Records are
examined to determine of the amount of business transactions, interstate commerce participation, government contracts, the layout of the facility, and payroll and time records.
a) Label all documents produced with “Confidential and Proprietary,” and keep all trade secrets or confidential business information under cover sheets.
b) Make and keep duplicates of every record produced to the DOL.
c) Bates-stamp each produced document to better track and reference what was produced.
- On-Site Inspections and Interviews. Investigators may conduct private employee interviews that may occur on the employee’s premises, at the employee’s home, by mail, or by telephone. Both former and present employees may be subject to investigation interviews.
a) During the investigation have a manager escort the WHD representative at all times while on site (except during interviews).
b) Track the activity of the WHD representative; subjects of his questions, written notes, etc.
c) Employers do not have the right to participate in non-exempt employee interviews, but do have the right to attend all management interviews.
d) Once DOL decides who they want to interview, schedule all interviews in advance and prepare employees.
e) Remember that you must never retaliate against employees for agreeing to be interviewed or because of anything they say during an interview.
- Closing Conference. A closing conference is conducted at the end of the investigation with the employer. The investigator will inform the employer of standards violated, corrections to be made, abatement dates, and citations may be issued. If the DOL finds any violations: a)Copies of the citation will be provided by mail and employers must post citations where affected employees can view them.
b) Be prepared for follow up inspections to ensure corrections are made and citations are posted.
c) Request time to provide supplemental information to correct any factual errors that form the basis of a proposed violation.
d) In deciding wither to contest the DOL’s findings, consult counsel to review whether the alleged violations are accurate, if the penalties are excessive and if the finding exposes you to costly
During more in-depth investigations, compliance officers may conduct preliminary investigations including looking into whether or not a complaint is valid, and checking on prior or current investigations for the same employer. Additionally, they may collect copies of prior inspection reports, inspector’s notes, interviews, signed statements, and information on previous complaints. An employer may provide a written position statement and request time to consult legal counsel. Investigators may also subpoena documents and witnesses.
6. Remedies for Violations. Depending on the violation, type of investigation, and who performed the investigation, remedies will vary. Financially, employers may be subject to the payment of back wages, civil money penalties, employee suits for recovery, and Secretary of Labor lawsuits brought on behalf of employees. Legally, employers may be subject to court injunctions brought by the Secretary of Labor, criminal penalties, and court injunctions that prohibit further violations. Certain statutes subject employers to the withholding of funds, administrative hearings, court actions, loss of federal contracts, and the declaration of ineligibility for future contracts. Protection will be provided to the employees who file complaints or provide information for the investigation. Charges of retaliation, and potentially criminal sanctions, may occur if employees are affected after an investigation.
7. Conclusion. Employers should be proactive as opposed to reactive in this area. They should conduct self-audits at least yearly to make sure they are in compliance with applicable laws enforced by the United States Department of Labor. Employers should also train their employees what to do if when an investigator shows up at the facility. Early planning and knowing how to respond to an inspection could
potentially save an employer thousands of dollars and protect the employer from criminal prosecution.