What causes a DOL audit?

Assuring fair labor practices and compliance with employment laws across various industries is one of the key responsibilities of the Department of Labor (DOL). A DOL audit is one of the tools it can use to assess compliance with federal labor laws by examining an employer’s records and practices. Employers can prevent penalties or fines by understanding what triggers a DOL audit and proactively addressing potential compliance issues. 

We’ll explore the common causes of DOL audits and provide tips on how employers can prepare for or prevent them in this article.

Wage and Hour Violations

One of the primary reasons for a DOL audit is suspected violations of wage and hour laws, particularly the Fair Labor Standards Act (FLSA). Common issues that may trigger an audit include:

1. Overtime Pay: Failure to pay overtime wages to eligible employees or misclassification of employees as exempt from overtime requirements.
2. Minimum Wage Compliance: Violations related to paying employees below the federal minimum wage or state-specific minimum wage requirements.
3. Off-the-Clock Work: Failure to compensate employees for work performed outside of scheduled hours, such as responding to emails or completing tasks before or after shifts.
4. Misclassification of Workers: Incorrectly classifying employees as independent contractors to avoid payroll taxes and other employment-related obligations.
5. Record-Keeping Violations: Inadequate or inaccurate record-keeping of employee hours worked, wages paid, and other relevant information.

Employee Benefits Compliance

Another area of concern for DOL audits is compliance with employee benefits laws, such as the Employee Retirement Income Security Act (ERISA). Issues that may prompt an audit include:

1. Healthcare Plans: Not providing required disclosures about health insurance benefits or not offering coverage to eligible employees as required by the Affordable Care Act (ACA).
2. Retirement Plans: Noncompliance with ERISA regulations governing employer-sponsored retirement plans, including failure to make required contributions or provide employees with necessary disclosures.
3. Family and Medical Leave Act (FMLA): Violations related to providing eligible employees with protected leave for qualifying medical and family reasons, as mandated by the FMLA.

Occupational Safety and Health Violations

The Occupational Safety and Health Administration (OSHA), a division of the DOL, oversees workplace safety standards and may conduct audits to ensure compliance with occupational safety and health regulations. Common triggers for OSHA audits include:

1. Workplace Injuries and Illnesses: High rates of workplace injuries or illnesses may prompt an OSHA audit to assess whether employers are providing a safe working environment and complying with OSHA standards.
2. Safety Violations: Reports of unsafe working conditions, failure to provide necessary safety equipment, or inadequate training on safety protocols may lead to an OSHA audit.

Unemployment Insurance Compliance

State workforce agencies, often operating under the guidance of the DOL, oversee unemployment insurance programs and may conduct audits to ensure compliance with unemployment insurance laws. Common reasons for unemployment insurance audits include:

1. Misclassification of Workers: Misclassifying employees as independent contractors to avoid paying unemployment insurance taxes.
2. Unemployment Insurance Claims: Suspicious patterns of unemployment insurance claims, such as a high number of claims filed by former employees, may trigger an audit to investigate potential fraud or abuse of the system.

How to Prevent or Prepare for a DOL Audit

While the prospect of a DOL audit can be daunting, employers can take proactive measures to prevent or prepare for audits and minimize compliance risks:

1. Stay Informed: Maintain a working knowledge of federal and state labor laws, including wage and hour regulations, employee benefits requirements, workplace safety standards, and unemployment insurance.
2. Maintain Accurate Records: Establish and maintain comprehensive record-keeping systems to track employee hours worked, wages paid, benefits provided, and safety-related incidents or training.
3. Implement Compliance Policies: Develop and enforce policies and procedures to ensure compliance with labor laws, including clear guidelines on overtime pay, minimum wage requirements, employee classification, and workplace safety protocols.
4. Conduct Internal Audits: Regularly review and audit your own practices and records to identify and address potential compliance issues before they escalate into DOL audits.
5. Seek Legal Guidance: Consult with legal counsel or HR professionals specializing in employment law to assess your compliance status, address any identified issues, and develop strategies for mitigating compliance risks.

Employers can reduce the chances of triggering a DOL audit by proactively addressing potential compliance issues and implementing sound policies and procedures. In addition to protecting employees’ rights and well-being, enforcement of  labor laws protects employers from costly penalties, fines, and reputational damage associated with noncompliance.