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.

However, a DOL audit doesn’t have to be as daunting as it sounds — it can help to know what’s coming. Here, we provide an overview of the audit process, review common workforce audits that a healthcare facility could face, and outline steps you can take to minimize or avoid Department of Labor audit penalties.

What Is a DOL Audit?

When the DOL is investigating the labor practices and workplaces of private employers, the agency has subdivisions that take the lead. For a Labor Department 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
• Overtime
• Employee classification
• Hours worked
• Recordkeeping
• 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.

Additional Department of Labor fines and penalties may be assessed depending on the severity of the discretion. 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, audits are often instigated by these 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 repeated 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 enforced by the WHD and the DOL in general that can have different statute of limitations periods. Multiple factors 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 Labor Department 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. Here are two examples of the types of records that must be kept:

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. The type of agency you partner with 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?

With DOL audits on the rise, you may have little to no advance notice of a workforce investigation. However, you can still prepare for an audit by understanding how the process works. Here’s an overview of the major phases of a Labor Department audit.

Step 1: 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.

Step 2: 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 Department of Labor audit employee interviews.

Step 3: 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.

Step 4: Final Conference

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 to Prepare for a DOL Audit

There are detailed Department of Labor audit checklists you can use to develop your internal procedures even if you’re not facing an audit. As you start the process to improve your audit preparedness, here are four important steps you can take.

1. Review Your Recordkeeping 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.

2. 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.

3. Train Your Management Team

Having a well-trained management team can not only help you 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.

4. Designate an Audit Response Team

Identify representatives who will manage your interactions and communications with an investigator should you face a Labor Department 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 Labor Department 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 — as well as audit prevention. As a true staffing partner, IntelyCare’s legal and auditing experts can get you free healthcare 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.