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Any business can be targeted for a Department of Labor (DOL) audit — and these audits are on the rise across industries like food service, agriculture, manufacturing and more. Sometimes a single employee complaint can trigger an audit. Other times, the Department of Labor (DOL) selects businesses at random.
For employers, the prospect of an audit may feel intimidating. But being proactive and prepared can make the process smoother and protect your business from costly fines or penalties. Here’s what every business owner should know about DOL audits and how to prepare.
A Department of Labor audit is an investigation that evaluates whether a business is complying with federal labor laws. The DOL conducts different types of audits depending on the issue at hand.
Two of the most common audit categories are:
Financial audits – Review the accuracy of a business’s financial statements.
Within these categories, some of the most frequent investigations include:
Employee benefit audits, such as 401(k) plan audits.
Wage and Hour audits, which review compliance with the Fair Labor Standards Act (FLSA).
For example, if an employee alleges unpaid overtime, the DOL may launch a Wage and Hour audit to determine whether your business owes back pay.
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The purpose of a DOL audit is to ensure compliance with labor laws. Auditors may review records, interview employees or examine policies. Common areas of focus include:
👉 Need help staying compliant before a Department of Labor audit ever arrives?
Axcet’s certified HR consultants can partner with you to safeguard your business. Reach out >>
Understanding the process can help you stay prepared. Here’s a typical audit timeline:
Your business may or may not be notified in advance.
Employers should always keep employee documentation organized and ready.
The DOL can request records, reports, and documents from the last two years (or longer in some cases).
PEO clients, like those who partner with Axcet, can quickly access all required documents through their provider.
If you’ve been notified that your business will be the subject of a DOL audit, you can reach out to the Department of Labor and ask what the focus of the investigation will be. This step helps you anticipate which records will be most relevant.
Keep in mind that there is a two-year statute of limitations on overtime and minimum wage claims, meaning auditors will always review at least two years of records — and sometimes longer.
To help you visualize what happens next, here’s what you can expect:
The DOL issues a report with findings, violations and required remediation steps.
If fines or penalties are assessed, they will be detailed in the report.
Employers may request a meeting with the DOL’s Wage and Hour division to dispute findings or negotiate penalties.
If resolution cannot be reached, businesses may appeal the decision.
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Being proactive is key to preparing for a DOL audit. Employers should:
Maintain accurate records – Hours worked, wage rates, benefits enrollment and details of 401(k) distributions or loans.
Conduct internal audits – Internal auditing is another effective way to prepare for a DOL audit and should be done periodically to ensure compliance boxes are checked.
It’s tough for even the most experienced business owners to know the ins and outs of compliance regulations, such as when employees should be compensated for breaks and travel.
Stay proactive – Partner with a certified PEO like Axcet to manage compliance, payroll, benefits, and HR documentation.
Keeping thorough records and addressing compliance risks early will put your business in a much stronger position if a Department of Labor audit occurs.
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As a trusted and certified professional employer organization (PEO), Axcet saves small and mid-sized business owners time, worry and stress while reducing compliance risks. Our award-winning team of HR experts ensures you’re prepared for a DOL audit and positioned for long-term success.
👉 Schedule a conversation with our experienced team today >>
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