With the deadline to file personal income taxes rapidly approaching (less than a week left, everyone!), the dreaded thought of getting audited by the IRS might be looming large for some people right now.
Fortunately, your odds of being audited are pretty low – the IRS audited just 0.6 percent of all individual returns during the 2016 fiscal year. The likelihood a business will be audited is similarly low – the IRS audited about 1.1 percent of corporation income tax returns during FY 2016.
But the IRS isn’t the only agency that conducts audits. More fearsome than the idea of getting audited by the IRS for many employers is the prospect of a DOL audit (Department of Labor).
What is a DOL audit?
The Department of Labor (DOL) is the main federal agency regulating and enforcing laws relating to employment. (There are a few other federal agencies that get involved when it comes to employment issues – DOJ, IRS, EEOC, NLRB – not to mention all the agencies on the state level, but the DOL is probably the most prevalent in business owners’ minds.)
Within the DOL are several agencies charged with the enforcement of specific acts or regulations, such as the Wage & Hour Division (WHD), Occupational Safety & Health Administration (OSHA), Employee Benefits Security Administration (EBSA), Office of Federal Contract Compliance Programs (OFCCP), and Mine Safety & Health Administration (MSHA).
A business might become the subject of a DOL investigation (commonly referred to as a DOL audit) due to a suspected violation of any rule or regulation enforced by one of these enforcement agencies.
The DOL can choose to audit an employer at any time, but most often audits are initiated when a complaint filed by a current or former employee, or as a result of the DOL’s efforts to target specific low-wage, high-violation industries (agriculture, child care, food services, health care, landscaping, retail, etc.)
Curious about how many investigations the DOL’s enforcement agencies conduct? Check out the agency’s enforcement data website: https://enforcedata.dol.gov.
What to do if your business becomes the subject of a DOL audit
The Department of Labor’s enforcement agencies typically provide little advance notice to employers who are the subject of an audit, so knowing how to respond before an investigator contacts you (or worse, shows up at your door) is key. Here are a few basic steps employers should take when they become aware that they are the subject of a DOL audit:
- Determine which division of the DOL is investigating your company, and what the scope of the investigation is.
- Contact your human resources manager or employment counsel to discuss your business’ rights and responsibilities when it comes to the audit process.
- While you might not receive much (if any) advance notice of a DOL audit, you may, however, request additional time to gather the records requested by the agency investigators. If you are able to reschedule the appointment, try to do so to give your business enough time to prepare.
- Designate a company representative or team who are responsible for working with the investigator to provide them with whatever they need to complete the audit. Limiting the response
- Gather and prepare all the documentation requested by the investigator. (And ONLY the documentation requested.) It’s also a good idea to keep track of exactly what records/documentation you provide to the investigator, and to create a file with copies of all the paperwork your business provided to the investigator and any paperwork the DOL gives you.)
- Provide the investigator with a quiet, private place to work and meet with company representatives (and, if applicable, interview employees). Not only is this just common courtesy, but it also helps minimize the potential disruption a DOL audit can cause within a workplace.
Once the audit is concluded, make sure to ask the investigator to provide a summary of his or her findings for your records.
Conducting a self-audit
The best defense is a good offense. This adage is as true when it comes to preparing for a DOL audit as it is to playing a basketball game. Not only will conducting a self-audit of your business’ human resources policies and procedures help familiarize your staff with the audit process, but it will also allow you to identify and resolve any potential HR compliance problems before an investigator gets involved – allowing your company to avoid the many costly penalties and legal fees associated with HR noncompliance.
Check out our post, “6 Steps For A Successful HR Audit,” to learn how to conduct a self-audit.
The single best thing an employer can do to prepare for and minimize the potential of a DOL audit, however, is to engage a human resources outsourcing company (like G&A Partners) to help ensure all of its employment practices are in compliance with the thousands of local, state and federal labor laws and regulations.
By outsourcing your business’ human resources functions, you not only get the benefit of sound HR policies and procedures, but you also get access to a team of experienced HR compliance experts that can help guide you through the audit process if your company ever does become the subject of a DOL audit.
G&A Partners can help you avoid the risks of HR noncompliance
G&A Partners offers a lifeline to businesses by delivering both strategic as well as tactical HR and administrative support. Our experienced human resources professionals study the nuances of federal and state labor laws so they can help companies understand and expertly execute procedural tasks surrounding HR compliance. G&A Partners will partner with you every step along the way to help you avoid noncompliance audits.
