What to Know About Wage and Hour Audits

The top 10 employment-related settlements totaled over $2.72 billion in 2017, according to the Society for Human Resource Management (SHRM), with wage and hour disputes topping that list. The growth in these types of settlements ($1.2 billion) made this the top exposure for all businesses last year. That means that it’s more important than ever to have prevention methods, which is where wage and hour audits come into play.

Every staffing agency should be prepared for periodic audits in order to keep track of what’s going on in behind the scenes. While they generally don’t happen unless an employee complains, it’s always good to make sure that there’s a plan in place when handling an audit. Here’s what you need to know about wage and hour audits.

The Basics Behind Wage and Hour Audits

If the U.S. Department of Labor’s Wage and Hour Division decides to audit your agency, then you have to be prepared for it. It can be announced or unannounced. Making sure that your agency adheres to the Fair Labor Standards Act (FLSA) is really what the government is looking for. The FLSA mandates that all non-exempt employees are rightfully paid at least minimum wage for the hours that they are worked, as well as overtime pay. And all of these hours and pay need to be adequately kept track of. When an audit happens, the past two years of your records are going to be looked at. If a violation is found, expect the Secretary of Labor to fine you at least $1,000, on top of owing back pay to your employees. This type of violation can end up costing a substantial amount of money because it can impact multiple employees.

Employment Practices Liability Insurance is going to be necessary to cover any judgments arising from these disputes. If your agency doesn’t have it, now is the time!

FLSA Violation Concerns

As far as violations go, some of the things that are being searched for include:

  • Failure to maintain records of hours worked.
  • Salary employees improperly classified as exempt.
  • Unlawful wage deductions.
  • Inaccurate wage payment to immigrant workers and minors.
  • Insufficient tips that don’t offset the difference between minimum wage and employer wage obligations.

If an audit happens, here’s how you can be prepared:

  • Have a private interview room for the auditor.
  • Make sure all labor law posters are up-to-date and visible.
  • Make sure your time cards for employees are accurate.
  • Make sure all payroll from the past three years is properly organized.

Other things that you should be concerned with are being able to explain everything that your agency does; job titles should be maintained and all practices should be able to be explained thoroughly and accurately. Auditors are going to interview everyone, so be ready.


About World Wide Specialty Programs

For the last 50 years, World Wide Specialty Programs has dedicated itself to providing the optimal products and solutions for the staffing industry. As the only insurance firm to be an ASA commercial liability partner, we are committed to that partnership and committed to using our knowledge of the industry to provide staffing firms with the best possible coverage. For more information about Staffing Professional Liability Insurance or any other coverage, we have available to protect your staffing business, give us a call at (800) 245-9653 to speak with one of our representatives.