What To Do If Your Company Is Facing a Wage Audit in California
The federal Department of Labor (DOL) and its partner agencies regularly perform audits to assess compliance with labor and employment laws. Although these audits happen at intervals, some are prompted by public complaints—often from current or former employees who have faced issues related to workplace practices. In some cases, the DOL will also target a specific industry. Once the DOL receives a complaint suggesting potential significant or widespread labor violations, it initiates a detailed audit process. This investigation aims to verify the claims and evaluate the company’s adherence to relevant federal labor laws.
Should the audit reveal violations—such as improper wage practices, discrimination, or unsafe working conditions—the DOL can take immediate enforcement actions, which may include imposing fines, mandating corrective actions such as the back pay, or other penalties. In cases involving unpaid overtime, employers are often required to pay “liquidated damages” in an amount equal to back wages owed, effectively doubling the employer’s exposure. In more severe instances, the DOL may refer the employer to the U.S. Department of Justice (DOJ) for prosecution, possibly resulting in more serious legal consequences for the company.
That is why when confronted with a DOL audit, employers need to take swift and strategic action.
Consult Legal Counsel
The audit process typically starts with a thorough grasp of its scope, which involves pinpointing the exact areas under review, such as wage and hour compliance, workplace safety regulations, or employee benefits. At this stage, engaging with an experienced employment law attorney is critical.
These legal professionals can provide tailored guidance for your specific circumstances, help you understand the applicable laws, offer advice on potential legal risks associated with non-compliance, and assist you in crafting appropriate responses to auditor questions. This proactive strategy can improve your standing and ensure you are fully prepared.
Collect Documentation
The next step often involves gathering relevant documents for the audit, including payroll records, timekeeping logs, employee handbooks that detail workplace policies, job descriptions for every position, and any documents related to wage calculations. Focus particularly on overtime records, meal and rest breaks, and pay stubs, as these aspects are frequently examined during audits.
Evaluate Company Policies
Review your current company policies on employee classifications, overtime pay, and meal and rest breaks. Ensure these policies comply with California labor laws and best practices. This evaluation should compare your policies with legal requirements to identify gaps or areas needing updating.
Perform an Internal Audit
Carry out an internal audit of your payroll practices. This should involve assessing the accuracy of employee classifications, verifying timekeeping records for discrepancies, and checking for any non-compliant deductions or practices.
Cooperate Fully with the Auditor
With the assistance of counsel, respond to all appropriate requests for information and documentation promptly and in an organized way. Before submitting any requested details, carefully review each request to ensure the provided information is complete and accurate, minimizing the risk of misunderstandings or further inquiries.
Maintain Transparency While Being Cautious
While providing honest and accurate information is crucial, be careful about the details you reveal. Only share information that is specifically requested and avoid giving extra context that may complicate the audit or raise further questions.
Address Discrepancies Promptly
If problems or inconsistencies occur during the audit, immediate corrective action is important. This includes investigating the root causes of any identified violations, implementing necessary changes to resolve them, and documenting all steps taken to address them. This proactive response demonstrates a commitment to compliance and can positively impact the audit’s outcome.
Contact Us Today To Learn More
If your company is facing a wage audit or you want to learn more about the process, contact Gould, Hahn, & Reinhardt today to schedule a consultation with our team.