How to Protect Your Company Against a DOL Audit
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How to Protect Your Company Against a Department of Labor Investigation


When it comes to time and pay issues under the FLSA, it only takes a single employee complaint to start a U.S. Department of Labor (DOL) investigation. Without warning, you could find a DOL investigator at your company’s door, demanding information, documents, an inspection of your premises and/or interviews with your employees. If violations are discovered during the investigation, your company could then face substantial penalties and even criminal action.

Obviously, the best way to prevent this is to follow all the rules of the FLSA, including minimum wage, overtime pay, recordkeeping and child labor standards. You should also know your obligations and options should you receive a surprise visit by the DOL.

What starts an investigation?

Again, an investigation is typically initiated through an employee complaint made against you. The DOL investigator assigned to investigate normally will not discuss with you the name of the employee (or ex-employee) who filed the complaint, the nature of that complaint, or whether the investigation was even initiated by a complaint, because the DOL is entitled to conduct random investigations.

Although the DOL can target anyone for a random investigation, certain categories of businesses tend to be investigated more often. Common targets include low-wage industries, industries with a high rate of wage violations, industries that typically employ vulnerable workers, and industries experiencing rapid changes in growth or reduction. Sometimes the DOL targets certain geographic areas without considering the kind of business or industry.

General investigation procedures

There are typically five parts to a DOL investigation:

  1. An initial conference to define the scope of the investigation
  2. An examination of records to determine which laws or exemptions apply (such as documents showing the employer’s annual dollar volume of business transactions, the employer/employee’s involvement in interstate commerce, work on government contracts, and relevant job descriptions)
  3. An examination of records subject to recordkeeping requirements
  4. Employee interviews
  5. A final conference to address violations and penalties

Keep in mind the DOL has limited resources for its investigations, so it can’t always conduct a “full investigation” of every complaint. As a result, the agency has established other options for handling complaints. These include:

  • Limited investigation -- A “limited” investigation centers only on a particular employee or group of employees, a specific department, a particular employment practice (such as child labor violations) and/or a defined period of time. A limited investigation does not probe into the employer’s general practices or areas that are not mentioned in the initial complaint.
  • Office audit -- This approach allows you to produce affidavits and requested documentation at a DOL office and does not involve an on-site visit.
  • Self-audit -- Some investigators will allow you to conduct your own internal review of the complaints made. In a self-audit, you compute any back wages owed and report the results to the investigator for review.
  • Conciliation -- In many cases, you and the DOL can consent to a quick resolution, such as payment of back wages to the employee or small group of employees. The matter is then resolved without an investigation.

While it’s up to the DOL investigator to determine the type of investigation to conduct, it’s in your best interest to limit the scope as much as possible, preferably handling it as a conciliation or self-audit. By avoiding a full investigation, you will save time and legal costs, and you may have a better chance of avoiding back-wage assessments and other penalties.

Other tips for navigating an FLSA investigation:

Consider some level of legal assistance. Even if you decide to handle an investigation yourself to avoid paying legal fees, you should involve an attorney, on a limited basis, to help you. For example, you may want to have an attorney assess your liability, for settlement purposes, or review documents and written submissions before you submit them to the investigator. At the very least, you should have legal counsel review any agreements, settlements or other binding documents.

Educate yourself. Regardless of whether you hire a lawyer, you should educate yourself about the investigation procedures and any relevant laws as early as possible in the investigation process. It’s important to know what the investigator has the authority to do and what you may legally be allowed to withhold before agreeing or objecting to the investigator’s requests.

Clarify the range of the investigation. If an investigator agrees to limit the scope of the investigation, or provides a specific description of the scope of the investigation, confirm the information in writing. You may rely on this written confirmation throughout the investigation to challenge requests for anything that is not listed.

Conduct an internal, “defensive” compliance audit. Once you learn you are being investigated, you should determine the status of your compliance with the specific FLSA regulation. You can conduct this audit yourself or with the help of a lawyer. In some cases, if you find the problems and start fixing them immediately, the investigator may overlook earlier violations. In addition, it’s in your best interest to right any wrongs to prevent any lawsuits that could be filed for back pay during the previous three years.

Gather/preserve documents. Do not destroy or throw away documents connected to the investigation. This could be seen as destruction of evidence, resulting in a severe penalty. Additionally, most of the records requested in a DOL investigation are covered by recordkeeping laws, and your company could face penalties for breaking these laws as well. ​​