How to Measure Your Labor Audit Liability

labor law audit female lawyer

When an employee brings an action against an employer, courts usually rule in favor of the employee if there are inadequate records to substantiate the employer’s case. Unfortunately, this means there are often cases where an employer is actually in compliance but is penalized following a labor audit for simply having inadequate records.

With over 20 laws affecting employers – and each one of them requiring some form of personnel file maintenance! – proper recordkeeping is essential to regulatory compliance.

How Would Your Records Stand Up in a Labor Audit?

To start, we recommend that business owners review their recordkeeping methods frequently to make sure they remain in compliance. Most employers keep records of the obvious information—employee names, contact information, hire dates—but what about the less obvious data?

Under the FLSA, employers must keep records for all non-exempt employees including:

  • An employee’s full name and social security number.
  • Their address, including zip code.
  • Birthdate, if younger than 19.
  • Sex and occupation.
  • Time and day of the week that the employee’s workweek begins.
  • Hours worked daily.
  • Total hours worked each workweek.
  • The basis on which the employee’s wages are paid. For example, hourly, weekly, piecework, etc.
  • The employee’s regular hourly pay rate.
  • Total daily or weekly straight-time earnings.
  • Total overtime earnings for the workweek.
  • All additions to or deductions from the employee’s wages.
  • Total wages paid each pay period.
  • Date of payment and the pay period covered by the payment.

Keep For 3 Years

In addition to the above information, employers must also keep records for their past employees. For example, the following records must be kept for three years following an employee’s termination of employment:

  • Payroll records
  • Union contracts
  • Sales records
  • Purchase records

Keep For 2 Years

Lastly, employers must also keep the following items for two years after an employee is no longer employed with the business:

  • Time cards and piece work tickets
  • Wage rate tables
  • Work and time schedules
  • Records of additions to or deductions from wages

Top Tip: It’s important to note that there may be other laws regarding records for your employees who have been terminated. When in doubt, keep the records until you verify the document retention requirements for all applicable laws.

Are Your Recordkeeping Procedures Sufficient?

  • Are employee time and attendance records accurate and accessible?
  • Can employees cheat the system?
  • Are associates paid for all the time worked? (Employers should not require staff members to work before and after shifts, or at home off the clock.)
  • Does the system accurately calculate PTO?
  • Would the data stand up to a labor audit?

Do Employees and Managers Increase or Decrease Your Liability?

  • Do employees know how to properly punch in/out for shifts, meals, and breaks?
  • Have you trained your staff to prepare timesheets?
  • Do managers know federal, state, and local labor standards?
  • Have you trained your managers to verify time cards?
  • Do managers know how to approve shift change requests?

What Do You Think?

Did you know that the Department of Labor has a time tracking app that anyone (think–your employees) can download from their site? With the app, individuals can track their hours and calculate wages to the minute right on their smartphone.

Essentially, if you are still using pen and paper time and attendance systems and spreadsheet scheduling systems, you might not be tracking data as accurately as your team. (Not to mention a staff member with an app designed by the very agency that enforces the recordkeeping laws!)

Now is the time to make comprehensive data management a priority. SDP’s Workforce Management Suite is a powerful but easy-to-use cloud-based solution that automatically captures the documentation required for FLSA compliance. Easily track hours worked, overtime, schedules, job codes, and breaks to meet wage and hour standards – all while preventing a potential labor dispute.

Let’s talk to see how SDP can help your business decrease your risk of a labor audit. And be sure to check us out on FacebookTwitter, and LinkedIn for even more business tips & tricks!

Photo by August de Richelieu from Pexels

business, compliance, Employee, HR, labor, Payroll, timekeeping

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