What’s the best way to handle an on-site DOL investigation?
Quick Answer
Implement a previously prepared response plan that identifies key response team members and ensures relevant documentation is organized, ready to be copied and then provided on demand. Verify DOL personnel credentials and engage cordially and cooperatively without offering unsolicited information.
Legal Perspective
MLE Law
Ft. Lauderdale, Florida
When it comes to a DOL on-site investigation, every situation is unique, says employment law attorney Michael Elkins. Even so, here are some general tips that may help ensure a smooth process and hopefully lead to a resolution with no penalties:
- Regardless of the reason for the investigation, be prepared to provide data and answer questions regarding FLSA compliance. The DOL investigates numerous employment law matters – and they almost always ask about the FLSA in any investigation. If you’re ready for that inquiry, you can disarm the investigator. Even if you’re not compliant, you can show good-faith efforts to correct problems by saying, “We were expecting you to ask, and after an internal audit done in advance of your arrival …” while sliding over a perfectly tabbed binder showing measures taken to correct any FLSA violations.
- Have your documents ready. Most DOL on-site investigations start with a subpoena for records. The DOL usually provides an online portal to upload documents in advance. However, usually, the subpoena will also say that the records need to be available at the on-site meeting. So, make sure to do that. Even if the investigator doesn’t read the documents at the meeting, the act itself makes a statement that you’re taking the investigation seriously, and hopefully, don’t have anything to hide.
- Have counsel present. I can’t tell you how many times I have been hired AFTER the investigators were on the premises. By that time, the proverbial cat is already out of the bag. Your lawyer can’t help if your lawyer isn’t there.
- Remember that a good attitude goes a long way. The DOL investigators are just doing their jobs. They’re humans, and thus, a good professional attitude helps make the process more efficient and hopefully less painful.
Relevant Case Law
Walsh v. Caribbean Island Restaurant & Bar
Newmark & Co. v. Wirtz
Acosta v. Austin Electric Services LLC
HR Insight
SuccessFuel
King of Prussia, Pennsylvania
When you receive the notice of audit or investigation, that’s when you call an attorney, says VP of HR Jackie Plunkett. It’s too late once it has begun.
Follow legal advice to prepare. The DOL is the federal government, their investigators are federal agents, and noncompliance could have backlash.
Alcoa Community FCU
Benton, Arkansas
First, take the visit very seriously, advises HR Specialist Andrea Rose. Full cooperation must be given because any perceived resistance could result in drawn-out and costly proceedings involving subpoenas or court proceedings. I’d advise contacting your legal department and/or legal counsel to be present during the investigation.
Cooperation tends to end with more favorable outcomes, even if the company has violated DOL laws. You bear the burden of presenting payroll records or other records relevant to the investigation but do not give more than you are asked for down to the letter.
Don’t stand on a soapbox of denial. If you’re found in violation, take the entire experience as a learning opportunity to get in compliance. Pay the fines or restitution, and move forward with better practices.
The Cost of Noncompliance
DOL: Company threatened worker who participated in agency’s investigation
Who was involved: PS Tree Service, Inc. and several employees in Massachusetts.
What happened: According to the DOL’s Wage and Hour Division, the company’s owner threatened an employee who participated in an investigation that ultimately found violations of the FLSA’s wage, recordkeeping and child labor requirements.
Result: A federal court ordered the company to pay $25,000 in punitive damages to the threatened worker and also permanently enjoined the company from threatening or retaliating against employees who cooperated with the agency’s investigation or exercised their rights. In a related consent decree, the company had to pay $82,123 in back wages and an equal amount in liquidated damages – a total of $164,246 – to eight employees to resolve the FLSA violations.
DOL investigation: Father-daughter team stole employees’ retirement cash
What happened: In Green Bay, WI, Pinnacle Machine LLC COO Donald Miller and his daughter, Jennifer Miller – then Pinnacle’s director of human resources and accounting – failed to forward employee contributions in a timely manner to the company’s savings and retirement plan.
What people did: The DOL’s Employee Benefits Security Administration investigated and found these actions took place from January 2016 to September 2019. After neither defendant filed an answer to the DOL’s complaint, a U.S. District Court Judge signed a default judgment in the case. It bars the Millers from serving as fiduciaries of an Employee Retirement Income Security Act covered plan in the future.
Result: The Millers have to restore $41,869 in employee payroll-deducted retirement contributions and lost opportunity costs to the plan.
FLSA OT violations: Krispy Kreme pays $1.18M
Who was involved: Krispy Kreme Donut Corp. and 516 workers across the U.S.
What happened: The DOL’s Wage and Hour Division opened an investigation at a Krispy Kreme in Louisville, Kentucky, and expanded the probe to all 242 locations of the chain across the U.S. The investigation found “widespread and systemic” violations of the Fair Labor Standards Act (FLSA). Specifically, the company failed to include monthly bonuses in some employees’ regular rates of pay. By doing so, the employer paid overtime at lower rates than the FLSA requires.
Result: The company agreed to pay $1,187,757 in back wages and damages to 516 affected workers. It also agreed to make necessary changes to comply with the FLSA in the future.
Info: Dollars to doughnuts: Krispy Kreme to pay more than $1.1M to 516 workers after DOL finds systemic OT violations, 11/17/22.
Adventure park pays $43K for child labor violations, DOL announces
Who was involved: Urban Air Jacksonville LLC, an indoor adventure park, and 67 employees, including 55 minors, in Florida.
What happened: A DOL investigation found the company violated child labor laws by allowing 55 minor employees, between the ages of 14 and 15, to work after 7 p.m. on school nights. While investigating that alleged violation, the DOL also looked at other possible FLSA violations. It determined the company deducted compensable break times from some employees’ weekly hours. As a result, it failed to pay overtime wages when the missing time pushed the total work hours over 40 in the workweek.
Result: The company was assessed $43,505 in civil penalties for child labor violations and had to pay an additional $558 in back wages to 12 employees.
Info: Trampoline park pays $43K in civil penalties, 2/17/23.
Key Takeaways
- Be aware of the types of documentation likely to be sought, and have that documentation organized and ready to produce.
- Documentation likely to be sought includes company registration information, EIN information, employee lists, payroll records, and documentation showing the annual dollar value of business transactions.
- Prepare employees who are likely to be interviewed by informing them to respond directly to questions, to be cooperative and cordial, to be honest with answers, and not to volunteer any unsolicited information.
- Create an investigation response team.
- Verify the credentials of investigators.
- Be open, honest and cordial with investigators.
- Be prepared to identify workers’ specific job duties in detail.
- In cases involving multi-day investigations, ask for daily updates.
- Do not volunteer additional information or give more information than requested.
- Have a designated employee accompany the investigator on the premises.
- Do not provide original documents.
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