How To Handle A Wage And Hour Division (WHD) Investigation Of FLSA Record-Keeping Practices

Published April 2, 2007

Is your company prepared should an investigator from the Labor Department’s Wage and Hour Division (WHD) come knocking on your door? Maintaining pristine records under the Fair Labor Standards Act (FLSA) isn’t enough. PLA went to an expert in the field, Morris Jennings, to help employers get better prepared and avoid blunders. Jennings, an Austin-based wage and hour consultant (www.flsafmla.com), is a former investigator for the WHD.

WHAT YOU SHOULD DO NOW

"Investigators are expected to uncover any violations that are substantial, but they do not look under every rock," said Jennings. "Investigators are particularly inquisitive about exemption classifications, overtime pay calculations, time records, and dubious contractor determinations." Employers should ensure that:

any claimed exemptions are valid,
the overtime calculation methodology is proper,
contractors are not actually employees under WHD rules, and
records are accurate and adequate.

Records should be maintained in a way that allows access to payroll, time, and related records for the immediately preceding 104 workweeks. There won't be much, if any, advance notice of an investigation.

WHAT YOU SHOULD DO UPON NOTICE OF A WHD VISIT

If you receive an appointment letter from the WHD, Jennings recommended these steps.

1. Have a serious, in-depth discussion with legal counsel or a competent FLSA advisor prior to any discussion with the investigator.

2. Acknowledge receipt of the letter, and confirm the appointment (or request a delay).

3. Make key management officials aware of the scheduled investigation, and determine who will participate in the initial conference with the investigator.

4. Gather all requested materials and nothing more, unless there is a subsequent request.

Jennings suggested calling the investigator, to inform him/her that you will fully cooperate, and to suggest that you would be agreeable to an informal discussion of any known areas of concern. Although investigators don’t normally reveal their suspicions, he admitted, it doesn't hurt to ask. A limited investigation would save time for the investigator and the employer.

WHAT YOU SHOULD DO DURING THE INVESTIGATION

Jennings offered the following do's and don'ts for meeting with a WHD investigator.

Do be professional and courteous to the investigator. Don't keep him/her waiting.

Do make available a suitable workspace, such as an empty office. Access to a copier might be needed, as well.

Do give a tour of the workplace, if requested.

Do have a private room ready for meeting with the investigator and for any interviews the investigator may want to conduct.

Do answer only the questions that are asked. Don't volunteer information except to clarify your answers to specific questions.

Don't ask, "Who complained?" Jennings: "Targeted enforcement results in many non-complaint investigations. If there is a complaint, the informant’s name will be divulged only with permission to do so, and then solely to circumvent time-consuming development of evidence. It is poor judgment to express criticism of the complainant; just deal with the facts and the application of the FLSA to those facts."

Do take copious notes during the final conference, where the investigator reviews findings and conclusions. A written report will not be provided to you.

WHAT YOU SHOULD DO IF VIOLATIONS ARE ASSERTED

"Make certain that you understand the explanations of violations. Ask questions and try to obtain detailed elaborations, especially if you believe the investigator to be incorrect," advised Jennings.

You will be asked to either compute back wages or, if the investigator has already computed, to sign a Summary of Unpaid Wages, agreeing to pay the back wages by a specified date. "Do not sign unless you are in full agreement that you actually owe the back wages, especially if the alleged back wages are substantial," Jennings warned. He recommended asking for some time (e.g., two weeks) to consider the back wage issue. "If the investigator insists upon your signing a statute of limitations tolling agreement, do not do so without the approval of counsel."

If your company concludes that it does owe back wages, call the investigator for instructions for making payment. "Prior to making that decision, however, it is worthwhile to seek guidance from counsel or another competent advisor. The FLSA is an extremely complex statute, and investigators sometimes arrive at erroneous conclusions," Jennings cautioned.

MISTAKES OF POOR JUDGMENT, LAZINESS

Jennings shared experiences from his days with the WHD of how employers shot themselves in the foot, sometimes to the tune of more than $100,000.

Mistake #1: Presenting more records and documents than were requested. One employer provided 10 years of records, in which Jennings found a letter showing evidence of willfulness.

Mistake #2: Refusing to reach a resolution on a limited basis (when that option has been presented). When a company refused a resolution involving only one establishment and back wages for employees in one occupation, "the entire chain was then investigated and numerous violations of various types were discovered."

Mistake #3: Agreeing to do a self-audit (in lieu of an investigation) and then overlooking many violations. Jennings had to investigate anyway, and found extensive violations.