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Wage and Hour Division Investigations
The Fair Labor Standards Act (FLSA), Davis-Bacon and Related Acts (DBRA), and the Service Contract Act (SCA) are enforced by the United States Department of Labor, Wage and Hour Division (WHD). An investigation or even a more limited form of enforcement may cause the employer a considerable investment in time and aggravation, and the result is usually an assertion that back wages are owed and/or that minors have been illegally employed. In most cases, the alleged liability or child labor determinations are completely unexpected by the employer.
Since 1947, the usual period of investigation has been the most recent 104 workweeks. The Wage and Hour Division appears to now administratively apply a three-year statute of limitations in selected cases. Back wages owed during the third-year back are only recoverable in the event of willful violations. It appears that the Wage and Hour Division now feels that it is acceptable for willfulness to be asserted administratively rather than seeking a court's authorization to collect back wages for a three-year period.
If unpaid wages are found to be owed, voluntary payment (under WHD supervision) is expected. Refusal to voluntarily pay the back wages may result in DOL litigation. Notification to employees of their independent litigation rights is standard procedure when DOL neither recovers back wages nor files suit.
Virtually any employer is subject to investigation for FLSA compliance. The first objective of the investigator is to establish "coverage." If coverage is not applicable (this is rare), the investigation should not proceed. If there is FLSA coverage, the investigator will then examine exemption potential, determine whether all workers are on the records, and evaluate monetary and child labor compliance status.
How an employer deals with the investigator may influence the outcome of an investigation, either avoiding or creating complications. It is advantageous for an employer to be prepared. It is vital that your thorough understanding of each claimed exemption enables you to clearly explain to the investigator how your scenario fits within the exemption; otherwise, you are setting the stage for an expensive and time-consuming ordeal. If your pay plans are legal but complex, failure to correctly explain the methodology to the investigator can result in erroneous violation assertions. What you don't know can hurt you, and what you say "can and will be used against you."
Please note that "investigation" is not the only type of enforcement action; the investigator might say "This will not be an investigation, it will only be a conciliation," or "I am asking you to perform a self-audit," or some similar limitation may be expressed. These "informal" procedures may be converted, at the investigator's option, to an investigation. The results of limited enforcement actions become a part of the Wage and Hour Division database (as do investigation findings, of course), so even a limited or "informal" procedure must not be taken lightly.
If you are a federal service contractor, the investigation will include a determination of compliance with the Service Contract Act. This type of enforcement is typically much more involved and complex than an investigation that is limited to the FLSA, and violation findings are more serious in view of the debarment potential. See Service Contract Act.
If you are engaged in public works construction, you probably have "prevailing rate" obligations. If the Davis-Bacon Act or a Related Act (DBRA) is involved, enforcement may be initiated by the contracting agency or by the DOL Wage and Hour Division.
Whether the enforcement action is FLSA, SCA, or DBRA, full investigation or limited action, employers will benefit from the expert guidance available by consulting with Morris.
Be Aware of Your Rights
There are numerous articles about how to deal with a Wage and Hour Division investigator. Some of them are very useful, while others will cause you to just irritate the investigator, resulting in a more exhaustive investigation. Being prepared is the key. The more you know prior to contact by the Wage and Hour Division, the more effectively you can participate in management of the investigation.
You should display a cooperative attitude, but it is not necessary to allow the WHD to "walk all over you."
Investigators are not required to provide advance notice of an investigation. In the event of a "walk-in" visit, judgment comes into play. If you are fully prepared and the designated representative (e.g., owner, CEO, HR Director, or general counsel) is available, it is preferable to allow the investigation to begin. You might have reasons to avoid answering questions at this stage; attempt to delay the investigation, and confer with your attorney or FLSA advisor in the meantime. If the investigator is not agreeable to a postponement, and you are averse to proceeding, simply refuse and call your attorney.
You are not obligated to present records without a notice of at least seventy-two hours, according to the FLSA record keeping regulations, if the records are maintained elsewhere (e.g., a central record keeping office).
The FLSA states that the WHD investigator may "inspect" and "transcribe" records. It is recommended that you make records available only at your establishment (or at the office where records are maintained, if the investigator is willing to go there). While the investigator may transcribe records and retain those transcriptions, Morris recommends that you allow copies of the records to leave your office very selectively. The original records should not be taken from your office during an administrative investigation by the WHD.
Investigators sometimes request that records be made available electronically. I recommend that you do not accommodate such a request. If the investigator is insistent on receiving records electronically, you should confer with legal counsel. The circumstances might warrant such release of records, but it should be a last resort. Providing records to the WHD via a flash drive or DVD, or as a PDF attachment to email, is an unnecessary security and confidentiality risk.
Failure to know how to deal with the investigator, and mistakes that are made early on, can be very costly to an employer. Rather than wait until an investigation has begun, it will be worth your while to confer with Morris and your attorney long before you ever hear from the Wage and Hour Division.
Services are available nationally (via telephone conferences and email), including FLSA,Service Contract Act, and Davis-Bacon Act consultation, compliance assistance, DOL investigation guidance, self-audit coordination, and litigation support as a consulting expert.