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3 Ways to Prevent Fines During a DOL Audit

While it is not the federal government’s intent to stifle the livelihood of small business owners and suffocate the flow of capital in the economy, they are still concerned about the business practices of many business owners and feel the need to enforce regulations to ensure that owners are operating legitimately and also being fair to employees.

There continues to be heavy focus on making sure small businesses are following compliance than ever before.  In fact, new employees have been hired by the Department of Labor and the IRS to keep the pulse on business owners’ and their human resource practices.

What does this mean to you?

$$$$$$ resulting not only from potential penalties but also from the loss of revenue due to down-time within your organization to comply with the needs and requests of the inspector conducting the audit.  Additionally, the negative perception that your own employees will have when the see “the windbreakers” enter their workplace and digging through records creating uncertainty among your team ~ uncertainty breeds stress and lack of production.

The following are three areas you want to make sure you are in compliance and to keep regulators off your back.  Are they the only three things to worry about?  No.  But if you’re doing well in these areas, in can only help if the auditors “come a knocking”…

  1. Employee File Compliance Documents.  Do your employee files contain all of the required forms and documentation that should be kept in employee files?  Are there items in the files that shouldn’t be?  It’s important to have a good understanding of what an employee record file should contain to reduce your potential fine and legal exposure. For instance, every employee is required to complete an I-9 form and provide supporting documents of their eligibility to work in the United States.  Non-compliance can result in fines up to $1,000 per employee per day.
  1. Misclassifying individuals as independent contractors vs. employees or vice versa is another area that could be quite costly for your business.  Agencies have very specific criteria that must be met in order to determine whether or not an individual is an employee or contractor.   For instance, how much control do you have over how the complete the work assigned and the hours that they work?
  1. Employee payroll records are another area of focus for an audit.  Many employers do not have proper documentation to support why they have paid employees for x number of hours, or why the timesheets are different than the actual payroll.

We hope this information helps you to make more informed decisions, but it is still vital to contact an HR professional to save you from uncertainty and possible fines.  Thanks for your time today.


The information contained in this blog is provided only as general information may not reflect the most current legal developments; accordingly, information contained here is not promised or guaranteed to be correct or complete. HR Synergy, LLC expressly disclaims all liability in respect to actions taken or not taken based on any or all the contents of this blog.