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Firms need to self-audit overtime pay
April 7, 2005
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Old Saybrook, Conn. -- Firms that have not conducted a recent self-audit of their overtime pay practices run serious risks, according to a recent survey by Business and Legal Reports Inc. (BLR). The survey, conducted among users of two BLR websites for HR professionals, found that every fifth employer has been audited at least once by U.S. Department of Labor for federal wage-and-hour law violations.

Such audits are especially important in the wake of last year’s changes to overtime-exemption rules of the Fair Labor Standards Act (FLSA). BLR, in fact, conducted its survey to determine how employers have been affected by the changes. Approximately 400 companies, of various sizes and locations throughout the U.S., participated.

Asked whether they had ever been audited by the DOL for a wage-and-hour violation, 15 percent of the respondents said they’ve been audited once. Another 5 percent said they’ve been audited between two and five times. Seventy-nine percent said they’ve never been audited.

For employers, the numbers underscore the importance of conducting self-audits, according to Susan Prince, J.D., managing editor of BLR. By regularly reviewing their pay practices, employers can protect themselves from government enforcement action and employee lawsuits, she says.

“Internal audits decrease the chances that anyone would view any errors in your past practices or policies to be willful violations of the law,” says Prince.

Generally, audits are triggered when a current or former employee files a complaint with the DOL or when the DOL targets a specific industry for investigation. In 2004, the agency collected $165 million in back wages due to violations of the FLSA.

Among other things, Prince says, employers need to check for employees who’ve been misclassified as exempt from overtime pay and might therefore be entitled to retroactive pay. They also need to ensure that job descriptions are current and accurately reflect employees’ true duties.

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