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FLSA Audit

FLSA Audit Checklist

by | Apr 12, 2021

The Fair Labor Standards Act (FLSA) establishes federal minimum wage, overtime pay, child labor, and record-keeping standards. The rules and regulations set out by the FLSA are enforced by the Wage and Hour Division of the Department of Labor. They have the authority to investigate an employer’s policies and procedures and conduct employee interviews in order to determine the employer’s compliance with federal employment and labor regulations.

Violations of the FLSA can have civil and criminal consequences for an employer. Employment discrimination or violations of child labor provisions can be prosecuted criminally and include fines up to $10,000. Employers who willfully or repeatedly violate minimum wage or overtime pay requirements are subject to a civil fine of up to $1,000 for each violation. 

In order for an employer to ensure proper compliance and stay out of trouble, a regular compliance FLSA audit should be conducted internally. Below is a checklist of records that should be carefully reviewed during such audits:

For each Non-Exempt Employee, in addition to personal and biographical information that must be regularly recorded in the employment context, the following payroll records must be regularly tracked:

  • Time cards;
    • Piece work tickets;
    • Time and day of the week that employee’s workweek begins;
    • Regular hourly pay rate;
    • Hours worked each day and total hours worked each week;
    • Daily and weekly regular wages;
    • Weekly overtime wages;
    • Total wages paid each pay period;
    • Dates of payments and the pay periods covered by the payment;
    • Deductions from wages; and
    • Any additions to wages.

For each exempt employee, in addition to the personal and biographical information as described above, the following information must be regularly tracked:

  •  Confirmation that exempt classification is proper
    • Verify that employee’s job duties fall into the positions set forth by the FLSA as qualifying for exempt status
      • Ensure that job descriptions are up to date.
    •  A salaried employee is paid at least $684.00 per week.
      • Keep track of total wages paid each pay period; and
      • The date of payment and the pay period covered by the payment
    • Make sure that paycheck deductions are appropriate and permissible under the FLSA.

The preservation of records reflecting the above information is crucial for employers to protect themselves in the event that a dispute arises. An employee’s payroll records should be kept and ready for inspection for at least three years.

In situations where an employer has independent contractors or consultants providing services to them on a regular basis, it is necessary that legal review be conducted to ensure that they are being properly classified as non-employees. It is also important for employers to be aware of their state’s wage and hour laws, as some can preempt the FLSA and must be complied with.

We understand the complexities that arise from FLSA disputes. Our firm is here to help with your employment law matters as well as any corporate or commercial law issues. We offer both in-person and virtual consults, please feel free to call our office at 305-460-0145 to schedule a consultation or click here.

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