There are many types of employment-related government audits. We have experience managing most of them. A sample of the types of audits we defend follows:
- Wage and Hour enforcement by both the federal and state governments is on the rise. In fact, in one recent year, the federal Department of Labor investigated over 20,000 cases involving Fair Labor Standards Act violations. Even with a new federal administration which may not continue the past trend, the states are likely to continue this emphasis on enforcement. Most frighteningly, an employer never knows what could trigger an audit or investigation. Sometimes, an angry employee’s complaint or anonymous tip will trigger an investigation. Other times, the government may choose to randomly audit a company. In either case, the appearance of a government investigator at your doorstep is a concerning development which could cost a business a significant amount of money and time. You need someone with expertise in defending against audits and investigations on your side.
- Wage and Hour audits and investigations can take many forms. A common government focus is on your obligations to pay minimum wage and overtime. For instance, if you do not pay your employees time and a half for all hours over forty in a week, or if you pay your employees the same flat sum whether they work thirty or fifty hours, you may be violating the minimum wage and overtime requirements in the Fair Labor Standards Act and analogous state laws. An audit will surely uncover this.
Another focus is whether you have classified your workers as independent contractors or employees. The government looks askance at employer efforts to skirt minimum wage and overtime requirements by misclassifying employees as independent contractors. There are strict multi-factor tests the government uses to determine whether a worker is truly an independent contractor. Does the worker invoice you for his work or is he/she paid through payroll? Does he/she use timesheets with your letterhead on it? Does he/she perform work for multiple companies? Does he/she have his/her own business cards? If the answer to these questions is no, the worker may very well be an employee.
If you were not paying them minimum wage and overtime, this means you would have to pay him/her back wages going back years to make up the difference, not to mention liquidated damages. Brody and Associates can forcefully present your position to the government, advocating that your workers are properly classified. But when no defense will work, we know the best routes towards settlement and the best means to reach a settlement package that protects the Company, rather than breaks it. Perhaps the single most important goal in an audit or investigation is to prevent it from spreading. What may begin as an inquiry into one employee’s specific complaint can quickly morph into a widespread investigation of how all of your employees are compensated. You need someone who is skilled in navigating the process to ensure containment of the investigation and preventing an initially small issue from becoming a full-blown crisis.
Unemployment Insurance and Workers’ Compensation Audits
Brody and Associates also defends businesses against issues stemming from Unemployment Insurance and Workers’ Compensation coverage. Disputes often arise over whether your business must pay into your state’s Unemployment Insurance and Workers’ Compensation funds. While you do not have to provide Unemployment and Workers’ Compensation insurance to independent contractors, you do if the workers are employees. Therefore, if your company uses only independent contractors, you are not liable for those payments. However, the government may disagree with your determination. It may want to issue its own determination using a special multi-factorial test of whether a worker is truly an employee or an independent contractor. Another example is employees who perform work in one state when the employer is entirely based in another state. Even though your facilities may be localized entirely in one state, the states where your employers perform work may nevertheless determine you must register for and pay Unemployment Insurance and Workers’ Compensation taxes in those states. Factoring in penalties and the fact the government often looks back multiple years, your liability can add up quickly.
In such situations, it is important to retain counsel who can guide you through the labyrinth of the Unemployment and Workers’ Compensation agencies. As with Wage and Hour audits, a major concern is to contain the audit and keep it from expanding to encompass any more workers than is absolutely necessary. Brody and Associates has significant experience defending employers against Unemployment Insurance and Workers’ Compensation audits. We will explain your best options for resolving the audit as efficiently as possible and will advocate on your behalf to the auditors so they understand your business’s unique situation.