Tips and Strategies for Defending Against a DOL Audit
The U.S. Department of Labor (DOL) is the federal agency responsible for enforcing the nation’s employment laws. It has broad authority over companies’ employment practices, with its jurisdiction covering everything from wages to workplace safety, and from employment discrimination to federal benefit programs.
Given the breadth of the DOL’s authority, the Department is extremely active in its efforts to enforce federal employment and labor law compliance. This includes conducting audits targeting individual employers suspected of (or accused of) employment and labor law violations. Several of the DOL’s agencies and divisions conduct compliance audits and investigations, including:
- Civil Rights Center (CRC)
- Employee Benefits Security Administration (EBSA)
- Mine Safety & Health Administration (MSHA)
- Occupational Safety & Health Administration (OSHA)
- Office of Federal Contract Compliance Programs (OFCCP)
- Office of Workers Compensation Programs (OWCP)
- Wage & Hour Division (WHD)
While the DOL and its agencies conduct periodic audits in order to evaluate companies’ labor and employment law compliance – particularly in low-wage industries and industries in which violations are common (i.e. agriculture and farming, construction, food service, health care, and hospitality) – most audits and investigations are the result of complaints from the public. Usually, these complaints come from current or former disgruntled employees. If the DOL receives a complaint that appears to involve a significant or widespread violation, it will conduct an audit; and, if the audit reveals an employment or labor law violation, the DOL will either take enforcement action directly or refer the employer to the U.S. Department of Justice (DOJ) for prosecution.
What Employers Should Do When Facing a DOL Audit
When facing a DOL audit, employers must respond swiftly and effectively. This begins with gaining an understanding of the scope of the audit and the company’s risk, and it continues through steering the audit toward a favorable resolution. Here is an overview of some of the key steps employers need to take when facing a DOL audit:
Determine Which Agency or Division is Conducting the Audit
One of the first steps to take is to determine which DOL agency or division is conducting the audit. If your company has received a target letter or other correspondence, this should be evident from the face of the document. If you received a phone call or DOL auditors showed up at your company’s offices, it may be necessary to inquire with the auditors if they did not identify their specific agency or department during their initial interaction.
Why is this important? Each of the DOL’s agencies and divisions focuses on a specific subset of federal employment and labor law violations. For example, while the OWCP audits providers’ claims under DOL benefit programs, the CDC and OFCCP focus their enforcement efforts in the area of equal opportunity.
Determine the Scope of the Audit
Once you determine which DOL agency or division is conducting the audit, you can then seek to identify the scope of the audit. Is your company facing a comprehensive review of its labor and employment practices within a particular area; or, is the audit focused on a discrete alleged incident? Knowing the scope of the audit will allow your company to tailor its response appropriately, and it will help ensure that no viable defenses go overlooked.
Determining the scope of the audit can require some investigation. At this stage, you will want to engage outside employment law counsel to communicate with the DOL’s auditors on your company’s behalf. At Oberheiden P.C., our former federal prosecutors and federal agents have deep experience on both sides of federal audits and investigations, and we can use this experience to quickly identify the substantive issue(s) involved in your company’s DOL audit.
Conduct an Internal Labor and Employment Law Compliance Assessment
Once you know the scope of your company’s DOL audit, the next step is to conduct an internal labor and employment law compliance assessment. In many respects, this is the most-important step in the entire process of responding to a DOL audit.
This internal assessment needs to be conducted quickly; and, as a result, it should focus on the specific issue(s) raised by the DOL’s audit. However, it is also imperative that this assessment be sufficiently comprehensive to identify any potential areas of exposure. Assessing your company’s compliance will allow you to make informed decisions, and it will allow your company to proactively address any issues that have the potential to lead to liability in the audit.
Confer with the DOL Auditors Regarding Timing and Scope
DOL auditors will often request voluminous records, and they will often impose very short deadlines for document production. However, these requests can also be vague, and in many cases timely compliance will be impractical. When this is the case, the key to avoiding unnecessary issues is to confer with the DOL personnel handling the audit. By proactively raising your company’s concerns and seeking clarification, you can open a dialogue that can help facilitate a smooth process and positive outcome.
Establish an Internal Audit Response Team and Designate Roles
While companies need to engage legal counsel to handle their DOL audits, they also need to establish internal audit response teams. Successfully resolving a DOL audit can involve a lot of work, and involving appropriate internal personnel who are familiar with the company’s operations and documentation can be essential to meeting the company’s response obligations while also exploring all viable defenses.
The company’s internal audit response team needs to be chosen carefully. For example, any personnel who are potentially implicated in any alleged labor and employment law violations should be excluded. It may be necessary to engage operational department leaders, HR leaders, and IT personnel. Once the team has been assembled, specific roles should be assigned, and there should be clearly-established lines of communication between the company’s internal personnel, its outside counsel, and the DOL’s auditors.
Collect All Required Documentation
The first major task involved in responding to a DOL audit is to collect the documentation that the DOL has requested. This can involve varying degrees of difficulty depending on the scope of the auditors’ request and the document management systems the company has in place.
Here, too, comprehensiveness is key. The DOL expects companies to be able to produce all required documentation, and failure to produce any responsive documents can lead to additional unwanted scrutiny.
Review All Required Documentation Prior to Submission to the DOL
Another critical step is to review all required documentation prior to submission to the DOL. When reviewing this documentation, your company’s legal counsel will be looking for three main things:
- Ensuring that only responsive documents get submitted to the DOL
- Redacting or withholding any documents that are subject to the attorney-client privilege
- Redacting or withholding any documents that are otherwise privileged from disclosure
While your company must generally comply with the auditors’ requests for documentation, this obligation is not absolute. By carefully and strategically protecting documents that are not subject to disclosure, your company may be able to significantly mitigate any potential risk of enforcement action or other liability.
Be Cooperative, But Not To Your Company’s Detriment
As a general rule, cooperating with a DOL audit can help to facilitate a favorable outcome—if paired with an effective defense strategy. However, it is important not to be overly cooperative to your company’s detriment. During DOL audits, companies should not automatically comply with all requests, and they should not defer to auditors’ judgment in all cases. Instead, companies need to make informed and strategic decisions about how best to approach their audits based on the specific circumstances presented.
Review the Auditors’ Conclusions and Evaluate Next Steps
After going through the DOL audit process, companies need to review the auditors’ conclusions and evaluate their next steps. If an audit results in a finding of no liability, then no further action may be necessary. However, if the audit leads to enforcement action or to a referral to the DOJ, then the company will need to determine whether the auditors’ conclusions are substantiated and what steps the company needs to take in order to avoid or mitigate any potential liability.
Update Your Company’s Labor and Employment Compliance Program As Necessary
In addition to executing a tailored defense strategy during the audit (and after the audit, if necessary), companies that are audited by the DOL should also reassess their labor and employment compliance programs. If deficiencies in a company’s program trigger an audit, those deficiencies should be addressed promptly, and appropriate training should be provided to relevant personnel throughout the organization. In addition to representing companies in DOL audits, we also assist with labor and employment law compliance, and we can help your company implement any necessary new or modified policies and procedures.
Speak with a DOL Audit Defense Lawyer at Oberheiden P.C.
Is your company facing a DOL audit? If so, our senior federal attorneys and former federal agents can help. To discuss your company’s DOL audit in confidence, please call 888-680-1745 or tell us how you would like to be contacted online now.
Dr. Nick Oberheiden, founder of Oberheiden P.C., focuses his litigation practice on white-collar criminal defense, government investigations, SEC & FCPA enforcement, and commercial litigation.