How to Respond Effectively to Inquiries From

How To Respond Effectively To Inquiries From

Wage And Hour Investigators

LOIS A. GRUHIN, ESQ.

ZASHIN & RICH CO., L.P.A.

(614) 224-4411

I. INTRODUCTION

It begins with a page over the company’s intercom system. An investigator from the United States Department of Labor’s Wage and Hour Division would like to see you concerning the Company’s overtime records. Because you previously provided the receptionist training concerning this type of investigation, he offers the inspector a drink and asks him to have a seat in the reception area.

Calmly, you greet the inspector and take him back to the nearest conference room. Once inside, he reveals that the Wage and Hour Division has received a complaint concerning alleged improper payment of overtime. Today a complaint is not even necessary. The Wage and Hour Division (“WHD”) of the United States Department of Labor (“DOL”) hired 350 new investigators. Many of these investigators are extremely experienced because they are in a second career, served in the Armed Forces, and possess post-graduate degrees, or combination thereof. This means that WHD has more investigators to conduct more investigations and even the new investigators have other experiences or credentials that will enable them to be aggressive. With increased enforcement by both federal and state agencies, you must prepare your company for this type of an investigation. Whether the inspection is announced or unannounced, you must know how to handle this situation carefully and confidently. This outline provides practical advice for skillfully managing the investigation and the investigator and identifies other agencies likely to appear at your company.

II. DEPARTMENT OF LABOR (WAGE AND HOUR DIVISION)

The DOL is responsible for enforcing the Fair Labor Standards Act (29 U.S.C. § 201, et seq.), the Family and Medical Leave Act (29 U.S.C. § 2601, et seq.), the Consumer Credit Protection Act (15 U.S.C. § 1671, et seq.), and the Polygraph Protection Act (29 U.S.C. § 2001, et seq.). The Wage and Hour Division is primarily concerned with minimum wage and overtime violations. The DOL’s designated representatives have the power to investigate and inspect records. Section 11 of the Fair Labor Standards Act (FLSA) empowers WHD to conduct an investigation of the employer’s compliance with the FLSA’s requirements. These requirements include (1) maintaining certain payroll and employment records; (2) compensating employees for all hours worked; (3) paying employees at least minimum wage and an overtime premium for hours worked in excess of 40 in a work week; and (4) complying with limitations on the hours of work and types of jobs which apply to youth employees under 18 years of age. Other statutes, such as those with immigration work visa programs like the H-2 guest worker program, also WHD with administrative and enforcement authorities. In most instances, WHD will follow the same basic procedures in conducting an investigation.

1. The DOL’s designated representatives are generally authorized to inspect and copy an employer’s records and to perform any investigation necessary to determine whether an employer violated an act under the DOL’s purview or to aid in enforcement. Generally, an employer need not have been actually charged with a violation of law. The DOL will not disclose the name of the complaining party.

2. Most WHD investigations are scheduled in advance by an by investigator either by sending a scheduling letter or by telephone call informing an employer of a date and time at which the investigator will visit an employer. The scheduling letter may include a list of documents, records, and other information that the investigator will need or review as part of the investigation. Sometimes, an investigator will not advise an employer in advance of an investigation; rather, the investigator will make an “unannounced” call on the employer and inform the employer that it is there to conduct an investigation. We are seeing an increased usage of such unannounced investigations. Regardless of the manner in which an investigation schedule, most investigators will work with an employer to conduct the investigation at a convenient time and to afford an employer the opportunity to gather its employment documents and records. However, if an investigator makes an “unannounced” visit and insists on conducting an investigation right then and there, they legally can insist on that. However, an employer can refuse to permit such an investigator to come upon its premises to conduct an investigation. When contemplating such action, please know WHD has subpoena power and will not hesitate to use it to gain access to the employer’s premises in order to enforce the law.

3. Another important aspect of a WHD investigation is whether the investigator will expand the geographical reach of the investigation to facilities beyond that visited by the investigator. This will depend on whether the company has other locations where employees perform the same type of work. If so, WHD has a policy pursuant to which the investigator will contact the WHD district office (DO) closest to the company’s headquarters or main office (MO). Oftentimes referred to as the MODO policy, it requires the investigator to coordinate the investigation with the WHD DO office and may result in the WHD DO assuming responsibility for the investigation and expanding the investigation to include other facilities of the company. In addition to trying to limit the issues covered by an investigation, another reason for an employer to be proactive is to limit the geographical scope or reach of an investigation.

4. The DOL normally will give an employer the opportunity to review its records and make a report to the DOL. If the DOL is not satisfied that the employer undertook an objective view or if the employer refuses, the DOL will conduct its own inspection. A DOL investigator will conduct an on-site inspection that will probably consist of the following:

a. An initial conference with the employer to explain the nature of the investigation and the records that will be reviewed. The investigator will also request a place to review the records and a company representative to answer questions about records and payroll systems.

b. The investigator will then request records (e.g., government contracts, records revealing annual dollar volume of business and payroll and time records).

c. The investigator will then conduct interviews generally to confirm payroll and time records. The investigator will also seek to identify employee job responsibilities to determine if any exemptions apply. The investigator will also use interview to check for possible wage discrimination or possible illegal employment of minors.

d. The investigator will conclude with a closing conference to inform the employer of any violations found. Pursuant to a Memorandum of Understanding with the Immigration and Naturalization Service, the investigator may also inspect a company’s I-9 Forms.

III. PRACTICAL SUGGESTIONS

A. PREPARE, PREPARE, PREPARE

You must prepare for announced and unannounced inspections by WHD as well as other federal or state agencies. Every employer should have an individual assigned and trained to deal with an unannounced inspection by a federal or state agency. This individual should accompany the investigator during the entire investigation and should understand the requirements of the applicable law. Further, employers should instruct all receptionists or guards on how to treat the unannounced investigator upon the first encounter. Specifically, receptionists/guards must know the company representative that he/she must call. The receptionist/guard should also not allow the investigator to leave the reception area and enter the facility until the appropriate company representative greets the unannounced investigator. Employers should consult with legal counsel before an announced inspection of any records and documents and when an unannounced inspection occurs.

B. VERIFICATION OF THE INSPECTION

While it is important not to anger the investigator, you should seek to politely request the investigator’s credentials and the scope of the investigation during both announced and unannounced investigations. During the initial meeting, it is important to gather the investigator’s business card and make copies of any search warrant that the investigator may have. In addition, during the opening conference with the investigator, you should seek to have the investigator describe the reason for the investigation and the exact scope of the on-site inspection of records. During this meeting the investigator will explain the purpose and plans of the investigation, provide information, provide information on the time period the investigation will cover, advise what records and documents will be needed and if they plan to interview employees. An employer has a right to have its attorney or associate present during the investigation. Company employees can explain their commitment to the FLSA compliance, monitor the activities of the investigator and respond to questions.

C. YOU INSIST ON A SEARCH WARRANT

Generally, you should insist on a search warrant or allow an unannounced inspection to proceed ONLY after consultation with legal counsel when the investigator seeks to conduct a facility-wide inspection or a follow-up inspection based on a previous citation that the company currently contests. If the investigator has a search warrant, make a copy of the warrant and attached affidavit and call legal counsel immediately. Decisions concerning warrantless inspections and other non-routine inspection issues should be made only after consultation with legal counsel or a member of management.

D. EMPLOYEE INTERVIEWS

One component of most investigations is employee interviews by the investigator. The investigator may interview non-exempt as well as exempt employees. Note the names of all interviewed employees. A company official or representative is not permitted to sit-in on the interviews of non-exempt employees; these are private. Generally, a company official or representative is permitted to be present for the interview of an exempt manager. In some cases, investigators will conduct employee interviews after work time by telephone or by sending an employee a questionnaire in the mail. An employer should be perceptive to employee comments of telephonic or mail interviews as they are the subject of a WHD investigation. If the investigator has a list of employees who they wish to interview or allows the employer to pick such employees may provide some insight into the type of investigation it is and its focus.

If the investigator would like to talk privately with an individual employee who cannot reasonable leave his/her work station at that time, the company representative should politely inform the investigator of this fact and tell the investigator that the employee will be made available as soon as possible. The company representative should record the names of any employees who had private conversations with the investigator. WARNING: It is a violation of law to retaliate against any employee because he or she cooperated with a federal or state agency investigator.

E. DO NOT VOLUNTEER ANYTHING

The company representative should never volunteer information or documents. In addition, the company representative should not offer additional areas for inspection. Statements made by the company representative may be used against the employer. When responding to questions by an investigator, the company representative should answer only as to factual matters. Opinions and speculation can be damaging to the company.

F. CLOSING CONFERENCE

Upon completion of the inspection, investigators will generally hold a closing conference. The investigator should be escorted back to the same office used for the opening conference and along the same route previously used. The company representative should use the closing conference to ask the investigator questions. Any information gleaned from the investigator should be detailed and provided to legal counsel.

The investigator will ensure that the company representatives have authority to make decisions and commit the employer to certain corrective action in the event that the investigator has found violations. During

the closing conference, the investigator will review their findings with the employer and seek agreement to pay back wages if any are found due and owing and to commit to comply with the law if there are violations. While an employee is expected to reply at the final conference, there may be reasons for an employer to defer a response – such until the employee has had an opportunity to review the findings, submit a position statement or verify back wage computations. Depending on the size and scope of the violations, an investigator may request that the employer make such back wage computations, subject to review and verification to WHD.

G.  POST-INVESTIGATION

In the event that an employer does not agree to comply with the law and/or pay back wages at the closing conference, WHD will continue to make ever effort to resolve an investigation at the administrative level. However, failing agreement, WHD may refer to is investigatory findings to the Office of the Solicitor for litigation. Also, WHD will notify employees of their right to file a private lawsuit under section 16 of the FLSA. In private litigation, an employer could be liable for back wages, liquidated damages in an amount equal to back wages, attorneys’ fee and costs.

Finally, WHD has the authority to assess a civil money penalty (CMP) of up to $1,100 per violation under the FLSA after an investigation. WHD has an enforcement policy that it can assess a CMP to a repeat or willful violator. A repeat violator is an employer who has a history or a prior violation of the minimum wage or overtime requirements of the FLSA. In order for WHD to assess a CMP against a repeat violator, the violations need not be the same. A willful violator is defined as an employer who knew that the FLSA prohibited its conduct or exhibited “reckless disregard” for compliance with the FLSA.

H. DON’T BE PENNY WISE AND POUND FOOLISH

Oftentimes companies attempt to save money and utilize legal services only after an investigation has occurred. In many instances, legal advice can be very important before and during an on-site investigation. In fact, legal counsel can be used to restrict the scope of an investigation, reduce any hostility between the investigator and the company and preserve the employer’s rights pursuant to federal and state statutes. Before allowing any investigation to proceed, carefully analyze whether your company should seek legal advice before and during an on-site investigation.

IV. OTHER AGENCIES

A. IMMIGRATION AND NATURALIZATION SERVICE

The Immigration Reform and Control Act of 1986 (“ICRA”) requires that individuals or entities that hire, recruit, or refer for a fee individuals for employment verify identities and employment authorizations. 8 C.F.R. § 274A(b). Covered individuals or entities are required to review appropriate documentation within three (3) business days of hire. 8 C.F.R. § 274a.2. The Immigration and Naturalization Service (“INS”) is responsible for ensuring compliance with the ICRA and can inspect a company’s I-9 Forms. Other government agencies (e.g., the Wage and Hour Division of the DOL) will also review compliance with I-9 requirements as part of agreements with INS.