Time/overtime costly in DOL audits Email
Wednesday, September 10, 2014 02:14 PM

Staff exiting truck

“I thought we were going to owe $30,000 in back overtime,” said one owner of a metro Denver design-build firm.

When the US Department of Labor auditor came back after interviewing several workers, he told the owner they could just estimate an average of 5 hours per week per person for back overtime pay owed to all employees. The owner’s response? “I ran the numbers and told him $30,000 would put us out of business.”

The company kept precise payroll records, paid more than minimum wage and calculated overtime which employees were paid.

What went wrong? The scenario started a few years ago when crews left the yard and made lengthy stops at the local convenience store to make breakfast burritos and buy their lunches. They finally got to the job site 45 minutes late – and all that time was on the company clock. To strike what they thought was a fair deal, company owners said they would pay for “yard time” for loading trucks, etc., but not travel time, including stops for food. Employees could either report directly to the job site – or they could ride in the company truck – and everyone except the driver went on the clock when they got to the job.

DOL said “NO.” Once you report to the yard and load a truck or do any work, you’re on the clock from then on, including travel.

All the travel time (including stop time at the convenience stores) had to be added back to the work records which also meant re-calculating overtime pay. “I had to go through each work report for the past two years and look at the time paid for everyone working more than 38 hours/week to see if they had been compensated correctly for overtime,” says the owner.

The auditor agreed to the in-house recalculations and the company ended up owing around $1,600 instead of $30,000. They had to issue checks to employees. “I have 15 people that no longer work here, so if their checks get returned to me, I give the info to DOL and they'll try to find the people. If they can't find them, the money goes into DOL treasury.”

How much time did it take? Besides audit prep and meeting with the auditor initially, the detail work to arrive at revised payroll and overtime amounts involved another 4 hours working with the auditor and a full week of work to re-calculate payroll and overtime. Once checks were sent to former employees, more tracking was involved with employees and the bank to provide verification to DOL.

What’s changed since the audit? “Employees have lost about 3 hours of pay per week because we can’t have them do yard work in the morning,” says the owner. The driver or foreman does all the loading/unloading and he can pick one person to help who will also be paid travel time. Everyone else starts and ends their work day at the job site and they can still choose whether or not to use company transportation.

Lessons learned: “It was intense and even depressing thinking we might owe thousands of dollars,” the owner says. She recommends knowing the details of the regulations and keeping careful track of payroll records. “The auditor told us up front that they are targeting the landscape industry – and that’s information other companies need to know.” He also said to expect to be audited again in two years to ensure that they are being compliant – so the process is really not over.

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