December 2013

By: Walter J. Liszka, Esq.

For those of us over 50, “Who’s that knocking on my door?” reminds us of the three little pigs and the wolf who would huff and puff and blow your house down. Unfortunately, the child-like tale of the three little pigs and the wolf has had a difficult time transferring to the Internet, but is now being replaced – you guessed it – by our big brother, the United States Government. There are more and more investigations being conducted on a daily basis by the various agencies of the United States Government and one of the most active is the United States Department of Labor (USDOL).

Over the last few years, investigations by the USDOL primarily dealing with enforcement of Wage and Hour Laws have greatly increased due to “enhanced budgets” ($117 billion allocation in 2011/2012) and adding 250 additional investigators. It should be very clear to any employer that has been the recipient of a USDOL investigation that this has become a very protracted process and usually results in serious financial issues. The author suggests five (5) tips for dealing with a USDOL investigation.

1. Never underestimate the possible breadth of an investigation and understand that there may be problems with payroll practices.

In today’s complicated economy, problems have developed dealing with various facets of Wage and Hour Law (failure to pay overtime pay; tip credits; failure to pay an intern; failure to keep competent records). The findings of a Wage and Hour investigation may often result in a requirement that an employer pay additional wages to its employees, interest and/or liquidated damages, and, if serious enough, the potential of possible criminal liability. If an employer has the possibility of violating Wage and Hour Laws, it should engage in straightforward and honest discussions to resolve the investigation before it heads for an administrative hearing or court proceeding. Administrative Law Judges and the Courts will generally give deference to the USDOL findings against an employer with regard to any “alleged violation” unless there is actual proof of arbitrary behavior/investigative techniques; capriciousness; or lack of proof to substantiate the USDOL findings. An employer can achieve a much better and less costly result by working with the investigator directly and not letting the matter proceed to litigation. If a problem is found, work with the investigator to solve it, not fight about it!

2. Cooperate fully.

USDOL investigators have a great amount of discretion as to how they proceed through the investigative process. An employer who is uncooperative or attempts to aggravate and forestall the investigation will find itself in a costly nightmare if the investigator feels that the business is failing or refusing to cooperate. Consequences may be severe – subpoenas may be issued requiring the production of documents or subpoenas for actual questioning; court action may occur which will cost the employer substantially, and, as a last alternative, if an employer is truly refusing to cooperate, the USDOL may just accept the Complainant’s allegations at their face value and assess costs to the employer. Be cooperative, not just on liability issues, but also on a willingness to provide to the USDOL information that may lead to limiting the scope of the investigation and documents required.

3. Have competent counsel.

I am suggesting that an employer retain competent and able counsel to represent their interests in an investigation. Competent counsel can help in clarifying the investigation and in limiting the extent of the investigation. Competent counsel may be able to “short circuit” the process and get it over quickly. Competent counsel may also provide an ability to substantiate Tip No. 2: cooperation in the investigation. Please make absolutely certain that counsel has the right to speak to and get accurate information from accountants and/or other individuals who are typically entrusted with preparing or maintaining payroll records in the first place. This may help in providing counsel a basis to control or limit the investigation.

4. Make the investigation a positive – an opportunity to come to compliance.

Rather than resisting the investigation or continuing to deny that there is a problem, employers may use the efforts of the investigator to come into compliance and mitigate their damages – the day that an investigator concludes that an employer is in compliance, the liability is cut off. From a practical standpoint, using the investigation to come into compliance will condition the USDOL personnel to establish that the employer is trying to work with them rather than against them.

5. Control the process.

If an employer can gain control over an investigation, it will have the ability to limit the scope of records that will be provided and, therefore, limit its potential exposure. Treating the investigator with respect and dignity will help the employer gain control. Also, dependent on the case at hand, a self-assessment of the employer predicated on the initial scope of the investigation submitted to the USDOL based on its payroll records may not only limit the extent of the investigation, but the financial penalty.

Following the aforementioned five (5) tips may position the employer to have “no reason to be concerned as to who is knocking on the door.”