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The Role Of Internal Audits In Ensuring Wage And Hour Compliance

Any business that hires employees must take care to pay attention to federal and state labor laws. While a business may strive to be a place that supports its employees and creates an environment for them to flourish, it may instead be harming its employees if it fails to ensure wage and hour compliance. If a business is not in compliance, it may trigger a lawsuit against the company, damage employee morale, and hurt the company’s reputation overall.

 

However, if a business can implement effective internal audits, it can avoid these repercussions and keep the enterprise running smoothly. An experienced employment law attorney from Schwab & Gasparini can help ensure compliance with up-to-date standards. Consider scheduling a consultation by calling the relevant office at (315) 422-1333 in Syracuse, (518) 591-4664 in Albany, (914) 304-4353 in White Plains, or (914) 304-4353 in Hudson Valley for more information.

New York Department of Labor (DOL)

Most labor and wage standards that businesses must adhere to are established by the Department of Labor, which is also in charge of enforcing those regulations. One of the roles this government entity plays in the labor landscape is conducting external audits to ensure compliance with labor laws. 

 

This is different from internal audits, as they are not being conducted by the company itself and may have severe ramifications if a business is found to be in violation of any labor laws.

Wage and Hour Division (WHD)

When it comes to wage and hour compliance, businesses will most likely be interacting with the Wage and Hour Division (WHD) of the Department of Labor. Regulations that fall under the jurisdiction of this department include minimum wage, child labor, overtime pay, and recordkeeping requirements. 

Common Compliance Issues

Keeping track of the various laws and regulations can be difficult, especially with larger companies that employ workers in multiple locations. Here are some issues that internal audits could help address in a business. 

Misclassification of Employees

Certain employee classifications are exempt or non-exempt from certain wage laws, depending on their job descriptions. If an employee is classified improperly, they may not be receiving the overtime pay that they are owed, which may lead to legal action later on. 

Overtime and Pay Spread

Another common violation is overtime and spread pay. In New York, employees are entitled to time and a half pay for every hour worked over 40 in a week. They may also be entitled to an extra hour’s pay if they work over ten hours in a single day, which is referred to as spread pay. 

Child Labor

In a recent study, the Department of Labor reported a 68% increase in child labor violations between 2021 and 2022. Federal laws prohibit most minors under the age of 14 from being employed, and may also restrict the hours and employment options available to minors under the age of 16, and prohibit certain hazardous work conditions for minors under 18. 

 

A skilled employment law attorney from Schwab & Gasparini may be beneficial in conducting internal audits to evaluate compliance. 

Consequences of Non-Compliance

If a business is found to be in violation of any of these workplace laws, there may be significant repercussions up to and including legal action.

Employee Morale

If a business is failing in wage and hour compliance, the first to feel the effects will be the employees themselves. When employees aren’t receiving proper compensation for their work, they may feel hurt, overlooked, or angry. Disputes over wage and hour information or employee classification can erode trust between a company and its workers, which can negatively impact the function of the business.

Reputation

In addition, wage and hour compliance issues may damage the company’s reputation. Some of the larger violations may draw the public eye and cause a decrease in sales revenue. Rebuilding a damaged reputation is much more difficult than preventing the issue in the first place with internal audits. 

Legal Action

If the violations continue, others may move to take legal action against the company. This can impact employee morale, and the company’s reputation, and cost the company financially in damages and court expenses. However, having a robust system of internal audits can help prevent this and ensure proper compliance. 

Role of Internal Audits in Ensuring Compliance

When it comes to wage and hour compliance, internal audits essentially serve to catch errors before an external auditor does. If an external auditor finds a violation, it may mean fines or even legal action for the business. But if an internal auditor finds an error, it can be corrected and keep the business running smoothly.

Reviewing Labor Laws

An internal auditor would be aware of the most current labor laws and compliance issues and would be able to ensure that the business is up to standard. By reviewing labor laws, the auditor is equipped to ensure that the company is functioning as it should.

Implementing Payroll Systems

An auditor may also recommend the implementation of effective payroll systems. If a business can automate a system for providing pay–including overtime and spread pay–to their employees, they can avoid the element of human error and streamline the process to be more efficient. 

Corrective Action

Internal auditors can also recommend corrective action to remedy any code violations. Quickly addressing any infractions can help keep a business out of trouble, while also building trust with employees and those they serve. 

Frequently Asked Questions

Listed below are frequently asked questions about internal audits and wage and hour compliance. 

What Are the Five C’s of Internal Auditing?

Internal audits identify and classify their findings in terms of the five C’s: criteria, condition, cause, consequence, and corrective action. This framework helps address what kind of issues are present, what may happen if they are not addressed, and how they can be remedied.

Contact a New York Business Attorney Today

To properly support employees and maintain a safe and supportive work environment, business owners may benefit by protecting their company with internal audits. By ensuring compliance with wage and hour guidelines, business owners can help their companies grow with confidence and succeed. To learn more about wage and hour compliance guidelines, consider speaking with an experienced employment law attorney from Schwab & Gasparini by calling the relevant office at (315) 422-1333 in Syracuse, (518) 591-4664 in Albany, (914) 304-4353 in White Plains, or (914) 304-4353 in Hudson Valley.

Mon Sep 2 2024, 12:00am