Recently, I had the extreme pleasure of handling a “random” federal Department of Labor Wage and Hour audit for one of our North Carolina clients.  This blog will briefly provide you with some insight into what the federal government can demand from any establishment.

Since this is exclusively a North Carolina company, you may wonder how the fed’s had jurisdiction.   It is simple; the jurisdiction test can be met simply by accepting credit card transactions in a business since processing typically takes place across state lines.   There are other requirements which I will not go into in this blog.  My main point is with regard to time cards for managers who typically would be exempt from overtime under the Fair Labor Standards Act (FLSA) as long as they met the guidelines.  Four managers were selected to review under the FLSA guidelines.  The investigator has authority (and did) to “look-back” exactly two years from the moment of entering the establishment.  Since exempt pay levels were questioned in this case, each employee was subject to potential overtime compensation for the “look-back” period.  Given that time cards were not available for one of the managers (as they were routinely discarded for this manager); the investigator has the right to accept the verbal confirmation of how many hours the employee worked from the employees’ mouth directly.  It is then up to the employer to prove any inaccuracy.  In the end, the employer in this case had to pay up due to employee recollections of time worked and their own description of their job.

My recommendation is to first evaluate and document every “salaried” job to ensure compliance with FLSA since paying a salary does not automatically exempt an employee from overtime.  Second, keep time records in a format that can be easily reproduced if ever audited and have employees actually sign their time sheets.   Third, train your managers who have authority of hiring and firing within defined federal and state guidelines.  Finally, maintain time and attendance records for three (3) years.  The DOL requires two (2) years, however the IRS can require three (3) years, so it is best to follow the longest period requirement.