Why Is an FLSA Audit Important?
Ensure Compliance with a Broad and Exacting Law
The FLSA Audit is the only reliable means that an employer has to determine whether it is complying with the several and exacting FLSA requirements and regulations. Casual and periodic spot checks are not sufficient because of: the complexity and broad scope of the FLSA; the U.S. Department of Labor (DOL) regulations that interpret the FLSA; and the numerous DOL opinion letters that apply the FLSA to particular employers. It is only through an in-depth investigation into an employer's time keeping and compensation practices, and an analysis of how those particular practices measure up to FLSA requirements, that an employer can be fully assured of its FLSA compliance.
Avoid Staggering Judgments for FLSA Violations
FLSA lawsuits are popular because they offer employees a low risk means to recover staggering money judgments. For example, an employee who wins an FLSA litigation can recover not only back pay owed for unpaid overtime wages, but also "liquidated" or double damages. Unless an employer can prove the "good faith defense" discussed below, the court must award the employee liquidated damages in an amount equal to unpaid wages.
Another reason that FLSA lawsuits are popular is because the back pay recovery period can be extended from two to three years if the employee can prove that the employer willfully violated the FLSA. That one-year extension of the recovery period, moreover, also exposes the employer to another year of liquidated damages.
Additionally, the damages also extend forward until the employer corrects the FLSA violation. This means that the monetary damages to the employer can increase as the lawsuit is litigated. Since litigation typically takes a year or longer, liability frequently exceeds four or five years for the FLSA violation.
Finally, FLSA lawsuits are popular because the employer is required to pay the employee's attorneys' fees whenever the employee wins. Even if the employees' attorney charges a reduced rate to his or her client, in seeking attorneys' fees for prevailing in an FLSA lawsuit, the attorney can recover the prevailing market rate for attorneys with his or her experience. This often means that the attorney is requesting $300-400 per hour from the court for attorneys' fees.
An FLSA Audit May Create a Good Faith Defense
The FLSA provides a defense to liquidated damages to those employers who can prove that they had a good faith belief that their pay practices complied with FLSA requirements. Specifically, the employer receives the good faith defense if it can prove: 1) that it actually believed that its practices complied with the FLSA; and 2) that its actual belief was reasonable when compared to the beliefs of other employers. An employer who receives the FLSA Audit may qualify for the good faith defense to liquidated damages.
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