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Scope of An FLSA Audit
An employer has many choices when selecting the scope of the FLSA Audit. Although the best way to avoid FLSA lawsuits is to audit all payroll practices for all employees, time and cost constraints may dictate a less comprehensive approach. An employer can select any of the following approaches that best fits its particular needs or concerns.
Focused on Specific Departments
An FLSA Audit can be tailored to a specific department or division. Departments that work the most overtime hours – such as police and fire departments – are the best candidates. By focusing on the departments that work the most overtime, the agency can maximize the benefit of the audit.
Limited to Known or Suspected FLSA Problems
Another approach is to complete a limited audit that focuses on known or suspected FLSA issues. For example, the employer could audit whether the employees who do not receive overtime qualify for the overtime exemption under the FLSA salary and duties tests. Another example would be to audit paychecks to ensure that all employees are being paid overtime at the particular FLSA “regular rate” of pay.
Comprehensive Examination of All Payroll Practices
A comprehensive audit reviews all aspects of FLSA compliance for all employees. Although a comprehensive audit is the most detailed and time-consuming option, it also gives the employer a greater opportunity to utilize the good faith defense in the event of litigation. Once an employer completes a comprehensive audit, moreover, updates are necessary only if there are changes in the law or the employer’s pay practices.