There aren’t many contractors out there who would like a federal audit for the holidays. But those who take on government jobs – like the ones coming from the trillion dollar Infrastructure Investment and Jobs Act – don’t always get the option. While every contractor should keep accurate records, if your company plans on taking advantage of some of the thousands of government-funded projects that are rolling into states and cities, you really need to make sure your recordkeeping processes are up for the task.
The US Department of Labor’s (DOL) Wage and Hour Division (WHD) enforces several employment laws, including those that fall under the Fair Labor Standards Act (FLSA) and the department’s investigators can audit employers for violations – and they’re not required to provide employers with an advance notice of a visit. Employers who can’t confirm FLSA compliance could be on the hook for both back wages and fines. According to Construction Dive, the DOL’s WHD recovered more than $32.9 million in back wages for over 17,000 construction workers in 2022. Then, there’s the complexity of prevailing wage tracking for public works projects, which increases the focus on recordkeeping and reporting.
Without the right records, your construction company could fail an audit.
When Bad Audits Happen to Good People
The usual adage about DOL audits is it’s not a matter of if but when. An audit can happen at any time. Sometimes audits are spurred by an employee or competitor complaint, but they can also simply be random. And when they occur, the DOL might just show up or they might give you a month or two notice. If you haven’t done anything wrong, e.g., you’ve paid your employees for all their overtime, you should be all set. But an audit can go very badly if your recordkeeping is lax or worse, nonexistent. Recordkeeping on paper is a bad idea as documents can get lost, misplaced or damaged. If you can’t prove to the DOL that your records accurately reflect what hours your employees worked, you could be forced to pay back any unpaid wages and possible liquidated damages.
The best offense to an audit is a good defense.
Records to Keep for an Audit
Keeping accurate records can help you prepare for what happens during an FLSA audit. If you employ non-exempt workers in the U.S., you must keep these employee records for at least three years to comply with FLSA regulations.
- Employee’s name, gender and birthdate
- Employee’s social security number
- Employee’s address
- Employee’s occupation
- Time and day when the employee’s workweek begins
- Number of hours the employee worked each day
- Total hours the employee worked each week
- How the employee was paid (hourly, salary, commission, etc.)
- Employee’s regular hourly pay rate
- Total daily/weekly ‘straight time’ earnings
- Total weekly overtime earnings
- Any additions to or deductions from the employee’s wages
- Total wages paid to the employee
- Dates that the given pay period covers
If you’re tracking employee time on paper, not only will you have to physically sort, file and find the information in the event of an audit but it could be wrong or just plain lost. But using digital time tracking solution will not only accurately collect the above information, but it will also securely store it so it’s available exactly when you need it.
How Digital Time Tracking Improves FLSA Recordkeeping
Time tracking software helps you either avoid audits or handle them well by recording accurate hours, breaks, lunches and overtime for all employees in real time. ExakTime’s digital time tracking uses either an app, kiosk or rugged time clock to track worker hours. Workers clock in and out with their unique, 4-digit PIN number and tap the green ‘Go’ button to clock in or the red ‘Stop’ button to clock out.
Digital time records collected with an app or through a rugged onsite time clock and synced directly to your accounting program are much less susceptible to human error and the type of after-the-fact disputes that may drive a complaint that leads to an audit. Cloud-based time tracking software stores the records. You’ll have instant access to a digital “paper trail”, as well as a history of every punch-out that includes employee responses to compliance-related questions every single time they finish a shift. Workers can review digital time cards and approve them with a signature. You can also prompt employees to sign off on compliance-related questions regarding breaks and injuries at clock-out. This information protects your business from audits, lawsuits and fines because you’ll have digital proof of checking all compliance boxes.
No matter if you’re still using paper timecards or another web-based time tracking solution, getting started with ExakTime is simple…and quick. Most companies take just a single payroll cycle to make the change, and our implementation experts are here to help. Learn more about the time tracking solution that has been meeting the needs of construction and contracting companies for over 20 years.
Schedule a demo and start tracking time better today.