DOL Audits

Auditors finding “Good Faith” for smal business using a PEO.

During a recent conversation and review of a Department of Labor audit with a client I mentioned how the auditor used the term “Good Faith” during the audit. This came from her finding out that the employer was using a Professional Employer Organization (PEO). Once we as the clients PEO contacted the auditor the auditor was happy and willing to work with StaffScapes to gather and provide information pertaining to the claim. 

The audit came about after a client terminated an employee and that employee felt that he was due overtime pay. The employee was an exempt manager and was paid on a salary basis. During the audit it was determined that the employee was correctly classified and was not due any overtime pay.

I believe that the PEO relationship helped this audit go in the correct direction for our PEO client. Once the Auditor found out that the client was using a PEO she mentioned that it is good to see business making a good faith judgement in following the rules and regulations around having employees and employment. The PEO relationship allowed the client to focus on his business and marketing of that business and allowed the PEO to work on the business of employment. Because of this the employer had all the correct job descriptions, hiring and firing responsibilities laid out in the employers handbook. With that and the easily accessed time records we kept as the PEO the auditor was able to make a quick decision in this case.

Before the auditor came out to the work site we meet with our client to review the audit procedure. Our client was not happy that he had to have an audit and wanted to make that point clear to the auditor the next day. We advised him to come into the meeting with a smile and to treat the auditor as a co-worker and not to be confrontational. The auditor could have opened the audit to both of his business and not keep it focused to the claim at hand. It was decided early on that we would be at the meeting and help run the meeting with the auditor so as the correct questions would be answered and no additional information would be provided in less it was relevant to the discussion.

In the end the client had to meet with the auditor for a little over an hour. The audit went in the clients favor and no wrong doing was found. As the PEO we did suggest to the client how he can improve how he hires and fires.

Creating a good faith PEO relationship properly saved this client from having an audit go the wrong way.