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Tracy Kosbau

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Tracy Kosbau, MBA | Vice President of Marketing and Public Relations

Oct 9, 2018

Department of Labor Conducting Audits in Milwaukee and Fox Valley

Tax AuditAs we’ve reported, the restaurant industry has been under increased scrutiny and as predicted, Department of Labor (DOL) audits arrived in our state several years ago.

In the past most audits were typically the result of a complaint, but now DOL has gotten away from that approach and is proactively looking for violations! Representatives from DOL recently confirmed that restaurants in Milwaukee and the Fox Valley, are being randomly investigated -- so it is critical that you know what the laws require and ensure you are following the letter of the law. Keep in mind that other areas could be targeted in the future.    

DOL investigations in Madison in 2015 unearthed violations yielding over $724,000 in back wages due to 275 employees!     

DOL has expressed their concerns about our industry, stating “too often, many low-wage restaurant and hotel workers fall victim to their employer’s violations of the Fair Labor Standards Act’s overtime, minimum wage and record-keeping provisions…” and then go on to describe industry employees as “especially vulnerable to unscrupulous employers.”    

Some of the most common FLSA violations include: 

  • Paying employees fixed salaries without regard to how many hours they worked, leading to overtime violations when they worked more than 40 hours in a week. 
  • Improperly calculating overtime for tipped employees. 
  • Paying overtime in cash, off-the-books, at “straight time” rates.  
  • Deducting the cost of uniforms, breakages, or shortages from workers’ pay; reducing their hourly wages below the federal minimum wage. 
  • Failing to keep accurate and thorough records of employees’ wages and hours worked. 
  • Failing to pay for all hours worked. 
  • Paying servers tips only. 
  • Requiring tipped employees to surrender tips to an illegal tip pool.
  • Requiring minor aged employees to work outside of the hours allowed by the law.    

WRA has been sounding the alarm about DOL audits for several years. With DOL investigators already in our state, this is a critical time to take stock of your employment practices to make sure you are on the right side of the law and aren’t vulnerable to DOL audits, or even worse – lawsuits filed by private attorneys representing employees.    

This is also a good time to make sure you have the most recent Laws & Regulations chapters of the HERO manual! You’ll find pertinent information on the tip credit, tip pools, overtime (including a formula to calculate overtime for tipped employees), state vs. federal law (to determine if you are subject to FLSA), etc. Visit Members Only to download the most current Laws & Regulations chapters.     

The DOL website has a lot of useful information to help with FLSA compliance, including the fact sheet "Tipped Employees Under the Fair Labor Standards Act (FLSA)" which addresses common issues specific to our industry.    

Attorney Barry Chaet, a partner with the Milwaukee law firm of Beck, Chaet, Bamberger & Polsky, S.C., shared these hints in the event that you get audited by DOL:    

Ten Commandments for Responding to Wage and Hour Audits 

  1. Should you get a letter from any government agency, you need to seek legal advice immediately. Anything you or your supervisors say or do will be held against you. 
  2. The government investigators may appear friendly, but they are not your friends. Their scorecards depend on how good they are at ferreting out violations. They will keep looking until they find something.
  3. Always be polite, even when an investigator is rude, abusive or uncooperative. The investigator is there to do a job. If you are polite to them, they will be more likely to give you the benefit of the doubt when it can be given. They do have some discretion.  
  4. Although it may not seem so, you will be given time to seek legal counsel and/or prepare for the on-site investigation.
  5. Never give anything to an investigator unless you and your legal counsel have thoroughly reviewed the document first.
  6. Wage and hour investigations are kept confidential while they are underway and therefore, employees should be advised of an investigation only on a need-to-know basis. For example, you may need an affidavit from an employee to show that his or her position is an exempt position. Also, the wage and hour investigator usually will interview certain employees. You should meet and discuss the investigation with those employees before they are interviewed. Under no circumstances should any management or supervisors be interviewed by investigators without the presence of legal counsel.  
  7. Keep in constant communication with the investigator throughout the audit. By doing so, you will gain more insight into what the investigator is looking at and you will be in a better position to respond.
  8. When you get the initial determination by the investigator, do not panic. You have the opportunity to negotiate and to reduce the amount of the monetary assessment and/or penalty. 
  9. Be aware that if the matter can't be resolved at the local level, it can be resolved at a higher level.
  10. Call the Wisconsin Restaurant Association. They can provide valuable advice throughout the audit. In addition, they can monitor both the number and type of state and federal investigations that occurring throughout the state.    

Call or email the WRA Hotline 800-589-3211 if you need information.