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Protect Yourself from a Labor Department Wage Crackdown

Did you know the Department of Labor can audit your hotel and review payroll? Here is what you need to know to protect yourself.

Wednesday, January 29, 2014
Niraj Dhanani
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In the wave of recent Department of Labor: Wage and Hour Division’s audits targeted towards the hospitality industry, it’s important to prepare yourself. One may ask why these audits happen and how or what that department gains in return?
The Department of Labor’s duty is to protect the Country’s labor force by setting standards and auditing them for compliance.

Fair Labor and Standards Act (FLSA) provides the authority for the agents to enter the premises. Agents normally review payroll & employment records, payroll wages, overtime pay, under age employee job hours and descriptions. Plus they have the right to interview employees.

Your business can get a letter in the mail notification of an audit, or a phone call from an agent. They will provide you a letter with the required documents, time period audited and records & documents they need access to for auditing. At times, the agents will show up in person unannounced and demand to see the records or interview employees. You may ask to schedule a different time for the audit or time to notify upper management/ownership/attorney or to retrieve your records they are requesting. Most agents will work with employers on scheduling another time, instead of the unannounced visit. Agents will never disclose if the audit is the cause of a complaint or just random audit. It is always beneficial to hire an experienced professional like an attorney or consultant to guide the hotel through the audit. Experienced consultants will have been through several audits and know the laws and rights of the businesses being audited.

During the audit, it will be beneficial to have your Attorney/Consultant and your HR person present to answer or address any questions or explain any inconsistency in the records. The agent will either audit the records and documents on site or may ask to take them to their office. It is your company’s decision on how to approach it.

If the agent will be interviewing, they can do so in person, over the phone or via a questioner. Both exempt and non-exempt employees can be interviewed per the Agents discretion. When the employee is an exempt status, (manager title supervising other employees paid on salary) they can decline to be interviewed or other hotel representative may sit in. Hotel or management cannot and should not coach, guide or threaten the employee on any way.

After the Agent’s audit of the records and interviews, they will schedule a conclusion meeting. They will meet with ownership or management with authority to sign the conclusion and findings of the audit. Agents will review the facts and computations of any back wages and/or overtime owed to employees. They will pressure the hotel representative to agree and sign off on the findings. Do not sign any document of findings you do not agree with or need time to confirm the Agent’s calculations.

The Agent will require the hotel to pay the amounts owed to the employees and provide proof of such payments sent. If the hotel disagrees to pay the employees, Agent will advise the employees of their rights to sue, which could cost more to the hotel in the long run.

If there are back wages or overtime owed to employees after the audit, the hotel will be charged a penalty. If the audit is a first for the hotel, the fine could be about $1,000 per violation. Second or repeated offenders with audits can be charged higher penalties.

Depending on the Agent and the outcome of the audit, the agent may also issue notifications of additional audits to all the other businesses owned or operated by the current owner. Regardless of the geographic locations of the other businesses, the auditing Agent may reach out to the other field office.
Niraj Dhanani    Niraj Dhanani
AP Hospitality, LLC

Bio: Mr. Dhanani is a hotel expert with years of industry experience in acquisitions, management, renovations and litigation support. He has successfully consulted on or turned around numerous properties and revived them back to financial health. His company (AP Hospitality) provides Hotel Consulting, Expert Witness, Property/Department Trainings, Revenue Management, Repositioning/Rebranding, Negotiating Franchise Contracts/Impacts & PIP’s, Hotel Management Services and much more. Contact him at Neal@APhospitality.com or visit website at www.Aphospitality.com
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