Regulatory Audits – What to do (and Not to do) when your business is investigated

As an employer you know that your employment practices and policies need to comply with federal and state laws.  What you may not realize is that the various state and federal agencies that enforce these laws could at any time conduct an audit to scrutinize those employment practices and policies.  Regulatory audits can pose serious risks to your business, take up your time and money, and result in stiff penalties, effectively turning your business on its head.

So what do you do when a federal or state agency notifies you that it intends to audit your business?

Every regulatory audit begins with some kind of notification, usually a certified letter delivered to the business owner or HR department.  Sometimes, a government investigator will show up at the door and demand to examine the company’s worksite or records immediately.

If you receive an audit notice or letter by mail, first take a deep breath. Remember that you have resources to help you get through this.  Read through the letter to get an idea of the source of the audit and the scope of information that the auditor has requested.  If you have a lawyer, send a copy of the audit letter to your lawyer and start planning your response. If you do not have a lawyer, don’t panic.  Give us a call and we can help guide you through the audit process, and if needed we’ll help you find a local lawyer to assist you.

On the other hand, if an auditor shows up at your door: above all else, stay calm.  Ask for a business card to establish the auditor’s identity and government affiliation.  If the auditor has a subpoena or a search warrant, make a copy and ask for as much detail about the exact scope of the investigation as possible.  Ask the auditor for time to gather the documents.  If you are courteous and respectful, most auditors will work with you to schedule a convenient time to conduct the audit.  If the auditor insists on an immediate investigation, contact your attorney. In most cases you have the right to have an attorney present.

No matter what happens, do not turn an auditor away. Although it may feel stressful to have an auditor show up to investigate your business, remember that for them it’s part of the job. If you make the job more difficult for them, they will make the audit more difficult for you.  In addition, do not attempt to stall or dodge the auditor.  You may feel like hiding under your desk until he or she goes away, but doing so will only make things worse for your business.  And finally, never lie to the auditor.  Do not change records or make false statements to try and make the situation look better.  Instead, be proactive in bringing your business into compliance so that when you are audited you can handle it with grace.


General Tips to Keep in Mind

Auditors will usually not reveal the cause for the audit or whether there was a specific complaint, but the scope of their investigation may reveal the source to you. If you do figure it out, do not retaliate!  You risk incurring additional penalties if you retaliate against the source of a complaint.

Train your public facing employees, like your receptionist, how to deal with the arrival of an unannounced investigator. They should know whom to call (e.g., HR manager, CEO), and should not allow the investigator to wander around the building without an escort.  Essentially, teach them to “greet and seat” the investigator until your designated person can assess the situation.

Lastly, it pays to be proactive.  Don’t wait for an audit letter to get your practices and policies in order.  Hire HR professionals to help you get into and maintain compliance.  The cost of getting your business in order is small compared to the stiff financial penalties you will avoid when a government auditor comes calling.

Contact me today for more information on how to protect your business from a regulatory audit.