Wage & Hour Compliance: Common Mistakes That Trigger Audits

Staying compliant with wage and hour laws isn't just a best practice, it’s a legal necessity. The U.S. Department of Labor (DOL) and state labor agencies are increasingly proactive in conducting audits, often sparked by common and avoidable employer missteps. For small and midsize businesses, the consequences of noncompliance can be costly and reputation-damaging. 

At HRBuffalo, we work with clients across industries to navigate the complexity of wage and hour laws and avoid the pitfalls that trigger investigations. Here are some of the most frequent mistakes we see and how to avoid them. 

1. Misclassifying Employees as Exempt or Independent Contractors 

One of the most common errors is incorrectly classifying employees as exempt from overtime or as independent contractors. Just because someone is salaried or works remotely doesn’t mean they meet the legal criteria for exemption under the Fair Labor Standards Act (FLSA). 

Avoid it: 
Conduct a regular audit of job descriptions and actual duties—not just titles—to ensure compliance. If in doubt, seek professional guidance. 

2. Failing to Pay for All Hours Worked 

This includes not compensating employees for prep time, travel between job sites, or time spent answering emails outside normal hours. Even short tasks completed off-the-clock can add up to a major compliance issue. 

Avoid it: 
Establish clear policies around work hours and ensure time tracking systems are accurate and easy for employees to use. 

3. Improper Deductions from Paychecks 

Unauthorized or excessive deductions for uniforms, tools, or cash register shortages—can bring businesses under scrutiny, especially if those deductions bring pay below minimum wage. 

Avoid it: 
Understand what deductions are permitted in your state and document all authorization agreements with employees. 

4. Overtime Miscalculations 

Misunderstanding how to calculate overtime for non-exempt employees, especially those with bonuses, multiple pay rates, or irregular schedules, is a red flag for auditors. 

Avoid it: 
Ensure payroll providers are using the correct calculation methods and regularly review pay stubs for accuracy. 

5. Incomplete or Inaccurate Recordkeeping 

Wage and hour laws require meticulous recordkeeping. Missing or inconsistent records can signal to regulators that there may be larger issues beneath the surface. 

Avoid it: 
Maintain accurate records of hours worked, rates of pay, job classifications, and payroll changes. Keep everything organized and up to date. 

6. Ignoring State and Local Laws 

Many businesses assume compliance with federal law is sufficient, but state and local laws often provide greater employee protections. 

Avoid it: 
Stay up to date with wage and hour laws at all jurisdictional levels. Partner with an HR firm or legal advisor familiar with your state’s regulations. 

Final Thoughts 

Wage and hour compliance doesn’t have to be overwhelming. With the right systems, proactive auditing, and a commitment to fair labor practices, you can minimize risk and protect your business. At HRBuffalo, we help our clients build policies and practices that not only meet legal standards but also support a positive, transparent workplace culture. 

Need help with a wage and hour audit? 
Let’s talk. HRBuffalo is here to guide you through compliance and beyond.