Top 5 DOL Focus Areas: Where They Look First (And Hit Hardest)

When the Department of Labor (DOL) steps into your business, they don’t come in casually. They have a clear strategy—a checklist of high-priority targets they look at first. After decades of working with business owners facing DOL investigations, we at Baron Payroll know exactly where they start—and where business owners are often most vulnerable.

Think of it like a routine check when you’re pulled over. The officer doesn’t inspect every detail of your vehicle; they start with registration, insurance, and your license. The DOL is the same way—they know where to find issues that can cost you significant money if left unchecked. Let’s dive into the top five areas where the DOL looks first.

1. Are Your Employees Working Off the Clock?

Off-the-clock work is a hidden risk that can hit hard if it’s overlooked. Many business owners are confident in their timekeeping systems—until we ask about employees who come in early or stay late to set up, clean, or handle other tasks off the clock. Suddenly, a seemingly minor oversight turns into a major liability.

We worked with a restaurant owner who thought everything was running smoothly. Employees clocked in at the start of their shifts and clocked out at the end. But his prep cook was coming in 30 minutes early every day, unpaid, to set up. When the DOL reviewed the records, those 30 minutes added up, resulting in tens of thousands in back pay and penalties.

Baron Payroll’s Tip: Make it a policy that any work performed must be on the clock, no exceptions. Create a strict policy and communicate it with your team. Time worked should always mean time paid.

2. Are You Getting Overtime Calculations Right?

Overtime might seem straightforward, but this is one of the most common and costly areas for errors. Calculations aren’t always as simple as time and a half after 40 hours. They often need to include additional compensation, like bonuses or commissions.

A client in the sales industry learned this the hard way. She was paying overtime on her employees’ base hourly rate, unaware that the DOL required commissions to be factored into those calculations. This oversight resulted in over $150,000 in back pay owed.

Baron Payroll’s Tip: Work with your payroll provider or a compliance consultant to ensure your overtime calculations are comprehensive. Documentation is key—having records of your calculations can make all the difference if you’re ever audited.

3. Are You Tracking Meal and Rest Breaks?

Meal and rest breaks are one of those “little” details that can quickly add up to big violations. If employees aren’t taking their breaks as intended—or if you don’t have records to prove it—the DOL sees this as a compliance issue.

One business owner we assisted had a policy requiring 30-minute lunch breaks, but her employees often ate at their workstations during busy shifts. The DOL saw this as a failure to provide actual breaks, resulting in over $80,000 in penalties.

Baron Payroll’s Tip: Use a timekeeping system that specifically tracks meal and rest breaks, and review the records regularly. Employees should be clocking out for their breaks to maintain proper records.

4. Have You Properly Classified Employees as Exempt or Non-Exempt?

Misclassification of employees is one of the costliest mistakes a business can make. Exemptions are based on specific duties, not titles, and it’s crucial to ensure each exempt employee actually meets those criteria.

We had a client with an IT services company who assumed all his tech support staff were exempt because they were “computer professionals.” Unfortunately, their actual job duties didn’t meet the exemption, resulting in a significant financial hit.

Baron Payroll’s Tip: Review every exempt position annually, comparing actual duties to DOL standards. When in doubt, classify the role as non-exempt to avoid penalties later.

5. Are Your Independent Contractors Classified Correctly?

Many businesses prefer independent contractors to save on taxes and benefits, but misclassifying employees as contractors is risky. The DOL applies a strict test for independent contractor status, and failing to meet it can lead to costly penalties.

A client in the cleaning industry classified her workers as contractors, even though they followed her schedules, used her equipment, and wore her uniforms. When the DOL investigated, they reclassified the workers as employees, leading to a six-figure bill.

Baron Payroll’s Tip: Document every contractor’s role and ensure it meets the DOL’s criteria. If there’s any uncertainty, consult a professional or err on the side of classifying them as employees.

Your Compliance Survival Plan

Here’s what you need to do right now if you want to avoid a costly DOL audit:

Audit your timekeeping practices for off-the-clock work.
Review overtime calculations, including commissions and bonuses.
Document and enforce meal break policies rigorously.
Assess exempt employees’ actual duties against DOL standards.
Examine all independent contractor relationships thoroughly.

Why Proactive Compliance Matters

At Baron Payroll, we’ve seen too many businesses blindsided by costly DOL violations. The reality is that even honest mistakes can result in huge penalties. Take the time to review your practices in these five areas, and don’t hesitate to get expert help. Investing in compliance now could save your business from a crippling financial hit down the line.

Your best defense against DOL audits is a proactive approach. Review your policies, document your practices, and keep a close eye on any areas that could be vulnerable. The cost of doing it right is nothing compared to the cost of getting it wrong.

Want more insights on staying compliant? Check out our resources in the Baron Payroll Learning Center.

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