More audits look for violations of wage-and-hour laws.

One in five employers has been audited by the U.S. Department of Labor (DOL) for violating wage-and-hour laws under the Fair Labor Standards Act (FLSA) and the Family and Medical Leave Act (FMLA), according to a new survey by Business and Legal Reports, Inc. (BLR), a Connecticut-based company that produces compliance and training materials.

The survey also reported that in 2004, these audits collected over $165 million in back wages under FLSA and $2 million under FMLA.

"A [Labor Department] audit can be very costly," said Susan Prince, BLR managing editor. "It costs the company time, money, sometimes double back pay."

The survey looked at the effects of new FLSA rules enacted in August 2004 and how employers are using them to classify workers as either exempt or nonexempt. The changes redefined "white collar" exemptions for executive, administrative, sales, professional, and computer positions and raised the salary threshold for exempt employees to $455 a week.

Exempt employees are workers who are exempt from FLSA requirements. For instance, they do not receive overtime pay.

Prince said one reason for the rise in audits may be that employers have difficulty figuring out a complex set of federal and state regulations.

"Historically, [compliance] has been very complicated for employers," noted Price. She said the changes were an attempt to make the rules easier to understand, "so a lot of these audits are actually from the time before the changes were implemented."

Just over half--51 percent--of the employers surveyed by BLR said they "completely" understood the new federal regulations "and their interplay with state law," and 13 percent said they did not have a clear understanding of the laws.

Prince noted that some state laws provide greater protections to workers and that when in doubt, "employers should choose the option that gives workers the most protection."

Employers made several changes to comply with the new rules:

* 11 percent of respondents said they had to raise some employees' salaries to meet the new requirements for exemption.

* 83 percent said they didn't need to change any employees' status from nonexempt to exempt.

* 41 percent said they reviewed all their company's job descriptions to make sure they were accurate.

* 15 percent said they put "substantial limits" on overtime hours.

"Employers really need to reexamine their job classifications," said Prince. "More [respondents] dropped [positions] to nonexempt instead of the other way around. If it's borderline, we recommend making [the position] nonexempt. It is always better to provide more overtime protection."

The size and type of business were important factors in determining the likelihood of a DOL audit, the survey found. Most of the companies were audited only once. The only companies that said they had been audited more than five times were those with workforces of more than 500 employees. And certain industries are more frequent targets of investigation.

"Industries such as health care, hotel and motel, agriculture, day care--the DOL keeps a specific eye on them. These tend to be low-wage, with a lot of nonexempt employees," Prince said.

Eleven percent of the companies surveyed said their employees were generally pleased with the new classifications; 16 percent said their workers were unhappy; and 29 percent said there was no reaction.

"Five-Minute Overtime Audit: Where Does Your Company Stand?" is available from Business and Legal Reports, Inc., at www.blr.com