Ask the BPHR Advisor: Wage and Hour Audit

Ask the BPHR Advisor: Wage and Hour Audit 600 400 Balance Point Team

This post has been updated on February 24, 2020.

Question: Our company received an audit notification letter from the New Jersey Wage and Hour Compliance Division. What do I need to know to prepare?

Answer: We’ve been hearing the same thing from many of our clients. There have been many new laws enacted in New Jersey related to Pay Equity, Family Leave, Wage Theft and Employee Misclassification. This audit, though, is likely a result of the State’s new Earned Sick Leave law.

First, you should reacquaint yourself with the law:

  • The act went into effect on October 29, 2018. It requires New Jersey employers of all sizes to provide up to 40 hours of paid sick leave per year to covered employees. Just about every employer and employee in New Jersey is affected. Final regulations were issued on January 6, 2020.
  • The act requires employers to designate any period of 12 consecutive months (such as calendar, fiscal, or anniversary year) as a “benefit year.” In each benefit year, an employee will accrue up to 40 hours of sick time at a rate of one hour for every 30 hours worked. Alternatively, an employer may “frontload” the full 40 hours at the beginning of the benefit year.
  • Current employees started accruing time off as of October 29, 2018. New hires must begin accruing time off as soon as they start working and can begin using accrued time no later than 120 days after their date of hire.
  • The DOL advises against combining all time off (vacation, personal, sick) into one policy, because the requirements and protections under the ESLL would apply to the entire PTO bank.
  • The Act’s broadly defined “family member” and long list of reasons for an employee to call out sick (including preventative medical care, care for a family member, result of domestic violence, or to attend their child’s school-related conference, meeting, or event) makes it difficult for an employer to object to any sick time request.
  • Employers may prohibit “foreseeable” leave during “verifiable high-volume periods.”

Learn more by accessing our on-demand webinar: New Jersey’s Earned Sick Leave Law Final Regulations.

Next, you’ll have to gather the requested documents. It’s likely the letter includes a laundry list of items that must be made available for inspection. The Auditor will want to review your employee handbook to ensure your sick leave policy is in compliance and notifies employees of their designated benefit year and the details of accrual and usage. The Auditor will also request to inspect all time and payroll records related to the Earned Sick Leave law including hours worked, earned, used, paid out or carried over.

Satisfy Compliance, Focus on Strategy

New Jersey’s Earned Sick Leave law is being enforced and if your company is not in compliance, you could face penalties. If you’re not 100% confident in your organization’s ability to survive an audit, BPHR can help create an employee handbook as well as provide guidance in preparing for an audit and adhering to all labor laws. Schedule your free phone consultation today to learn more.

Have a question for Lisa? Email her directly.

DISCLAIMER: The material presented on this page is for informational purposes only and does not constitute legal advice or legal opinion. 

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