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What is a Labor Audit and What That Means to Business Owners?

24 May 2017
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Here is a question that we seem to be getting more and more of, “What is a labor audit?”
As department of labor audits continue to increase at a rapid rate, more people want to know how they can protect themselves from mistakes and costly fines. It is important to know first off, how the audit works.

Here is a graphic from the ICE website to show the flow of an audit:

Here is a graphic from the ICE website to show the flow of an audit:

Now we should learn what the auditors want to know. The auditors want to know if you:

  • Comply with the “Employment Verification System” (timely completion of the Form I-9);
  • Complete and retain the Form I-9 for all active employees hired after November 6, 1986 and retain the Form I-9 for former employees for the longer of 1 year from termination or 3 years from hire; and
  • Have hired only authorized workers
  • Treat all workers equally regardless of citizenship or national origin.

Okay, you get it now, right?

No? Let us break it down for you even further…

  1. Comply with the “Employment Verification System” (timely completion of the Form I-9)
    Translation: You have THREE days from the hiring date of the employee to complete the backside of the I-9
  2. Complete and retain the Form I-9 for all active employees; Retain the Form I-9 for former employees for the longer of 1 year from termination or 3 years from hire;
    Translation: You must keep (and be able to access) ALL of your I-9s for active employees, as well as former employees (even if they worked a day). You must keep these files for either 1 year after their termination, or three years from their hire date, whichever is LONGER.
    Translation of the translation: When in doubt, throw it out keep it!
  3. Have hired only authorized workers
    Translation: Worker must be US Citizen or naturalized, have proper work visas or employment authorization documents (EAD)
  4. Treat all workers equally regardless of citizenship or national origin.
    Translation: Ensure there is no workplace discrimination

So now maybe you think that this does not concern you since: all of your employees are authorized, you don’t discriminate, you have all your I-9 files stored compliantly, and you fill them out in a timely manner. But, have you completed them correctly?

I-9 paperwork errors have a minimum of $216 per error, per form. Those numbers can add up pretty quickly, make sure to check out our next article about Paperwork fines, what they are and how to avoid them.

SimpleForms allows managers and business owners the ability to manage and check their entire organization and locations’ paperwork for errors electronically with just a few clicks. Want to learn more? Email me at andrew@whattaxform.com to schedule a 10 minute demo.

Feel free to email us or message us if you have any other compliance tips or questions!

Written By: Andrew Martino



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