Bonnie Nelsen, LOFP Business Management Specialist
This article is Part 2 of 2 and first appeared in Fruit Notes, a subscription newsletter.
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Imagine the following scenario. It’s the peak of harvest, and several days of bad weather have put your crews behind schedule. You’re working against the clock when you receive a message from a field supervisor: “A couple of people from Wage & Hour just showed up. They’re pulling guys off the crews to interview them. I tried to listen, but they told me to get lost. They did say they’d want three years of payroll records and a lot of other stuff. What should I do?”
This is a situation that all employers who use H-2A labor will face. The H-2A program requires participating employers submit to periodic, unannounced audits conducted by state and federal departments of labor (DOL hereafter). How you respond to an on-site audit can impact just how costly, time consuming, and stressful the process will be.
This article will offer tips for navigating on-site DOL Wage & Hour Division audits successfully. It discusses the purpose, procedures, and potential outcomes of investigations and offers strategies for managing the process effectively. Both desk and onsite audits are stressful and potentially disruptive to an unprepared employer. Anticipating an audit, being prepared, and setting the right tone with inspectors will lower stress and help you achieve a favorable outcome.
Wage & Hour audits: Purpose and Process. On-site audits are on-farm inspections conducted by employees of Wage & Hour Division of state and/or federal departments of labor. The purpose of an on-site audit is twofold:
- To confirm that employers are compliant with all H-2A program requirements (especially payroll).
- To confirm that the employer’s participation in the H-2A program does not have deleterious effects on domestic (non-H2A) employees working at the farm.
On-site audits are seldom pre-scheduled; auditors (usually two) show up announced at a farm and go to work. Auditors may stop by a farm’s office to announce their presence, or they may head straight to the field. Auditors have a limited right access the farm property and speak to workers but not to disrupt operations. They can be asked to sign in upon arrival and comply with all food safety requirements (e.g., wearing hair nets or personal protective equipment). Employers can also ask for proof of identity and a business card (useful to have for follow-up questions). If you have any doubts about the auditor’s identity, call the regional Wage & Hour Division office to ask if they’ve sent inspectors to your farm.
The on-site audit process unfolds in several stages. The first stage consists of interviews with randomly selected employees; both H-2A and domestic workers may be interviewed. If investigating a complaint, auditors will certainly interview the complainant(s). Interviews can take place in a field, packing line, production facility, or in a private meeting space provided by the employer.
During interviews, auditors will ask questions to determine the employer’s compliance with H-2A program requirements. For example, did the employer provide the worker with a copy of their employment contract? Was transportation paid to/from their point of origin (i.e., their home address) rather than from a nearby consulate or embassy? Are all overtime hours worked paid at the proper rate? Auditors are empowered to investigate issues regarding contracts, regular and overtime pay, benefits, hours worked, working conditions, housing, transportation, and worker safety and occupational health.
Interviews with workers are confidential and private; employers or their representatives may not be present. The only exception to this rule is that owners and managers can be present when auditors are speaking to office managers, controllers, bookkeepers, or other personnel about business issues. Workers can tell employers what was discussed during the interview after auditors have departed. Workers are also entitled to a copy of the notes or transcript from their interview after its completion, and they can share this document with employers.
Auditors may also wish to speak privately with your domestic employees. They will want to know if they have received a copy of the farm’s H-2A contract for equivalent job roles, what their pay rate is, if they are being paid for all overtime worked, and the like. It may not make sense to ask a domestic worker if they received a copy of an H-2A contract—after all, domestic workers aren’t subject to H-2A standards. This is done to ensure that domestic workers are receiving comparable (or better) pay and benefits as H-2A workers, one of the key provisions of the H-2A program (that domestic workers should not suffer due to an employer’s participation in the H-2A program is an important program goal). Domestic workers in jobs similar to those performed by H-2A workers should receive a contract for comparison purposes. This is a small requirement that’s frequently overlooked yet carries substantial fines for noncompliance.
In addition to worker interviews, auditors may wish to inspect worker housing, vehicles used to transport workers to/from the field, and equipment used by workers. Inspectors are interested in knowing if on-farm or rental housing meets H-2A standards for safety and comfort and vehicles and equipment are safe and well-maintained.
While it’s possible that the audit may conclude after on-farm visits, many continue to a second stage involving inspection of payroll and company documents. A few days after the surprise on-site visit, you may receive a written request from the DOL requesting documents. A list of documents requested for an actual on-site audit are provided below (Ross, Schultze, and Stefany, 2024):
- Copies of all H-2A contracts for years 2019, 2020, and 2021 (several years may be requested)
- The legal name of the firm, principals of the firm, annual dollar volume of the enterprise (2019, 2020, and 2021), date of incorporation, and Federal identification number (EIN)
- A list of all current and former employees for the last two years to include full name, addresses, job titles, phone number(s), rate(s) of pay, location of employment, start date, termination date (if applicable), and date of birth if they were under age 18 when employed
- Separate list for H-2A workers
- Separate list for local/domestic workers
- Weekly payroll records and wage statements for this season including a copy of the last completed payroll prior to this letter
- Weekly time records for this season
- A copy of your housing pre-occupancy and water test certificates
- A list of any early departures, terminations for cause, or worker abandonment cases during the contract period for the last two years to include full name, addresses, job titles, phone number(s), rate(s) of pay, location of employment, start date, termination date, information regarding transportation reimbursement if applicable, and copies of any notices provided to ETA or USCIS regarding these workers
- Proof of worker’s compensation insurance
- Copies of shipping and receiving invoices of products purchased and sold
- Copies of vehicle registration and insurance policy
- A copy of driver’s license for any employee who transports your H-2A workers to and from the job site
- Proof of payments for inbound and outbound transportation for the current and previous growing season (2021 and 2022);
- Proof of recruitment efforts under H-2A to include:
- Recruitment report
- Contact with former U.S. workers
- Any supporting resumes and contact information
- Additional documents may be requested if needed
This is a very extensive set of documents covering multiple years. The employer in this case was given only five days to submit the requested documents via the Wage & Hour Division online portal (meaning that documents had to be digitized). It is possible to request more time to submit documents (generally a week or two). Such requests are more likely to be granted if the employer has established a cooperative relationship with auditors and offers a plausible reason for the delay (e.g., it’s the peak of harvest, your office manager is on maternity/parental leave).
Auditors will review documents to check for compliance. They may ask for additional documents or request a meeting with an employer to gather more information. If all is well, the Wage & Hour Division will issue a letter of compliance that signals the end of the audit. If problems are found, the Wage & Hour Division can require an employer to pay back wages to affected workers and financial penalties.
Strategies for Managing On-site Audits: On-site Wage & Hour audits are tough—they require employers to produce a lot of information in a short period of time. The unannounced, “surprise” nature of on-site audits takes many people aback—it can be nerve wracking to know that inspectors are on your farm and you can’t do much about it. Add in the potential for back wage liability and substantial fines and the result is a stressful and potentially costly situation. The key to managing it is preparation, cooperation, and calmness. The following strategies will help.
- Think Like an Auditor: One of the best ways to prepare is to think like an auditor. Make no mistake—auditors are looking for evidence of non-compliance when they show up at your door. As Daniel Ross, In-house H-2A counsel for Seso noted, Wage & Hour Division auditors “don’t get promoted by finding nothing (Ross, Schultze, and Stefany, 2024).”
But auditors are also busy. They have to inspect multiple farms on any given day. They don’t have time to dig deeply for non-compliance at every farm they visit. Investigators admit to deciding about a farm’s compliance during the first five minutes of an on-site audit (Ross, 2024). If an employer appears calm, confident, and cooperative, auditors are likely to conclude the employer has nothing to hide—and move on to the next farm. In contrast, if an employer is uncooperative, panicked, or unfriendly, an auditor may conclude that they have something to hide and will look for it. The strategies below are designed to create a good first impression during an on-site audit.
- Prepare Your Paperwork: As noted above, auditors may request business records, information about worker housing, and payroll records. Moreover, you’ll be expected to separate payroll documents for domestic and H-2A workers. It’s useful to place copies of commonly requested certificates (water testing, certificates of occupancy, copies of your EIN, copies of driver’s licenses for all farm employees, copies of farm vehicle insurance and registration cards, etc.) in your audit file—the same file prepared for desk audits. If possible, scan hard copies of documents ahead of time to make retrieval faster and easier during an audit. If possible, set up payroll records in a way that allows you to separate information for domestic and H-2A workers. If you outsource payroll for your farm, notify the payroll service provider in advance that you may need separate payroll records for domestic and H-2A workers in the future.
- Conduct Self-Audit: The best way to avoid non-compliance is to conduct self-audits. This entails checking payroll, company, transportation, and housing records to ensure that the farm is compliant with all applicable program rules and has all necessary documents on file. This is something to do during the winter or other slower times on the farm. If gaps are discovered during the self-audit, you can retrieve records at your convenience—not when you’re working on a tight deadline. There’s nothing like the feeling of confidence that comes from knowing that your farm is compliant and all records are available due to a self-audit. This will be obvious to auditors.
- Prepare Workers for Interviews: Many H-2A workers hail from countries where people are wary of the government and government agents. They may be reluctant to speak with Wage & Hour Division inspectors, particularly if they don’t understand the purpose of the interviews. While understandable, hesitance can create suspicions that employees have been coached not to speak to auditors; auditors may conclude that the employer has something to hide. This problem can be avoided by advising employees—usually during onboarding–that on-site audits may occur and that inspectors may wish to talk to them. Workers should be encouraged to speak freely to investigators and answer questions truthfully.
- Appoint an Audit Representative: Every employer should appoint someone to be a “point person” who interacts with investigators during an on-site audit. This person will implement the farm’s plan for managing an audit: greet the investigators, obtain their business cards, offer a private meeting space for interviews, retrieve the company’s audit file during interviews, etc. Ideally, the farm representative will be someone with a calm, professional demeanor who stays cool under pressure. Because the audit representative may be absent when an audit occurs, employers may wish to appoint a secondary, backup audit representative.
- Set the Right Tone: The audit representative’s job is to set the right tone during the audit. This means being cooperative, calm, and professional with investigators. Learning that auditors have suddenly shown up can be upsetting. How you react can have a big impact on whether the audit goes well or badly for the farm. Investigators form initial impressions about compliance based largely on employer behavior: Were they angry or calm? Helpful or evasive? Did they order auditors off the farm or offer to show them around? Representatives who are belligerent and uncooperative raise suspicions that the employer has something to hide, which may prompt investigators to dig deeper for evidence of noncompliance.
- Speech and Conduct: Some employers may be tempted to tell auditors, “We take good care of all our H-2A employees!” While this is something to be proud of, it’s a mistake to state this to an auditor. On-site audits assess how employers treat all employees—both H-2A and domestic. If an auditor gets the idea that you’re prioritizing H-2A workers over domestic workers, they may dig deeper into domestic worker’s payroll records—and the penalties assessed for violating domestic worker rights are much higher than those assessed for violating H-2A worker’s rights. It’s important to instruct supervisors to emphasize that the farm takes care of all employees, both domestic and H-2A.
These strategies will put you in a better place when an audit occurs. The process will be less stressful and disruptive to normal operations if you’re prepared!
This article has been adapted from a webinar on H-2A audit preparedness hosted by Seso Labor, Inc. on March 6, 2024.
References:
Ross, Daniel, Schulte, Chris and Stefany, David (2024) “2024 Spring H-2A audit preparedness seminar.” Webinar hosted by Seso Labor, Inc., on March 6, 2024.
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The post A Guide to H-2A Audit Preparedness Part 2 of 2 appeared in Fruit Notes by the Lake Ontario Fruit Team.
