Wage and hour audit

Definition

A federal or state look at how a business paid the people who work in it.

Why It Matters

It is the exposure most likely to be sitting in a business that looks clean, because the mistakes that cause it are ordinary. A manager paid a salary who does not meet the test for it. A technician whose drive time between jobs was never counted. A tip pool a supervisor shares in, or a bonus left out of the overtime rate. None of that shows in the numbers a buyer is shown, and the back pay is counted in years. Two things make it a buyer's problem and not only the seller's. The people who could complain stay on after closing, and in an asset deal a buyer who keeps the same workforce doing the same work under the same practices has usually bought the practice along with the crew. Read the pay records for the roles the seller treats as exempt, and read them against what those people actually do.

In numbers: Two managers misclassified for three years at ten unpaid overtime hours a week is roughly 3,000 hours, and at a $25 half-time premium that is $75,000 before penalties.