Following a significant increase in funding and staffing this year, the Department of Labor is preparing for an initiative that will target hotels, motels and resorts in the United States. DOL has concluded that the hospitality industry is a "high-risk industry" for violations of the Fair Labor Standards Act and certain immigration laws. Accordingly, on October 1, 2010, the agency will begin auditing hotel employers for violations of overtime rules, minimum wage, classification of exempt and non-exempt positions and requirements for workers holding H-2B visas.

During a wage/hour audit, a DOL investigator typically reviews all personnel time records and payroll records to determine whether there has been compliance with all aspects of the FLSA for all current and former employees on the employer's payroll for the past two to three years. The investigator is also likely to review immigration records for employees with special visa status.

If the audit reveals violations of federal law, DOL will require that the employer take action to correct the violations. Corrective actions typically involve making payments towards back wages found to be owed during the audit. In some circumstances, DOL may seek an injunction to restrain the employer from committing future violations and may impose civil penalties of up to $1,000 per employee. In rare cases involving known, willful actions, criminal prosecution may occur. DOL may refer potential violations of immigration records to the Department of Homeland Security. 

Hotel employers should act now to prepare for DOL's initiative. Prior to October 1st, employers should perform self-audits to review their employment policies, labor agreements, hiring practices and record keeping procedures to verify that they are in compliance with the federal regulations. Self-audits will help employers accurately assess potential exposure and allow them to take proactive steps to remedy any violations in advance of a DOL audit. Employers should consider engaging legal counsel during such audits to help assert that the audit results are privileged information. Additionally, employers should develop and implement strategies and procedures in the event of an audit request.