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New York Labor Department Audit — Ready to Meet the Auditor?

Surviving a NY Department of Labor Audit

Audit.Rip.Through.Newspaper.Dollar.Photo.Club.9.11.15.jpgOur Award Winning New York Department of Labor Attorney has counseled many small businesses in developing best practices and how to protect their interests during a Department of Labor Audit. Call our office for a confidential consultation if you have you received a notice from NY, which states:

Dear Employer: In accordance with Section 575 of the Unemployment Insurance (UI) Law, the NYS Department of Labor (DOL) conducts audits of employers to ensure compliance with the Law. This helps to protect the integrity of the Unemployment Insurance Trust Fund. Your account has been selected for an Examination. Please call me by January 10, 2016, to schedule an appointment. The Unemployment Insurance Division Auditor will visit your place of business and meet with you to discuss the purpose of the audit.

You should not ignore this notice and prepare to take appropriate action. If you ignore the notice and are deemed uncooperative, you may receive a subpoena compelling you to respond. If you ignore the subpoena, the DOL may issue its own findings based on its estimates and investigation. Depending on your circumstances, cooperation can be helpful. The notice (or subsequent subpoena) typically asks you to provide the following documentation and information:

  • General Ledger
  • Federal Income Tax Returns
  • Payroll records
  • Federal and State payroll tax returns such as Forms 941’s, 940’s, NYS-45, W-2’s, and W-3’s
  • Check Registers and Bank Statements
  • Records pertaining to services by freelancers or contractors
  • Documents showing off the books payments to workers
  • Founding documents such as a corporate minute book or related materials
  • Current Workers’ Compensation policy
Initial Steps to Consider


Step One: Contact an experienced employment law attorney learn your legal obligations, best practices and to understand your potential exposure. It is important to get counsel from the start because the DOL audit can have domino like consequences in other forums or proceedings. An admission or misstep in this process can lead to further examination, penalties or fines. This is a serious legal proceeding and should be treated as such.

Step Two: Gather Your Documents – Your records can be your friend and help in the defense of the audit. The audit period will typically go back 3 years. If you do not have any of the documents,

Step Three: Understand the process and its impact on your business model – If your business relies on using many independent contractors, you should determine if you have properly classified your workers. A focal point of the audit will be this very issue. If you misclassified employees as independent contractors, the state will be seeking unpaid payroll taxes and proper treatment going forward. The payroll taxes can be a problem but the bigger concern may be the effect on your business going forward. Many businesses operate on thin margins with fierce competition and the added employee-related expenses can affect the livelihood of a business. Many business owners are under the mistaken impression that a signed independent contractor agreement will protect them in absolute terms in an audit. That is not the case. Furthermore, well meaning intentions are irrelevant – business owners with the best intentions can be penalized. It is advisable to conduct your own analysis and determine whether the workers were properly classified. There is a multi-factor test to examine whether a worker is a contractor or an employee. While no one factor is dispositive, the agency will focus on the type of work performed by the worker and the amount of supervision and control.

Know.Your.Rights.Dollar.Photo.Club.3.9.15.jpgOur office can conduct an analysis for you and determine your exposure, if any, and the potential impact on your business. Contact our office to learn your rights and options.

Disclaimer: Thank you for visiting our Blog. This blog provides general information and thoughts about various employment law issues primarily in the New York Tri-State area and occasionally in other areas. You are welcome to read the posts. However, do not construe any content on this blog as legal advice or the creation of an attorney-client relationship. Again, we provide the content only for informational purposes. You should not make decisions based information on our blog since the application of the law depends on the facts and each situation may be different. In addition, the law in most jurisdictions is different and changes constantly and we make no representations that any information on our blog has been updated. The Blog should not be used as a substitute for competent legal advice from an experienced attorney in your state or jurisdiction. From time to time, a blog post may discuss a legal case – please note that the post may not contain the most to update information on the case as developments may have occurred after it was created.