Labor Audit Frustrations

Part of my job includes attending audits with clients. They come in all different names and scopes depending on the government agency involved. Sometimes they are simply random selections of a business to review its books and records to see if it is in compliance with the agency’s rules and regulations. For example, the New York Labor Department will routinely look at new businesses in the restaurant and hospitality industry for unemployment insurance payment compliance. It is no secret that the restaurant industry is known for off-the-books workers.

However, a review of the books and records by the Liquor Authority is almost certainly the result of a complaint that opened an investigation of the licensee. No matter what the situation, anyone looking at a small business’ books and records is a tension filled experience for the business owner.

In a recent audit, I felt nothing but frustration for my client. This was a case where the law doesn’t always seem to make sense. Small businesses in the food and beverage industry can rarely afford to offer health insurance and 401k plans. But many employers want to reward workers in small affordable ways. In this case, this client gave a birthday gift to an employee (say, a bouquet of flowers) and always offered free lunch to employees.

The auditor pointed out that she should have included the cost of the gift in the employee’s salary. Wow!  If you give an employee a bouquet of flowers, they will need to pay income tax on the value of the flowers. (Won’t the employee be happy to learn that tidbit.)

The auditor also pointed out that she could not offer free lunch to her employees. She must charge them a statutory meal charge of $2.30. That defeats the purpose of this gesture of good will and gratitude; a small thank you for a job well done.

Even when you want to be nice to employees, the government has to have a rule that makes it hard. Ugh!

I’ll admit: on busy days where my staff is giving 110%, I buy lunch for everyone. On a birthday or when an employee leaves, we sometimes go to lunch at a local restaurant. I cannot imagine telling my employees I had to charge them $2.30 to attend our morale booster meal. Kind of defeats the purpose of the gesture. I’ll still buy my staff flowers once in a while or offer a gift card to reward those going “above and beyond.” Some rules are made to be broken. I’ll accept my penalty and spanking. I’ll defend my clients for trying to be humane employers. Paying employees under the table is a no-no. Employers know they are breaking the law and deserve the associated penalties. But I’ll fight for no penalties and a warning letter on these issues where neither the employee nor the government were underpaid revenues it deserved.