Imported from RobertHH-IS/legalcode-skills (skills/legalcode-wage-hour-compliance-audit/SKILL.md). Install upstream with npx skills add RobertHH-IS/legalcode-skills --skill legalcode-wage-hour-compliance-audit. Copyright stays with the author.

Using this skill

Before following the workflow, read runtime and evidence requirements. They govern current tool use and source verification when older examples below differ from the connected runtime.

Legalcode Wage and Hour Compliance Audit

Disclaimer: This skill provides a framework for AI-assisted wage and hour compliance analysis. It does not constitute legal advice. All outputs should be reviewed by a qualified employment attorney licensed in the relevant jurisdiction(s) before any remediation, litigation, or regulatory filing. Federal and state wage and hour laws change frequently — verify current salary thresholds, minimum wage rates, and regulatory guidance before relying on any figure cited here. Statutory and case law references cited from memory carry hallucination risk — verify against authoritative DOL, WHD, and state labor agency sources before relying on them.

Purpose and Scope

This skill conducts a structured audit of an organization's wage and hour compliance posture under the Fair Labor Standards Act (FLSA), 29 U.S.C. §§ 201–219, applicable Department of Labor (WHD) regulations (29 CFR Parts 516, 531, 570, 778, 785), and state wage and hour laws.

Covers:

• Exempt vs. non-exempt classification under all six white-collar exemption categories (executive, administrative, professional, computer, outside sales, HCE) — duties tests and salary basis/level
• Salary threshold compliance with the operative 2020 DOL threshold ($684/week) and the status of the vacated 2024 rule
• Overtime calculation methodology — regular rate of pay, inclusions/exclusions, fluctuating workweek, piece rate, blended/weighted rate
• Meal and rest break compliance — federal framework plus state-specific requirements (CA, NY, WA, CO, IL, OR, and others)
• Timekeeping adequacy — records under 29 CFR Part 516, off-the-clock risk, continuous workday doctrine, remote work exposures
• Tip credit and tip pooling — 29 CFR Part 531, 2018 CAA amendments, 2021 DOL final rule on dual jobs, back-of-house inclusion
• Child labor compliance — 29 CFR Part 570 hours restrictions and prohibited occupations
• Predictive/fair scheduling obligations — Oregon statewide, plus NYC, Chicago, Seattle, LA, Philadelphia, San Francisco, and other city/county ordinances
• Pay stub and record-keeping requirements — California Labor Code § 226, NY Wage Theft Prevention Act, FLSA 29 CFR Part 516
• Exposure quantification — back pay formulas, liquidated damages, statutes of limitations, PAGA, class and collective action risk

Does not:

• Provide legal advice or replace qualified employment counsel
• Draft employment agreements, arbitration clauses, or settlement agreements
• Conduct prevailing wage / Davis-Bacon / Service Contract Act analysis (government contract labor standards — see a separate skill if available)
• Perform payroll tax analysis (FICA, withholding — a tax compliance domain)
• Apply outside the United States; for UK/EU wage matters see jurisdiction-specific skills
• Substitute for WHD audit response strategy — that is litigation/regulatory support work

Related skills:

• legalcode-independent-contractor-classification — worker classification IC vs. employee
• legalcode-employment-agreement-review — employment contract clause review
• legalcode-employee-handbook-review — handbook policy compliance review
• legalcode-non-compete-enforceability — restrictive covenant analysis

Jurisdiction and Governing Law

This skill is US-centric with a federal-floor / state-ceiling architecture:

• Federal baseline: FLSA sets minimum requirements. States and localities may (and often do) impose stricter requirements — higher minimum wages, daily overtime, mandatory breaks, scheduling notice — that preempt the FLSA floor.
• Multi-jurisdiction analysis: Most employers must comply with the law most protective of the employee. This skill identifies the applicable state law for each audit area.

[JURISDICTION-SPECIFIC] States with the most significant additional requirements:

• California: Daily overtime (Labor Code § 510), IWC Wage Orders (17 industry-specific orders), mandatory meal and rest breaks (Brinker Restaurant Corp. v. Superior Court, 53 Cal. 4th 1004 (2012)), AB 1228 minimum wage for fast food ($20/hr effective Apr 2024), PAGA exposure, pay stub requirements (Labor Code § 226)
• New York: NY Minimum Wage Act, WTPA pay notice requirements, spread-of-hours premium, call-in pay rules
• Colorado: COMPS Order No. 38 — daily overtime (over 12 hrs/day or 12 consecutive hrs), mandatory rest breaks
• Alaska: Daily overtime (over 8 hrs/day)
• Washington: Rest period requirements, paid sick leave interplay
• Oregon: Statewide predictive scheduling (ORS 653.450 et seq.)
• Illinois: Chicago Fair Workweek Ordinance, One Day Rest in Seven Act

[JURISDICTION-SPECIFIC] For each state where the employer operates, identify:

• State minimum wage (and any locality minimum wages)
• Whether the state has daily overtime
• State meal/rest break requirements
• State-specific salary basis tests for exemptions
• State pay stub and record-keeping requirements
• Predictive scheduling ordinances if in a covered city/county

Interactive Clarification

This skill uses interactive clarification at key decision points. Rather than assuming context, the workflow pauses and asks when:

• The answer would change the direction or scope of the analysis
• The employer's industry, size, or operating geography creates audit forks
• Multiple valid compliance approaches exist and employer preferences matter
• Incomplete records or ambiguous facts create forks

When you reach a ⟁ CLARIFY block, ask the user before proceeding — do not silently assume defaults. Use the harness's structured question tool when one is available:

• Claude Code / Agent SDK: invoke the AskUserQuestion tool. Limits: 1–4 questions per call, 2–4 options each, header ≤ 12 characters. Pass the CLARIFY options as the options array.
• OpenAI Codex CLI: invoke ask_user_question (runtime) or, in plan mode, request_user_input. Pass the CLARIFY options as choices.
• No structured tool available (other harnesses, CI, headless mode without a canUseTool callback): emit the CLARIFY questions as numbered plain text and stop until the user replies. Do not proceed with assumed answers.

Skip any CLARIFY question the user has already answered in the initial prompt or prior conversation. When you proceed with partial context, state every assumption explicitly so the user can correct it.

Workflow

Step 1: Accept Input Materials

Accept the audit inputs in any of these formats:

• Employee census data: Job titles, classifications (exempt/non-exempt), pay rates, FLSA exemption basis claimed, FLSA status, pay period, geographic location
• Payroll records: Sample pay stubs, overtime calculations, regular rate computations
• Job descriptions: Written duties for each position being audited
• Policies: Timekeeping policy, off-the-clock policy, meal/rest break policy, tip policy, scheduling policy
• Prior audit findings or WHD investigation results
• Narrative description: The user describes the workforce, industry, and known risk areas

If no materials are provided, prompt the user to supply what is available and note that analysis without records will be limited to identifying structural risks.

Step 2: Gather Audit Context

⟁ CLARIFY — Before beginning, gather the following context:

1. Industry and workforce type:

   • Options: Retail, Food service / hospitality, Healthcare / home care, Technology / professional services, Staffing / temp workers, Manufacturing / warehouse, Construction, Transportation, Other
   • Why this matters: Industry determines which IWC Wage Order applies in California, whether tip credit is available, whether DOT motor carrier exemptions apply, and what prohibited hazardous work applies to minors.

2. Operating geography (which states and cities does the employer operate in?):

   • Why this matters: Determines which state and local minimum wages, daily overtime rules, break requirements, and predictive scheduling ordinances apply.

3. Workforce composition:

   • Options: Primarily hourly non-exempt, Primarily salaried exempt, Mixed hourly and salaried, Tipped employees present, Piece-rate workers present, Remote workers
   • Why this matters: Tip credit analysis, fluctuating workweek applicability, remote work timekeeping risks, and piece-rate overtime methodology each depend on workforce composition.

4. Audit scope:

   • Options: Full audit across all 9 categories, Priority audit (specific risk areas), Pre-litigation exposure quantification, WHD investigation response preparation, Pre-M&A due diligence
   • Why this matters: Scopes the depth of analysis and the output format.

5. Known risk areas or prior violations:

   • Free text. Prompt: "Have there been prior WHD investigations, employee complaints, litigation, or internal audit findings? If so, describe the issues."
   • Why this matters: Prior violations create willful violation risk (3-year SOL and double liquidated damages) and escalate exposure.

6. Time period for audit:

   • Default: 3 years (covers both the standard 2-year and willful 3-year SOL)
   • Why this matters: Back pay exposure window is bounded by the applicable SOL.

Proceed with reasonable defaults and state them explicitly if the user provides partial context.

Step 3: Gather Jurisdiction-Relevant Legal Authority

Research process:

1. Identify all states and localities where the employer has employees. For each:

   • Current minimum wage rate (check for any locality rates higher than state)
   • Whether state has daily overtime requirements
   • State meal and rest break law
   • State-specific salary basis/level tests (some states have higher thresholds)
   • Predictive scheduling ordinances if in a covered jurisdiction

2. Use legalcode-mcp (if connected) to retrieve:

   • Current FLSA salary thresholds (confirm operative threshold post-Texas vacatur)
   • Current state minimum wage rates for relevant states
   • WHD opinion letters and field assistance bulletins relevant to the audit topics
   • Recent WHD enforcement statistics for the employer's industry

3. Save research results to /tmp/legalcode-wage-hour-authority.md:

   # Legal Authority Reference — Wage and Hour Audit
   
   ## Date: [date]
   
   ### Operative FLSA Thresholds
   
   - Standard exemption salary basis: $[amount]/week ($[annualized])
   - HCE threshold: $[amount]/year
   - Status of 2024 DOL rule: [Vacated Nov. 15, 2024 — Texas E.D. — operative rule is 2020 rule]
   
   ### State Minimum Wages (as of [date])
   
   - [State]: $[amount]/hour [effective date] [any locality overrides]
   
   ### State Overtime Rules
   
   - [State]: [daily overtime threshold, if any]
   
   ### State Break Requirements
   
   - [State]: [meal break], [rest break]
   
   ### Predictive Scheduling Jurisdictions
   
   - [Jurisdiction]: [advance notice], [industries covered], [predictability pay]

If legalcode-mcp is not connected:

• Proceed with general knowledge; mark all threshold figures with [VERIFY CURRENT]
• Note in Glass Box audit trail: legalcode_mcp: "Not connected — verify all thresholds"
• Cross-reference DOL WHD website (dol.gov/agencies/whd) before relying on any figure

Step 4: Exemption Classification Audit

This is the highest-stakes audit area. FLSA exemption misclassification drives the largest back pay exposure and is the most common WHD focus.

⟁ CLARIFY — For each exempt position being audited:

• "Does a written job description exist? Can you provide it?"
• "How does the employee actually spend their time day-to-day (vs. what the job description says)?" [Duties test is based on actual work, not job title or description]

4a. Salary Basis Test

For all white-collar exemptions except outside sales, the employee must be paid on a salary basis (29 CFR § 541.602):

Salary basis requirements:

• Paid a predetermined, fixed amount each pay period (not reduced based on quality or quantity of work)
• Amount is at least $684/week ($35,568/year) — the current operative threshold after the November 15, 2024 Texas E.D. vacatur of the 2024 DOL Final Rule
  • [VERIFY CURRENT] The 2024 DOL Final Rule (84 Fed. Reg. 51230) raised the threshold to $844/week effective July 1, 2024 and $1,128/week HCE effective Jan 1, 2025. The entire 2024 Final Rule was vacated by State of Texas v. DOL, E.D. Tex. (Nov. 15, 2024). The operative threshold reverts to the 2020 rule: $684/week / $35,568/year standard; $107,432/year HCE.
• Salary not subject to impermissible deductions (check payroll records for deductions for partial-day absences, disciplinary suspensions less than a week, etc.)
• If deductions have occurred: determine whether they constitute a "window of correction" situation or a loss of exemption for the affected period

[JURISDICTION-SPECIFIC] Several states set higher salary thresholds:

• California: $1,320/week ($68,640/year) as of Jan 1, 2024; $1,560/week ($81,120) for computer software employees under Labor Code § 515.5 [VERIFY CURRENT]
• New York: Varies by region and employer size — check NYCRR Part 141 [VERIFY CURRENT]
• Alaska: $684+/week [VERIFY for any state updates]
• Colorado: Check COMPS Order No. 38 for current threshold [VERIFY CURRENT]

Common salary basis violations:

4b. Executive Exemption Duties Test (29 CFR § 541.100)

An executive exempt employee must:

• Have a primary duty of managing the enterprise or a department/subdivision
• Customarily and regularly direct the work of at least 2 full-time employees (or equivalent — can be FTE aggregate)
• Have authority to hire/fire OR whose recommendations as to hiring, firing, advancement, promotion, or other status change are given particular weight

Primary duty analysis (29 CFR § 541.700):

• Primary duty = the "principal, main, major or most important duty" — not merely performed most often
• Consider: relative importance, time spent (50%+ is "strong indicator" but not required), relative freedom from supervision, relationship between salary and wages paid to others

Common executive exemption misclassification patterns:

4c. Administrative Exemption Duties Test (29 CFR § 541.200)

An administrative exempt employee must:

• Have a primary duty of office/non-manual work directly related to management or general business operations of the employer or the employer's customers
• Primary duty includes the exercise of discretion and independent judgment with respect to matters of significance

Discretion and independent judgment analysis:

• Must compare alternatives and make a choice — not merely apply established techniques or procedures
• Must relate to "matters of significance," not routine clerical or ministerial tasks
• Distinguishable from skilled work (skilled technician who applies expertise but doesn't exercise judgment about significant matters)

Common administrative exemption misclassification patterns:

4d. Learned Professional Exemption (29 CFR § 541.301)

Requires:

• Primary duty is work requiring advanced knowledge in a field of science or learning
• Advanced knowledge customarily acquired by a prolonged course of specialized intellectual instruction (degree or equivalent)
• Work must be predominantly intellectual as opposed to routine/mechanical

[JURISDICTION-SPECIFIC] Note: Registered nurses, dental hygienists, and licensed practical nurses may qualify depending on state licensure and degree requirements. Paralegals generally do not qualify (no advanced degree requirement). [VERIFY]

4e. Creative Professional Exemption (29 CFR § 541.302)

Requires:

• Primary duty is work requiring invention, imagination, originality, or talent
• In a recognized field of artistic or creative endeavor

Note: Journalism — routine reporting does NOT qualify; investigative/analytical work may.

4f. Computer Employee Exemption (29 CFR § 541.400)

Requires:

• Salary basis: $684/week or hourly rate of at least $27.63/hour (computer exemption uniquely allows hourly payment — 29 U.S.C. § 213(a)(17))
• Primary duty in one of: systems analysis, design/development/creation of computer programs/systems, machine operating, or related work requiring same level of skill

Common computer exemption misclassification patterns:

[JURISDICTION-SPECIFIC] California has a separate computer software employee exemption (Labor Code § 515.5) requiring $53.20/hour [VERIFY CURRENT 2024/2025 rate] and specific duties requirements. Narrower than federal.

4g. Outside Sales Exemption (29 CFR § 541.500)

Requires:

• Primary duty is making sales or obtaining orders or contracts for services
• Customarily and regularly engaged away from employer's place of business (i.e., at customers' locations)
• No salary requirement — outside sales exemption has no salary basis or level test

Common outside sales misclassification patterns:

4h. Highly Compensated Employee Exemption (29 CFR § 541.601)

Requires:

• Total annual compensation of at least $107,432 (post-vacatur of 2024 rule; the vacated 2024 rule would have set $132,964/year then $151,164/year) [VERIFY CURRENT]
• Receives at least $684/week on salary or fee basis
• Customarily and regularly performs any one or more of the duties of an exempt executive, administrative, or professional employee

Note: Lower duties bar — does not need to meet the primary duty test for the underlying exemption. Requires only customary and regular performance of any one qualifying duty.

4i. Special Exemption Categories (Industry-Specific)

⟁ CLARIFY — Ask whether any of these apply given the employer's industry:

Step 5: Overtime Calculation Methodology Audit

5a. Regular Rate of Pay Analysis (29 CFR Part 778)

The regular rate is the foundation of overtime calculations. Errors here multiply across all overtime pay periods.

Regular rate = Total remuneration / Total hours worked in workweek (29 CFR § 778.109)

Must be INCLUDED in regular rate:

May be EXCLUDED from regular rate:

⟁ CLARIFY — If any of the following exist, ask for details before classifying:

• "Does the employer pay any bonuses, commissions, or incentive pay?"
• "Are there any shift differentials, hazard pay, or premium rates?"
• "Are there expense reimbursements or per diems — are they tied to actual expenses?"

5b. Overtime Premium Calculation

For non-exempt hourly employees:

Overtime rate = Regular rate × 1.5
Overtime pay = Overtime rate × OT hours

For non-exempt salaried (fluctuating workweek — 29 CFR § 778.114):

• Requirements: (1) salary covers all hours worked in week; (2) hours genuinely fluctuate; (3) employer and employee have clear mutual understanding; (4) salary sufficient for minimum wage at maximum expected hours
• Overtime premium = Regular rate × 0.5 × OT hours (half-time method)
• [JURISDICTION-SPECIFIC] Several states do not permit fluctuating workweek — California expressly prohibits it. [VERIFY state-by-state]

For piece-rate employees:

• Regular rate = (piece-rate earnings + other compensation) / total hours worked
• Overtime = Regular rate × 0.5 × OT hours (if piece-rate earnings already compensate for all hours worked at straight time)

For employees working at two or more rates (29 CFR § 778.115):

• Weighted average method (default): Regular rate = total earnings at all rates / total hours worked
• Rate in effect method (by agreement): OT rate tied to rate in effect when OT occurs — must be predetermined agreement

Common overtime calculation errors:

5c. Workweek Definition Audit

• Is a fixed 7-consecutive-day workweek established? (29 CFR § 778.105)
• Is the workweek documented and communicated to employees?
• Has the workweek been changed? (Must have FLSA-compliant purpose, not to avoid overtime liability — Seymore v. Metro. Life Ins. Co., 932 F.3d 400 (6th Cir. 2019) [VERIFY])
• Are pay periods longer than weekly? (Must still calculate OT on workweek basis)

Step 6: Meal and Rest Break Compliance Audit

6a. Federal Framework

FLSA does not require meal or rest breaks but regulates how breaks must be compensated:

• Short breaks (5–20 minutes): Must be counted as compensable time — employer cannot deduct from hours worked (29 CFR § 785.18)
• Bona fide meal periods (30+ minutes): Not compensable if employee is completely relieved of duties — must truly be duty-free (29 CFR § 785.19)
  • If employee is required to remain at work site or is frequently interrupted → compensable working time

6b. State-Specific Break Requirements

⟁ CLARIFY — Confirm which states the employer operates in, then apply state rules:

California (most protective — IWC Wage Orders):

• Meal break: 30-minute unpaid meal period for shifts > 5 hours; second 30-min meal for shifts > 10 hours (may waive second meal by mutual consent for shifts ≤ 12 hrs)
• Rest break: 10-minute net paid rest per 4 hours worked (or major fraction thereof); no rest required for shifts < 3.5 hours
• Premium pay for missed breaks: 1 hour of pay at regular rate per missed meal or rest break (Donohue v. AMN Services, 11 Cal. 5th 58 (2021) [VERIFY])
• Brinker Restaurant Corp. v. Superior Court, 53 Cal. 4th 1004 (2012): Employer must "provide" breaks — relieve of duty — but need not "ensure" they are taken [VERIFY]

New York:

• 30-minute meal break for shifts > 6 hours between 11 am and 2 pm (factory workers: 60 minutes)
• Noontime meal break additional to any other

Colorado (COMPS Order No. 38):

• 30-minute unpaid meal break for shifts of 5+ consecutive hours
• 10-minute paid rest for every 4 hours of work

Washington:

• 30-minute meal break for shifts > 5 hours
• 10-minute paid rest for every 4 hours of work

Oregon:

• Meals: 30-minute unpaid for shifts ≥ 6 hours (or 20-min paid if work is uninterruptable)
• Rest: 10-minute paid per 4 hours

Illinois:

• 20-minute meal break for shifts > 7.5 hours (One Day Rest in Seven Act, 820 ILCS 140)

Common meal and rest break violations:

Step 7: Timekeeping Adequacy Audit

7a. FLSA Recordkeeping Requirements (29 CFR Part 516)

Every employer must maintain for 3 years (payroll records, collective bargaining agreements, sales and purchase records) or 2 years (supplementary basic records, time cards, wage rate tables, work schedules):

[JURISDICTION-SPECIFIC] California requires longer retention in some cases — Labor Code § 1174 requires 3-year retention. New York WTPA requires records for 6 years.

7b. Off-the-Clock Work Audit

The continuous workday doctrine requires compensation for all time from the first principal activity to the last (IBP, Inc. v. Alvarez, 546 U.S. 21 (2005) [VERIFY]):

Pre/post-shift activities:

• Integrity Staffing Solutions v. Busk, 574 U.S. 27 (2014): Security screenings held not compensable because not integral/indispensable to principal work [VERIFY]
• Donning/doffing protective gear, specialized uniforms → may be compensable
• Boot-up time for mandatory work-computer logins → compensable if required (WHD opinion)

Remote work risks:

• Employees working outside scheduled hours without authorization
• Late-night emails, after-hours messaging on company platforms
• Employer "knows or should know" standard — actual or constructive knowledge (Elwell v. Univ. Hospitals Home Care Servs., 276 F.3d 832 (6th Cir. 2002) [VERIFY])

Common timekeeping violations:

Step 8: Tip Credit and Tip Pooling Audit

(Apply only if the employer employs tipped employees or takes a tip credit)

⟁ CLARIFY — "Does the employer take a tip credit (pay tipped employees less than the standard minimum wage)? If yes, which states?"

8a. FLSA Tip Credit Mechanics (29 CFR Part 531)

• Federal minimum wage: $7.25/hour; federal tipped minimum wage: $2.13/hour
• Maximum tip credit: $5.12/hour (must notify employees before taking credit)
• Tip credit condition: Employee must retain all tips (except valid tip pools)
• If tips + cash wage < minimum wage → employer must make up the difference

Tip credit prerequisites:

• Employer provided notice to employees about tip credit (amount, type of work, tip retention right, that tip credit = wage supplement only)
• Employee's actual tips + cash wage ≥ minimum wage for every workweek
• Tipped employee works in a "tipped occupation" (regularly receives > $30/month in tips)

8b. Dual Jobs Rule and Tip Credit

Current DOL approach reverts to the "dual jobs" analysis following the September 2021 Final Rule that eliminated the 80/20 rule, subsequently reinforced by 2023 litigation developments [VERIFY current status]:

The current framework:

• Employer may take tip credit for time spent on duties related to the tipped occupation (related side work, setup, pre/post-shift tasks related to tipped work)
• Employer may not take tip credit for work in a separate, non-tipped occupation (e.g., a server who also works as a cook for part of their shift)
• [VERIFY] Confirm current Fifth Circuit and DOL positions on the dual jobs rule given continued litigation

8c. Tip Pooling Rules (Post-2018 CAA)

The 2018 Consolidated Appropriations Act (CAA) and the 2021 DOL Final Rule established:

Common tip credit and pooling violations:

Step 9: Child Labor Compliance Audit

(Apply if the employer employs or may employ workers under 18)

⟁ CLARIFY — "Does the employer employ any workers under 18? What is the youngest age? Are they employed in any manufacturing, warehouse, or hazardous environments?"

9a. Age and Hours Restrictions (29 CFR Part 570)

Employees 14–15 years old:

• Hours comply: Max 3 hrs/day on school days, 8 hrs/day on non-school days
• Hours comply: Max 18 hrs/week during school, 40 hrs/week outside school
• Hours comply: Work performed only between 7 am – 7 pm (7 am – 9 pm June 1–Labor Day)
• Work limited to permitted occupations (office, retail sales, food service excluding hazardous equipment, etc.)

Employees 16–17 years old:

• No restriction on hours (federal law)
• Not employed in 17 Hazardous Occupations Orders (HOs) (29 CFR § 570.50–.68): Manufacturing explosives, mining, logging, power-driven woodworking machines, wrecking demolition, roofing, excavation, power-driven hoisting apparatus, power-driven circular saws/band saws, power-driven metal forming, slaughtering/meatpacking, power-driven bakery machines, power-driven paper products machines, manufacturing brick/tile, operating power-driven elevators, coal mining, forest firefighting

[JURISDICTION-SPECIFIC] Many states have stricter requirements — California, New York, and others restrict hours for 16–17 year olds and have additional prohibited occupations.

9b. 2023–2024 DOL Enforcement Context

The DOL significantly increased child labor enforcement:

• FY 2023: 955 employers cited; approximately 5,800 children identified in violations
• Focus on exploitative conditions, undocumented minor workers, hazardous environment placements
• Expanded use of civil monetary penalties (up to $15,625 per violation under 29 CFR Part 579)
• [VERIFY] Check current civil monetary penalty amounts — subject to annual inflation adjustments

Common child labor violations:

Step 10: Predictive Scheduling Compliance Audit

(Apply if the employer operates in any covered jurisdiction)

⟁ CLARIFY — Confirm exact operating locations to identify applicable ordinances.

Covered jurisdictions as of early 2026 [VERIFY CURRENT for amendments]:

[VERIFY CURRENT] This table was compiled as of early 2026. Ordinances are frequently amended; confirm effective dates, industry scopes, and employer size thresholds.

Common predictive scheduling violations:

Step 11: Pay Stub and Record-Keeping Compliance Audit

11a. Federal FLSA Recordkeeping (29 CFR Part 516)

(Reviewed in Step 7a — cross-reference for completeness)

Check that all required records are:

• Complete (all 14 required data elements present)
• Accessible and organized for WHD review
• Retained for the required periods (2–3 years as above)

11b. State Pay Stub Requirements

California (Labor Code § 226 — most stringent):

Required on every wage statement:

1. Gross wages earned
2. Total hours worked (exempt employees excluded only from hours worked, not from other required items)
3. Number of piece-rate units earned and applicable rate (if applicable)
4. All deductions
5. Net wages earned
6. Dates of pay period
7. Employee name and last four digits of SSN or employee ID
8. Employer name and address
9. All applicable hourly rates and corresponding hours worked (including any different rates for overtime, double time, etc.)

Violation: $50 per employee per pay period for initial violations; $100 per pay period for subsequent violations; up to $4,000 per employee aggregate + PAGA exposure.

New York (NY Labor Law Art. 6 — WTPA):

• Wage statement: regular rate, OT rate, regular hours, OT hours, gross wages, deductions, net wages, dates of pay period, employer name/address/phone
• Annual written notice of wage rate (at hiring and any change)

Texas (Texas Payday Law):

• Itemized pay stub showing earnings and deductions [VERIFY]
• No specific itemization requirement at federal level beyond FLSA records

[JURISDICTION-SPECIFIC] For all other states: identify the specific pay stub statute and enumerate required elements.

Severity Classification System

Apply one of three classifications to each finding:

COMPLIANT

Definition: Practice meets all applicable federal and state requirements without any identified risk. Response: Note for audit record. No remediation required.

AT-RISK

Any one of:

• Practice meets a technical requirement but creates meaningful litigation or WHD audit risk given current enforcement trends
• Insufficient documentation to verify compliance
• Practice acceptable under federal law but may violate a state-specific rule (confirm state applicability)
• Ambiguous fact pattern where reasonable classification is difficult — requires legal review before confirmation

Response: Flag for legal review. Implement documentation improvements. Monitor for regulatory developments. Estimate contingent exposure.

VIOLATION

Any one of:

• Clear failure to comply with a specific FLSA or applicable state wage and hour requirement
• Incorrect classification that would result in unpaid overtime or minimum wage liability
• Missing required records, pay stub elements, or advance schedule notice in covered jurisdiction
• Regulatory requirement not being met — regardless of whether a claim has been filed

Response: Immediate remediation. Calculate back pay exposure. Implement policy and system changes. Evaluate voluntary disclosure vs. defensive posture.

Severity Tiers Within Classification

For VIOLATION findings, apply a priority tier:

Exposure Quantification Framework

For each VIOLATION finding, calculate exposure using the following framework:

Back Pay Calculation

For hourly non-exempt overtime underpayment:
  Back pay = Underpaid overtime premium per week × Affected weeks × Affected employees

  Where: Underpaid OT premium = (Correct regular rate × 1.5 × OT hours)
                                 - (Actual OT rate × OT hours)

For exempt misclassification:
  Back pay = Actual overtime hours worked × (Regular rate × 0.5 or 1.5 depending on method)

  Where: Regular rate = Total compensation / Total hours worked
  And: OT method = Half-time (fluctuating) or time-and-a-half
  Conservative approach: Use 1.5× on all OT hours until FWW agreement is established

Liquidated Damages

Under 29 U.S.C. § 216(b): Equal amount of back pay as liquidated damages, unless the employer demonstrates good faith and reasonable grounds for believing no violation occurred (29 U.S.C. § 260 — court discretion).

Practical approach: Budget 2× back pay as conservative exposure estimate (back pay + equal liquidated damages).

Note: The Trump DOL has signaled reduced emphasis on liquidated damages in WHD investigations [VERIFY current DOL enforcement policy as of audit date].

Statutes of Limitations

[JURISDICTION-SPECIFIC] State SOLs may be longer:

• California: 3 years for California Labor Code claims (CCP § 338); PAGA: 1 year for filing LWDA notice + 65 days before filing suit
• New York: 6 years for NY Labor Law violations
• New Jersey: 6 years
• Use the longer SOL when both federal and state claims apply

Class and Collective Action Exposure

• FLSA collective action (§ 216(b)): Opt-in mechanism; employees with similar situations to the named plaintiff
• State class action (Rule 23 or state equivalent): Opt-out; typically broader reach
• PAGA (California): Civil penalty action on behalf of LWDA; no class certification required; penalties flow primarily to LWDA (75%) with 25% to aggrieved employees

PAGA penalties [VERIFY current amounts post-2024 PAGA reforms]:

• Per pay period per aggrieved employee: $100 (initial) / $200 (subsequent)
• 2024 PAGA reform (SB 92, effective July 1, 2024): Caps on penalties, cure mechanism, increased LWDA involvement [VERIFY current penalty cap and cure provisions]

Exposure Estimate Template

For each VIOLATION finding, complete:

Finding: [description]
Affected population: [number of employees]
Average hours of underpayment per week: [hours]
Average regular rate: $[rate]/hour
Back pay per employee per week: $[calculation]
Audit period weeks: [weeks] ([SOL period] × 52)
Total estimated back pay exposure: $[total]
Liquidated damages (1× back pay): $[total]
Attorney fees and costs (estimate): $[estimate]
State penalties (if applicable): $[estimate]
TOTAL ESTIMATED EXPOSURE: $[grand total]
Confidence: [HIGH / MEDIUM / LOW]
Note: [assumptions, limitations, factors that could increase or decrease exposure]

Prioritization Framework

Prioritize findings as follows:

Citation Quality Gates

Run these 5 gates silently before delivering audit output. If any gate fails, revise before delivering.

Truncated - read the full file at https://github.com/RobertHH-IS/legalcode-skills/blob/e8c1f7c1eccab8c5ed48bf8363605e8033cb549c/skills/legalcode-wage-hour-compliance-audit/SKILL.md.