The Fair Labor Standards Act (FLSA) sets the standards for minimum wage, overtime, recordkeeping, and employee classification. While the FLSA doesn’t require routine government filings, it does require employers to maintain accurate historical records that demonstrate compliance—sometimes going back several years.
Each year, the Department of Labor’s Wage and Hour Division (WHD) conducts approximately 20,000 to 30,000 investigations, which often include wage and hour audits. These audits can be triggered by employee complaints, misclassification concerns, or other compliance issues, meaning that many organizations may face review at any given time.
For organizations that have switched payroll providers or HR systems, producing these records can be challenging, leaving them vulnerable during audits. In today’s dynamic workforce environment, where employees may move between departments, roles, and locations frequently, maintaining audit-ready records has never been more critical.
What Employers Must Maintain Under FLSA
To stay compliant, employers must retain detailed records for each employee. These records are the foundation of proving compliance during an audit and include:
- Hours worked each day and workweek
- Regular and overtime rates of pay
- Total wages per pay period
- Additions and deductions from wages
- Job classifications (exempt vs. non-exempt)
- Pay period dates and payment dates
The federal law requires three years of payroll records and two years of timekeeping records. However, many states extend these requirements to four, five, or even six years. Additionally, if litigation or class-action lawsuits arise, employers may be asked to produce records going back even further.
Why Detailed Recordkeeping Matters
Accurate records allow employers to demonstrate that:
- Employees were properly classified as exempt or non-exempt
- Overtime was calculated correctly
- Pay rates were applied consistently across roles and locations
- Deductions were made in accordance with applicable laws
Without comprehensive historical data, organizations risk increased scrutiny, penalties, and potential legal exposure.
FLSA Audits by State
While the FLSA is federal, many states have additional wage and hour requirements. State-specific rules affect lookback periods, payroll documentation, and pay statement requirements. Here’s a snapshot of key states with extended or unique requirements:
California
- Payroll must include hours worked (regular & overtime), pay rates, and piece-rate calculations.
- Requires detailed, itemized wage statements.
- Lookback: Up to 4 years.
New York
- Requires wage notices and pay rate change history.
- Spread-of-hours pay must be documented where applicable.
- Lookback: 6 years.
Massachusetts
- Accurate time records and pay calculation documentation.
- Lookback: 3 years.
Illinois
- Pay rate disclosures and detailed payroll records.
- Lookback: 3 years.
Colorado, Washington, Oregon
- Strict pay transparency rules.
- Expanded overtime eligibility.
- Detailed recordkeeping requirements.
- Lookback periods vary, typically 3–6 years depending on state law.
Employers operating in multiple states must meet the most stringent state requirements for recordkeeping and audit readiness. This often means retaining payroll and HR data for longer than the federal minimum and ensuring all documentation is searchable and accurate.
The Realities of FLSA Audits
FLSA audits are conducted by the Department of Labor’s Wage and Hour Division (WHD) and are often triggered by:
- Employee complaints
- Misclassification or overtime concerns
- Payroll system changes or transitions
- Organizational growth or acquisitions
Auditors expect employers to reproduce historical pay calculations, not just provide total payroll figures. This means that organizations must maintain records that clearly explain how each employee’s wages were determined at any given time.
Audit Frequency and Lookback Periods
While the DOL typically reviews records for the previous two to three years, auditors often request records that extend further, especially in cases of suspected willful violations. Many states impose longer retention periods, creating additional requirements for multi-state organizations.
Employers often underestimate the scope of what auditors might request, which can result in disrupted operations and increased audit duration if historical data is incomplete or inaccessible.
The Risks of Payroll System Changes
One of the most common FLSA compliance gaps occurs when organizations switch payroll or HR systems. Historical data can become fragmented or inaccessible, and static reports may fail to show the detailed calculations auditors expect.
Organizations face multiple risks during transitions:
- Loss of historical context: Without access to original timecards, payroll calculations, or job classification changes, auditors cannot verify wage compliance.
- Incomplete records: Data stored in outdated formats, such as PDFs or spreadsheets, may not provide the necessary audit trail.
- Extended system retention costs: Maintaining legacy systems solely to retain historical data can be expensive and operationally inefficient.
These challenges make audit preparedness a continuous responsibility, not a one-time task.
How ResNav Helps Employers Stay Audit-Ready
ResNav was built specifically to address these challenges. Rather than acting as a payroll system, ResNav focuses on preserving, extracting, and providing secure access to historical HR and payroll data, ensuring organizations can respond to audits confidently.
Key Benefits:
1. Preserves Historical Data
ResNav extracts detailed payroll and time records from legacy systems without altering original data, ensuring that all historical information remains intact.
2. Supports Audit Access
Employers can search, filter, and reproduce historical data on demand, allowing them to quickly respond to FLSA audits or state-level inquiries.
3. Maintains Pay Rate & Classification History
Auditors often ask when pay rates changed or how employees were classified. ResNav retains this historical context, providing clear answers to complex audit questions.
4. Reduces Risk During Transitions
When organizations migrate to a new payroll provider or HR system, ResNav ensures historical data remains accessible, eliminating the need to keep costly legacy systems online.
5. Multi-State Compliance
For employers operating across multiple states, ResNav supports extended lookback periods and varied state audit requirements, ensuring compliance regardless of location.
6. Streamlines Litigation Preparedness
In the event of wage disputes or class-action lawsuits, ResNav enables organizations to quickly provide the necessary historical data, reducing legal exposure and facilitating faster resolution.
Why Audit Readiness Matters Year-Round
FLSA compliance isn’t just a yearly check. Audits can occur anytime, and employers need quick access to accurate historical data. Organizations that maintain this data reduce audit stress, avoid penalties, and demonstrate good-faith compliance.
Even proactive organizations can find themselves under scrutiny if historical records are incomplete or difficult to access. Maintaining structured, searchable historical data ensures that responses to auditors or regulators are immediate, accurate, and defensible.
The Cost of Being Unprepared
Organizations that fail to maintain proper historical records face several challenges:
- Extended audits and increased DOL scrutiny
- Financial penalties and back pay liabilities
- Disruption to HR and payroll teams
- Loss of employee trust due to payroll inconsistencies
ResNav helps prevent these scenarios by providing a reliable, centralized repository for ongoing historical HR and payroll data.
Real-World Use Cases
1. Payroll System Migrations
Companies switching from legacy payroll platforms to modern systems can preserve historical data in ResNav, ensuring continuity and audit readiness without maintaining old systems.
2. Multi-State Compliance
Organizations with employees in several states can meet varying lookback and reporting requirements by retaining a centralized historical dataset accessible for audits in any jurisdiction.
3. Legal and HR Investigations
During employee complaints, litigation, or internal reviews, ResNav provides immediate access to historical wage and classification records, reducing response times and legal exposure.
4. Mergers and Acquisitions
When acquiring or merging with another company, ResNav ensures that historical payroll and HR data from both organizations is preserved, structured, and audit-ready for any due diligence requirements.
Conclusion
FLSA compliance is about more than processing payroll correctly today—it’s about proving compliance years later. Payroll system changes, legacy data retention challenges, and multi-state operations create risk for many organizations. ResNav helps employers preserve, access, and manage historical HR and payroll data, ensuring audit readiness at all times.
With ResNav, organizations can navigate FLSA audits confidently, reduce risk, maintain employee trust, and focus on strategic HR initiatives rather than scrambling for historical data.
FLSA compliance isn’t a task you can handle once a year—it’s a year-round responsibility. With ResNav, your historical HR and payroll data is always secure, accessible, and ready for audit.