The 2026 Construction HR Audit Checklist: Are You Ready?

If a Department of Labor (DOL) investigator walked into your jobsite trailer today, how confident would you be? For many construction companies, the answer is "not very." With labor laws evolving rapidly in 2026, relying on paper timesheets and spreadsheet calculations is no longer just inefficient—it's a liability.

The risks of misclassification, missed breaks, and overtime errors are higher than ever. That is why forward-thinking contractors are moving away from filing cabinets and switching to Construction Labor Law Compliance Software to automate their audit defense.

Is your company prepared? Use this 4-point checklist to self-audit your HR processes before the regulators do.

1. Wage & Hour Accuracy (The "Blended Rate" Trap)

The most common violation in construction isn't unpaid hours—it's improperly calculated overtime. If an employee works at two different pay rates during a single week (e.g., as a Foreman one day and a Laborer the next), are you calculating their overtime based on the weighted average of those rates?

• Audit Check: Can you prove exactly which hours were worked at which rate?
• Audit Check: Does your payroll system automatically calculate weighted averages for overtime?
• Audit Check: Are travel time and "show-up" time logged accurately?

According to the U.S. Department of Labor, failure to pay for all hours worked—including prep time—is a leading cause of back-wage assessments.

2. Meal & Rest Break Documentation

In states like California, a missed meal break isn't just an annoyance; it's a lawsuit waiting to happen (PAGA). If your timesheet says an employee worked from 7:00 AM to 3:30 PM with no clock-out for lunch, the law often assumes you denied them a break.

• Audit Check: Do your timesheets clearly show start and stop times for unpaid meal periods?
• Audit Check: If a break was missed, did you pay the required "premium pay" penalty?
• Audit Check: Do employees sign an attestation daily confirming they were provided a break?

3. Record Retention & Accessibility

Under the FLSA, employers must keep payroll records for at least three years. In construction, where work happens across dozens of temporary sites, losing a box of paper timesheets is all too easy.

• Audit Check: Are your I-9s and payroll records stored centrally?
• Audit Check: Can you retrieve a specific crew's logs from 2024 within 72 hours?
• Audit Check: Are your records legible and protected from water/jobsite damage?

4. Independent Contractor vs. Employee

Misclassification remains a top priority for the IRS and DOL in 2026. Just because a worker has their own hammer doesn't make them a subcontractor. If you control their schedule and provide materials, they are likely employees.

• Audit Check: Do you have a standardized process for vetting 1099 workers?
• Audit Check: Is this status consistent across all your projects?