Many human resource professionals shudder when they hear the word “audit,” as images of fire-breathing wage and hour agents, rushed I-9 forms, and their very job security flashes before their eyes. Indeed, some of the numbers related to state and federal governmental audits are downright traumatizing:
$467 million dollars: the amount of money that US companies paid in settlements with the Department of Labor in 2012.
3 out of 4: the number employers that were in violation of ERISA when audited.
$16,000: maximum I-9 monetary penalty per violation
93,727: the number of discrimination charges filed with the EEOC in 2013.
Countless: the number of billboards and television commercials targeting employees that have been improperly paid.
However, a human resource strategy quickly growing in popularity has been developed to assist organizations in mitigating, and even avoiding, the consequences of these devastating governmental audits and investigations. The elective employment law audit has become a crucial tool to evaluate legal compliance, institute preventative safeguards, and allow human resource and leadership teams the opportunity to resolve deficiencies without the expense or embarrassment created by an employment-based lawsuit or governmental audit.
Yet many human resource professionals avoid engaging counsel to conduct proactive audits because they fear the results may cast doubt upon the quality of work being provided by their department. However, well-designed audit programs actually affirm the value of the human resource function by allowing practitioners to best convey the potential consequences of failing to abide by crucial everyday risk-management practices, such as failing to regularly execute interview assessment documents, interrupting non-exempt employees’ lunch breaks, and rushing into termination decisions without properly consulting the human resource office. To best ensure such practices are thoroughly communicated, the highest quality audit relationships always include onsite interactive training that includes each member of the organization’s leadership team.
The audit itself should be conducted annually by an external legal firm to ensure that attorney-client privilege will provide crucial protections from external disclosure when sensitive communications involving issues such as regulatory failings, misclassified exemptions, and inadequate documentation need to be conveyed. Moreover, a legal firm that regularly provides such service is superior to those that primarily engage in litigation, since such practices often are far more current on regulatory additions and trends. Most human resource professionals that enjoy such relationships also regularly consult with the auditing firm throughout the year to ensure that the provided audit recommendations are best implemented.
The areas of consideration in a comprehensive audit should vary from year to year, but frequently include review of such topics as:
• Proper wage and hour classification under the FLSA
• Review and Edit of key employment forms, handbooks and policies
• Consideration of performance, corrective action, evaluation, and termination processes
• Leave administration and compliance under the Family Medical Leave Act, The Americans with Disabilities Act, and workers compensation laws
• Pay equity and discrimination
• Affirmative Action and Equal Opportunity efforts
• • Immigration compliance, including E-Verify and I-9s
• Trending topics, such as implementing green memorandums with criminal background screens, social media policies under the NLRB, and educating leadership on sexual orientation and gender identity
Given the complexities of today’s laws and the dramatic increase in the number of employment-based lawsuits being filed throughout Florida, every organization’s human resource function should ensure that an in-depth employment law audit occurs annually. Such an ongoing review will provide the practitioner with the tools needed to plan and efficiently implement the best practices to mitigate potential employment liability, while simultaneously encouraging leadership toward greater human capital outcomes. Recognizing that the negligible cost of an annual elective audit is dramatically less than that of protracted litigation or fines caused by an actual governmental audit, this tool is one of the wisest investments a human resource practitioner can make.