Human Resources Compliance Audits
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A company’s HR practices need periodic reviews to maintain compliance with changing laws and to insure consistent application of personnel policies and procedures by management and supervisors.

When should an HR audit be done?

• A business reaches 15 employees, 20 employees, 50 employees, 100 employees.

• A business grows to the point of supervisors making hiring, discipline, promotion, demotion, transfer or termination decisions without supervision of the HR department.

• An employee handbook is created or modified.

• A business opens facilities in another state.

• A new personnel manager is installed.

• Employee morale, high turnover, excessive discipline problems become issues.

• A business becomes a government contractor or subcontractor.

Who should conduct the audit?

If the audit is conducted with internal resources, or with a non-lawyer outside consultant, everything connected with the audit is subject to discovery in litigation relating to employment practices. If an employer uses its outside employment law firm to conduct the audit, the attorney-client privilege may protect communications between the business and its attorney, but the actions taken as a result of the audit are subject to discovery. If the same counsel ordinarily defends the business in employment litigation, the company’s own lawyer may be a fact witness if the audit becomes evidence in the case, and would be precluded from representing the company in the case. Because of these factors, an audit should be performed with full recognition that its results (and, under some circumstances, information accumulated during the audit) may be discoverable and admissible as evidence in a case against the company.

How should the audit be conducted?

Once it has been decided that an audit is to be conducted, the company’s objectives and the scope of the audit need to be determined–usually through a discussion between the auditor and the human resources manager or upper management. The auditor must become familiar with the company’s general approach to personnel practices. Is the business run "by the book" or is a more relaxed approach taken? Is there a collective bargaining agreement in place? What is the nature of the workforce? By using someone already involved with the company, these preliminary steps may be avoided.

The audit generally starts with a review of the written personnel policies, procedures, handbooks, retained records and any documents relating to prior interactions with regulatory agencies or the courts with regard to human resources issues.

The list of laws to be considered is long:

The audit procedure should include examination of the following:

• Size and location of company

• Organizational structure

• Supervisor and employee training

• Complaint reporting and investigation procedure

• Anti-discrimination / harassment / retaliation policy

• Anti-violence policy

• Drug testing policies and procedures

• Privacy / monitoring / searches policies

• Orientation procedures

• Employee handbook

• Employment contracts

• Recordkeeping policies

• Hiring practices, applicant background checks

• Promotion & transfer practices

• Disciplinary & termination policies and procedures

• Unemployment compensation policies

• Employee assistance programs

• Employee benefit programs

• Leave of absence policies

• Wage and hour classifications; payroll practices

• Job descriptions

• Collective bargaining agreement

Why bother?

Liability avoidance. Increased efficiency. Liability avoidance. Better employee morale. Liability avoidance. Productivity improvement. Liability avoidance. Better insurance rates. Liability avoidance.

Can you do the audit with "in-house" staff?

Only if your Human Resources Department has the expertise, the extra time, a willingness to acknowledge inadequacies in current procedures, and the clout to make necessary organizational changes.

Cost of an external HR audit?

Less than defending (let alone losing) even one lawsuit. Maybe free if your insurance carriers emphasize risk management. Some carriers provide audits as part of their programs. Some government agencies provide inspections outside the scope of official investigations, but these are an invitation for trouble. The cost of periodic HR audits should be budgeted with other risk management expenses. You can’t afford not to comply with laws applicable to your business. If you don’t, some disgruntled employee or competitor will eventually make you pay–-maybe with nothing more complicated than an anonymous phone call.

For further information regarding HR audits or other employment law issues, contact Omer Causey at 941-366-7550.

Email Mr. Causey

Please include the names of all parties to allow us to check for conflicts of interests. Do not send any confidential information until it can be determined whether any conflict of interest exists. No attorney-client relationship is established until such time as a written representation agreement or letter of engagement is fully executed by NELSON HESSE, LLP and the client.