Anti-Corruption & Compliance Blog

Human Resources Compliance Audits (Part 2)

In this guest post by a member of Porter Hedges’ Labor & Employment practice group, the Anti-Corruption & Compliance Blog turns its focus to labor and employment law compliance. This post is the second installment of the Blog’s limited series discussing best practices for conducting a Human Resources compliance audit. The first installment of the series provided an overview of the compliance audit process and practical advice at each step when conducting the audit. This second installment provides the detailed areas of inquiry that companies should assess when conducting a Human Resources compliance audit.

An internal audit of a company’s human resources practices can be used to mitigate potential liabilities by preemptively identifying areas of exposure and proactively implementing corrective measures. As discussed in the first installment of this series, at the onset, the company should identify the subject matters that will be included in the audit. Below is a list of potential subject areas to consider when determining the scope of the audit, along with a non-exhaustive list of suggested specific areas of inquiry for each subject area:

Recruiting

• The company’s job postings, descriptions, and applications should be reviewed to assess whether:
  • The documents are non-discriminatory, including compliance with federal, state, and local law such as the ADA and Title VII.
  • The job descriptions accurately reflect the position’s essential job functions.
  • The job descriptions for exempt positions sufficiently address the job duties test for the exemption.
  • Affirmative action provisions in the application omit prohibited questions and statements, include all required disclosures, and are maintained separately.
  • Applications comply with any applicable ban-the-box laws, salary history inquiry bans, and social media inquiry bans.
• The company’s interview process should be reviewed to confirm that interview questions are non-discriminatory and that employees participating in the hiring process are trained on illegal interview questions.
• Written offers of employment should be reviewed to assess whether the job offers state employment is at-will or unintentionally create a contractual agreement.

Onboarding

• The company’s background check procedure and related documents should be reviewed to determine whether:
  • The Fair Credit Reporting Act, and federal, state, and local background check requirements are satisfied.
  • The company uses an individualized assessment and is compliant with respect to the use of arrest and conviction records for hiring decisions.
• The company should audit the documents it collects from the employee at onboarding and the new hire information it reports to state agencies, including a review of the company’s compliance with employment eligibility verification and Form I-9s.
• The company should confirm that state law requirements are met for timely providing new hires specified employment information in writing, such as workers’ compensation coverage and compensation information.

Employee Policies

• This portion of the audit includes an evaluation of the company’s employee handbook and standalone policies for compliance with federal, state, and local law. Specified areas of inquiry include a review of the company’s:
  • Anti-discrimination and harassment policy, including confirming the company has a satisfactory procedure for reporting harassment.
  • Leave policies, including required leave under state law, FMLA, USERRA, and disability.
• This portion of the audit should also confirm (i) the handbook disclaims a contractual intent and (ii) the company maintains employee acknowledgment forms.

Record-keeping Requirements

• The company’s process and procedure for maintaining employee files should be assessed to:
  • Confirm all required forms are maintained in the employee’s general personnel file, confidential records are maintained in a separate confidential file, medical records are kept in a separate confidential medical records file, and Form I-9s are maintained in a separate confidential file.
  • Confirm employee files are created and stored in a secure location, and that there is a procedure to ensure that only those who need to access the records can view them.
  • Employee records are maintained for the requisite number of years as required by state and federal law.

Wage and Hour

• The company’s wage and hour practices should be evaluated for compliance, including an assessment of whether:
  • Employees are properly classified as exempt/non-exempt.
  • Overtime is properly calculated, including with respect to non-discretionary bonuses.
  • Compensable time is properly captured, including time recording procedures, break time, and travel time.
  • The company is in compliance with state and federal minimum wage requirements.
  • Independent contractors and other non-employees are properly classified.
• This portion of the audit can also assess the company’s travel and expense reimbursement policies, deductions, requirements for the timing of payment of wages, bonus policies, and equal pay analysis.

Agreements

• A review of all worker agreements should be conducted, including (i) employment agreements, (ii) independent contractor and/or consulting agreements, (iii) arbitration agreements, (iv) non-compete, non-solicitation, and confidentiality agreements, and (v) class action and jury trial waiver agreements.

Termination Procedures

• The company’s termination procedures and associated documents should be evaluated, including a review to confirm non-discriminatory and non-retaliatory reasons for termination, WARN and mini-WARN requirements, and to confirm that severance and release agreements comply with the Older Workers Benefit Protection Act and the NLRA’s prohibitions on confidentiality and non-disparagement provisions.

Additional Subject Matters

• Unionized Employees and CBA Agreements
• Employee Benefits
• OSHA and Health/Safety
• Workers’ Compensation
• Employee Performance
• Data Protection

Human Resources compliance audits can be tailored to the precise needs and areas of concern for the company. This post provides only a snapshot of the subject areas that can be covered. Porter Hedges’ Labor and Employment attorneys are experienced in conducting privileged internal Human Resources compliance audits. For questions please contact a member of our team.