Compliance Reviews and Human Resource/HR Audits

Ensuring employment law compliance and an effective human resources function is as important to the short and long-term health of an organization as eating right, regular exercise and listening to our bodies is to the health of an individual.  Similarly, just as regular check-ups and preventive medicine is important to achieving good overall human health, regularly examining and evaluating the operations, functions and systems which impact a company’s “human capital” are critical to ensuring the overall good health of that particular organization.

For example, while it is vital that employers have a comprehensive and well-drafted employee handbook, if they do not ensure that the handbook is regularly updated to reflect the constantly changing labor and employment laws and regulations, it not only can unnecessarily expose employers to costly litigation but also can unnecessarily increase an employer’s potential liability.  As employers doing business in California are aware, employment-related litigation in California is both prevalent and, often, very expensive.  Further, legislative changes and decisions by the California and federal courts are constantly changing the “rules of the game” by which all California employers are expected to play.

However, notwithstanding the ever-present threat of employment litigation and the constantly changing nature of the laws governing employment in California, employers all too frequently neglect or delay addressing important human resource issues or otherwise implementing effective human resource strategies until it is too late.  Yet, just as it makes good sense to have an annual physical examination to diagnose and take measures to reduce our health risks, employers are well advised to regularly undertake a similar examination of its policies, procedures, and practices in order to lessen their exposure to potential liabilities.

How Can Miller Legal Group, P.C. Help Protect Your Company?

At Miller Legal Group, P.C., we believe that, by proactively integrating effective human resource strategies into an overall business strategy, employers can significantly reduce the risks and costs associated with employment litigation or governmental agency audits and free themselves up to operate their businesses. Moreover, such efforts can also help increase job satisfaction, improve employee morale and reduce employee turnover. Accordingly, we recommend that employers conduct a periodic compliance review or human resources/HR audit to enable them:

  • To determine whether their policies, procedures and/or actual practices expose them to potential liabilities about which they may not be aware;
  • To determine the nature and extent of those liabilities; and
  • To obtain recommendations for eliminating or reducing those potential liabilities.

Specifically, in addition to identifying areas of non-compliance with applicable employment laws and regulations, HR compliance reviews and audits will identify:

  • Gaps or lapses in existing systems
  • Inadequacies as well as inconsistent practices and applications of existing policies and procedures
  • Areas for which improvement, training, leadership and supervision may be necessary

Undertaking such compliance audits will yield significant cost savings and provide employers with peace of mind in knowing that their company’s exposure to potential liabilities has been eliminated or dramatically reduced. To further our firm commitment to employer compliance and litigation avoidance, we work closely with our clients to develop compliance audits which identify areas of potential risk and develop recommendations for implementing preventive best practices to minimize legal exposure.

Advantages of Using an Experienced Employment Law Attorney Instead of an HR Consultant

While HR consultants may indeed be knowledgeable and experienced, the answer to this important question is simple:

  1. Not all HR audits are created equal;
  2. Level of expertise; and
  3. The ability to protect the compliance audit findings and recommendations from future disclosure by virtue of the attorney-client privilege.

Not All HR Audits Are Created Equal

HR consultants often try to position themselves as being able to meaningfully audit an employer’s policies, practices, procedures, and forms at a lower, “more affordable” cost than an employment law attorney.  However, not all HR audits are created equal and employers must be certain that they do not fall prey to a situation where they later realize that they “got what they paid for.”  Or worse, the employers realize that they did not get what it paid for.

Almost universally, even though an HR audit may be designated to cover a certain topic (e.g., hiring, wage and hour, etc.), the actual nature, extent and depth of these audits varies widely.  Further, because HR consultants are not subject to malpractice lawsuits, HR audits conducted by HR consultants are typically less thorough and detailed than those conducted by experienced employment law attorneys.  As a result, when evaluating providers to conduct an HR audit, it is important to ascertain those areas that are specifically covered by the compliance review as well as the costs.

Level of Expertise

By trade, seasoned employment law attorneys have their fingers on the pulse of legislative changes, government agency opinions and decisions and cases making their way through our federal and state court systems which impact the rights and obligations of employers. It is for this reason that HR professionals – who play a critical role on the front lines of any company – usually learn about employment law developments and trends from articles authored by and/or seminars presented by employment law attorneys.

Only Compliance Audits Performed by an Attorney
Can Shield the Results from Future Disclosure

Using an experienced employment law attorney (rather than a non-attorney HR consultant) to conduct the compliance audit enables the employer to leverage the attorney-client privilege to protect the substance of the audit as well as any corresponding findings and recommendations from future disclosure, thereby, minimizing the risk of being discoverable in any employment-related litigation.  In other words, if the compliance audit reveals the existence of actual or potential violations of law, these findings will be subject to the protections of the attorney-client privilege in the event of future litigation.

Similarly, to the extent the compliance auditors recommendations are not followed by the employer – for whatever reason (including a scenario whereby the employer simply lacks adequate financial resources to implement certain of the auditor’s recommendations – these, too, will be protectable from discovery in future litigation.

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In summary, in the case of a compliance audit done by a non-attorney HR consultant, an employer potentially risks exposing itself to even greater potential liability by being unable to protect the findings and recommendations – including actual or potential violations of law and the employer’s subsequent actions or inactions in response to same – from discovery in future litigation or in connection with a government agency audit or investigation. In fact, in most cases, even a compliance audit which is done internally by a company’s “in-house” HR manager will likely be subject to discovery in future litigation.

Unquestionably, competent and well-qualified HR consultants can play a valuable role in helping employers manage certain aspects of the employment relationship, provided they are not rendering an actual or de facto legal opinion on a particular issue or subject, or otherwise giving “legal advice”. However, it is our belief that it generally does not make sense for an employer – who wisely recognizes the value and importance of undertaking a compliance audit – to invest the required effort and expense where the audit would itself potentially expose the employer to an even greater risk of liability.

What Do Our HR Compliance Audits Include?

At Miller Legal Group, P.C., we offer a wide range of compliance audits which examine those areas most likely either to lead to and/or impact the outcome of litigation. Compliance audits generally include:

  • Review and analysis of your Company’s policies, procedures, practices and forms (as applicable)
  • Interviews of appropriate company employees (as necessary)
  • Preparation of written recommendations of creative, practical and strategically sound strategies to ensure basic compliance with applicable law, minimize employment disputes and avoid litigation
  • Client consultation to discuss audit findings and recommendations.

Moreover, our HR compliance reviews and audits are very affordable and designed to be value-driven.  In fact, because not all HR audits are created equal, we believe that, in many cases, employers will find that our compliance audits are more comprehensive but less expensive than those offering similar services.  In short, we are confident that your Company will derive exceptional value from a compliance audit performed by Miller Legal Group, P.C.

What HR Compliance Audits Are Offered by Miller Legal Group, P.C.?

Among the compliance audits we offer includes the following:

  • Employee Handbook and Policy Manual Audit and Consultation – a comprehensive audit of all of your organization’s current written and oral personnel policies and procedures and the associated liability risks, including to ensure they are updated to reflect current applicable state of federal, California and local (as reflected in recent statutory, regulatory and/or case law developments).  This audit also examines whether your organization’s current practices are consistent and in compliance with its existing policies.
  • Recruiting, Hiring and Orientation Audit and Consultation – a targeted audit of your organization’s recruiting, selection, hiring and orientation policies, practices, procedures and forms.  This compliance audit is designed to determine whether your organization has the necessary screening practices and procedures in place to ensure that those who are hired are more likely be an asset and not create employment problems for the employer down the road.  In addition, this audit is designed to determine not only whether your organization is recruiting and hiring employees in compliance with applicable statutory and other legal requirements, including as it relates to, among other things, workplace postings, discrimination, pre-employment screening and testing, privacy, etc., but also whether your organization is doing everything it can to protect itself from and reduce the risk of liability in the unfortunate event that it winds up in future litigation.   Similarly, this audit examines post-hiring practices to ensure newly-hired employees are provided with and required to sign appropriate documentation to:  a) comply with applicable law, including as it relates to their receipt of statutorily-mandated notices; and b) protect the organization’s interests, and establish and clearly communicate performance and behavior expectations, including through effective orientation and training.
  • Wage and Hour Audit and Consultation – a targeted audit of your organization’s wage, hour and payroll policies, practices, procedures and forms to determine if employees are generally being properly classified (e.g., exempt vs. non-exempt, employee vs. independent contractor, etc.) and properly paid (including an analysis of payroll and timekeeping practices, payment of overtime, bonuses, and commissions, paycheck stubs, paid time off, payment at termination, and payroll deductions).  This audit also evaluates your organization’s policies, practices, procedures, and forms relating not only to hours worked (including as it relates to such things as rest breaks and meal periods, on-duty meal periods, waiver of meal periods, makeup time, split shifts, travel time, etc) but also pay inequality issues.  In addition, this audit examines policies, practices, procedures and forms as it relates to reimbursement of expenses, uniforms and equipment, recordkeeping, and posting of the appropriate Wager Order issued by the California Industrial Welfare Commission.
  • Leaves of Absence and Disability Accommodation Audit and Consultation – a targeted audit of your organization’s policies, practices, procedures and forms to determine whether they comply with California and federal law with regard to leaves of absence, disability accommodation and the interactive process, pregnancy, workers’ compensation and other state-paid benefits, and other related issues of harassment, discrimination and retaliation.  Given the frequent intersection and overlapping nature of various California and federal laws in these areas as well as the extensive, complicated and occasionally inconsistent legal obligations contemplated by these various laws and regulations, this audit is an invaluable tool for employers seeking to avoid unnecessarily falling prey to legal claims in one or more of these areas.  In addition, this audit also will examine not only whether your organization is in compliance with other mandated leaves but also whether your organization’s polices regarding discretionary leaves are strategically sound and are not otherwise inconsistent with other applicable laws.  As part of this process, we will ensure your organization is complying with its notice and posting obligations, will review (and, if necessary, recommend revisions to) applicable forms used by your organization to administer each of these leaves, and ensure your organization is in compliance with the California Confidentiality of Medical Information Act (mandating that medical information be maintained in confidential files separate from an employee’s personnel file. 
  • Trade Secret and Employee Protection Audit and Consultation – a targeted audit not only of your organization’s trade secrets and/or other valuable information assets  which are in need of protection, but also of your organization’s policies, practices, procedures, agreements and forms used to protect such assets including: employee handbook policies; non-disclosure, non-solicitation and other related employment agreements; orientation and training procedures; “Bring Your Own Device” programs; notice, labeling, access and other security practices; non-disclosure agreements signed by vendors, independent contractors and consultants; exit procedures to secure the return and ongoing protection of company property and other confidential and/or proprietary information, etc.  In addition, we also make an assessment of whether your organization’s efforts to protect and secure such information are effective and what, if any, additional measures need to be put into place.  Where appropriate, we team with other data protection professionals to analyze available options and deliver effective data protection solutions to our clients.  Further, we also review your organization’s screening and new hire policies, practices, procedures, agreements and forms to identify applicants who are subject to confidentiality agreements and/or other restrictive covenants with prior employers and procedures to eliminate or minimize the risk of litigation associated with same.
  • Employee Termination Procedures Audit and Consultation – a targeted audit of your organization’s policies, practices, procedures and forms to identify potential problems or areas of risk in your organization’s performance, disciplinary and termination processes, including whether any aspects of that process run afoul of California or federal law or otherwise expose your organization to potential liability.  This audit covers voluntary and involuntary terminations, including layoffs, reductions in force and discharge, and seeks to determine whether adequate documentation is place to justify terminations.  It also examines the substance of the information communicated to the terminated employees and the manner of communication of the termination decision.  This audit also determines whether your organization is in compliance with its various termination obligations and reviews any policies, procedures, practices and forms relating to the use of exit interviews and separation or severance agreements. 
  • Personnel File Audit and Consultation – a targeted audit of the manner in which your organization stores employee information in order to identify potential problems or areas of risk in your Company’s record-keeping practices and procedures, including whether performance evaluations are adequate, accurate and complete, whether disciplinary and/or counseling documentation exists for employees with performance issues, and whether any aspects of the record-keeping process run afoul of California or federal law or otherwise expose your organization to potential liability, including for violations of employee privacy laws.  This audit seeks to determine whether your organization is including all documents which should be properly maintained in a personnel file.  The audit also seeks to ensure compliance with the California Confidentiality of Medical Information Act such that any documentation containing medical information is stored separately from personnel files and is maintained in such a way to ensure limited access.  Likewise, the audit also seeks to ensure that I-9 information is stored separately from personnel files.  Finally, the audit seeks to identify other potential problems, including managers or supervisors who maintain their own “separate files” on one or more employees. 
  • Safety and Health Audit and Consultation – a targeted audit to determine whether your organization is in compliance with California and federal health and safety requirements.  A primary focus of this audit is to ensure that your organization has complied with its legal obligation to have an Injury and Illness Prevention Program (IIPP) in accordance with California law and, if applicable, has a required heat illness prevention program.  This audit also generally reviews whether other safety measures are required or appropriate, reviews recordkeeping practices for workplace injuries and illnesses, and evaluates measures to address the potential for violence in the workplace. 
  • Job Descriptions Audit and Consultation – a targeted audit of your organization’s job descriptions to determine whether they accurately and adequately set forth the actual and current required job qualifications, essential job functions and physical/mental requirements, job environment and required performance expectations.  Accurate and up-to-date job descriptions are a critical component of any disability accommodation analysis process and thus, it is imperative that employers undertake such audits regularly.  This audit also examines whether the job descriptions classify employees as exempt vs. non-exempt and analyzes whether those classifications are supported both by the job description and by the job duties actually performed by the employee in question.  In addition, this audit examines whether the job description adequately and accurately characterizes issues of workflow and supervision. 
  • I-9 Audit and Consultation – a targeted audit of your organization’s policies, practices, procedures and forms to determine whether they comply with federal requirements, including ensuring that appropriate forms are being accurately and fully completed for each employee, that proper documentation is being submitted and accepted, and that records are properly retained. 
  • Comprehensive HR Compliance Audit and Consultation – a comprehensive audit of all of your organization’s existing policies, practices, procedures, agreements and forms.  This audit typically covers some or all of the above subjects, depending on the client’s needs.  It involves review and analysis of all HR related documents being used by your organization as well as in depth interview(s) of one or more individuals about the organization’s current practices and procedures.  In so doing, we are able to identify areas of potential liability which can be addressed through proactive HR solutions

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Contact a Los Angeles and Orange County Employment and HR Compliance Lawyer

For more information about our compliance audits or to schedule an initial consultation with an experienced Los Angeles employment compliance lawyer at Miller Legal Group, P.C., please contact us at our South Bay employment law firm by e-mail or by telephone at (310) 426-2650.