Now that summer vacation is only a memory, “getting back to business” is the primary objective. As part of this, every owner, CFO and HR professional should assess their company’s compliance with workplace laws, in order to avoid “landmines” that can severely impact the positive bottom line you worked so hard to achieve. The best approach to reducing the exposure to expensive audits and lawsuits is to establish sound business policies and procedures and proactively address some critical areas. Now is the time to review these areas and put compliance self-audit into the budget!
1. Pay Practices and Pay Equity: The number of companies exposed to wage and hour audits by the Department of Labor (DOL) increases each year, and the results inevitably are expensive settlements or even more expensive litigation. Last year, the Wage & Hour Division of the DOL recovered nearly a quarter-of-a-billion dollars in back wages. These cases included employees misclassified as “independent contractors” or employees who were improperly classified as “exempt” and not paid the overtime they were entitled to. Additionally, paying employees “off the clock”, or not designating all time worked as paid time (deducting for breaks not taken, allowing employees to work while not recording the time, designating certain activities as non-working time incorrectly) often results in substantial unpaid wages and overtime being awarded. A recent survey revealed that 18% of cases filed in local federal courts have been wage and hour cases.
Federal contractors and subcontractors have even greater obligations. Since the OFCCP heads up the Equal Pay Task Force for the White House, Director Shiu continues to aggressively investigate pay practices and pay equity during OFCCP audits. A recently signed Presidential Memorandum will continue to keep this in the forefront as, when finalized, it will require a report to be submitted annually to the OFCCP to include total W-2 Wage and Tax Statement earnings and total work hours for the previous calendar year for all employees included in the contractor’s most recently filed EEO-1 report, whether or not the employees were still employed on December 31.
Best Practice: Reviewing job descriptions, the classifications of your workforce and your pay practices should be on the top of the “To Do” planning list this fall. Be aware that you must be prepared to allocate funds should adjustments need to be made as a result of this review.
2. EEOC (and Human Rights) Charges and the Need for Training of Managers and Supervisors: Last year, the U.S. Equal Employment Opportunity Commission (EEOC) obtained the highest monetary recovery in the agency’s history ($372.1-million). Few companies realize that charges of “retaliation” are the most frequently cited category of discrimination. Race discrimination, sex discrimination (including sexual harassment), pregnancy discrimination and disability discrimination made up the rest of the top 5 charges for which employers paid out large amounts in settlements. As most HR Professional know, these charges are often a result of a manager or supervisor saying or doing the wrong thing due to their lack of knowledge of the labor laws or not following company policies and procedures.
Best Practice: In today’s diverse workplace, equipping management with the training and information needed to effectively deal with people from different backgrounds is critical. Providing training for managers and supervisors is one of the best investments a company can make. At minimum, every company should schedule Anti-Harassment/Discrimination/Retaliation training for their managers and supervisors on a regular basis.
3. Updated Employee Handbook: Employee lawsuits have risen 400% in the past 20 years to 6.5 claims per 1,000 employees annually. Employers need to implement guidelines for the prevention of discrimination in the workplace. A well-written handbook and consistently applied policies and procedures is critical to maintaining good moral, ensuring that employees understand their responsibilities, and providing clear guidance to all levels of management. Workplace laws keep changing; companies need to be aware of the changes, make modifications and keep their policies and procedures current.
Every company should be updating its policies to address vibrant topics such as: tele-commuting, social media, use of company issued equipment and recent changes in FMLA.
Best Practice: Review your handbook, policies and procedures with a workplace specialist to assure that you are addressing current federal and state regulations. Companies should also be reviewing the need to translate policies in the native language of their workforce. Be sure that you have a signed receipt from every employee that acknowledges receipt of the company handbook.
4. Form I-9: PMP has found that most employers are confused as to how and when to correctly complete Form I-9. Must the employee complete Section 1 on the first day of work? (YES!) Is the employer allowed to ask the employee for specific documents? (NO!) Should the I-9 be kept in the employee’s file? (NO!) It is the lack of knowledge of regulations that can cause companies to receive fines of $1,100 per form and up to $16,000 per worker for incorrect or missing forms. The U.S. Immigration and Customs Enforcement (ICE) continues to escalate its worksite enforcement and has announced that it will implement another round of I-9 audits. Although companies are allowed to do self-audits and correct errors, this should only be done by a person who is familiar with the current regulations.
Best Practice: Contact a knowledgeable HR Professional to schedule a review of your company’s I-9 forms.
By being proactive, a company can greatly diminish its exposure to expensive litigation. Budgeting time and money to address these four areas of concern now is the smartest way to avoid a large, negative impact on a company’s bottom line.
This article is intended for general information only and should not be construed as legal advice.