Using HR Audits to Control EPL Exposure

Do you remember the story of the Emperor wearing new clothes? The Emperor claimed that he was wearing the best clothes and was therefore sheltered from the elements, which he did in the eyes of his loyal subjects. It was a simple observation by a small boy that brought the empire to life. Many organizations believe they are protected (clothed), but in reality, they are vulnerable to employment-related liabilities. An organization only recognizes its vulnerability when it is accused of unlawful employment practices.

Do you remember connect-the dots puzzles? The answer to the puzzle is often a mystery without a numbering system. Organizations need a structured approach (a numbering path) to solve the problem of risk and human resource management. Organizations often fail to see the vulnerability of their employment practices until they file a claim.

Employers, and often insurers, are using more human resource (HR), auditing and risk management techniques to help them recognize and manage their exposure to issues related to employment practices. Below are some of these techniques.

GENERAL COMMENTS In recent years, there has been a marked increase in the use HR audits. Some audits are used to evaluate the effectiveness and efficiency of human resource management. Others benchmark best practices. An audit of employment practices is designed to evaluate an organization’s compliance against the multitude of federal, state and local laws and regulations.

Many organizations limit the benefits that these audits can bring to them. Audits are sometimes used to find out what is wrong. After identifying a wrongdoer is identified, they are punished. Others use audits only to gather information about the performance and activities of their units. This information is collected once it has been sorted, divided, analyzed, compared and stored for future reference. This information can be useful for reports to the top management but has very few other uses.

Given the potential benefits of HR audits, and the costs involved in conducting them, they should not be seen as purveyors or collectors of data. The main purpose of HR audits are to bring about action. This can be done to improve employment practices, or to rectify illegal or unethical activities. Audits that highlight the positive and correct the bad tend to increase managers’ participation and cooperation. They also reduce the tendency to react defensively and increase employees’ stake in achieving desired outcomes. This results in a lower exposure to claims related to employment and greater loss control.

A word of caution: Information gleaned from audits, assessments and surveys may be “smoking guns” and could be used to uncover information. Reports or perceptions of harassment, discrimination or other unacceptable conduct should be investigated immediately and taken corrective action if necessary. General auditing rule #1. You shouldn’t collect any information that you can’t use to make employment decisions. General auditing rule 2: If you don’t intend to act on your findings, you should not conduct an audit.

Human Resources Audit Tools
1) The Facilities Inspection. Employers must provide equal employment opportunities for employees with disabilities under the Americans With Disabilities Act. The recruitment, selection and hiring process is the starting point of the employer-employee partnership. Employers still require applicants to visit their offices to fill out an application or interview. An employer’s application intake area must be accessible to people with disabilities. In inspecting facilities, consider the facility from the individual-with-a-disability perspective. Example: Is it possible for someone with mobility impairment to gain entry to the building and access the human resource office? Is it possible for a person with a visual impairment to fill out the job application form Is the application form available in braille? Are there people who are trained and assigned to assist those in need?

2) Inspection of posters and notices. Employers must post notices and posters regarding employer obligations and employee rights in accordance with federal, state and local employment laws. To ensure proper display, a visual inspection is recommended.

3) An image-reputation assessment. The Civil Rights Act Amendments of 1991 allow plaintiffs to claim punitive and compensatory damages. Jury trials are also possible. Employers often find jury trials problematic. Although the facts of each case matter, juries will often consider subjective factors such as an employer’s reputation for fair and impartial treatment. Employer’s reputation can be damaged or enhanced by the implicit and explicit messages it sends in its annual reports, advertising media coverage, press coverage, and other documents. Negative impressions can be reduced by reviewing this material regularly from the perspective of a jury.

4) Employee Attitude Tests. Employers are responsible for illegal practices they knew or should have known about. Employers will be held accountable for any illegal practices they knew about or should have known about in the future. Employers should not be surprised when employees complain about being treated unfairly, harassed, or discriminated against. A study by the EEOC shows that discrimination claims are most common after employees have been fired. This is not the best time to discover that there is a problem.
Employers can only use employee attitude surveys to determine how employees feel about their workplace. Employee attitude surveys can be useful in determining employee’s feelings about the organization. Employers can take corrective actions before it is too late by using this improved feedback mechanism.

5) Employment Practices Assessment. Assessments can be made using checklists provided by law firms or internally developed tools. They also include proprietary audit tools like the Employment-Labor Law Audit. These assessments usually focus on the following areas of employment practices:
* Recruitment, selection, hiring
* Application forms
* Refer to the following and respond
* employment handbooks
* workplace discrimination
* The Americans with Disabilities Act
* sexual harassment
* performance appraisals
* Leaves of Absence
* The termination process

Employers are being pressured to pay more attention to their employment practices, and take corrective action if necessary, as the severity and incidence of employment-related claims increases. The role of HR audits is crucial in reducing liability.