Government Issues and Politics
Insurance and Employee Benefits
Business and Economic Information
Human Resources and Safety
Education Policy and Practice
Training and Consulting Services
Human Resources and Safety
HR Issues and Laws Safety and Health Tools and Forms Comp and Benefits Publications and Posters Training and Programs

Human Resources Audits - How Are You Doing?

This CBIA article is intended to provide general information only. It is not intended as legal advice or as a solution to an individual problem. You are encouraged to consult with appropriate legal counsel prior to relying on this document in whole or in part.

     It seems that with each passing day, managing a company’s human resources department has become more complex and time consuming. In an effort to address these complexities, companies are increasingly auditing their Human Resources functions. From the small business that didn’t have time to organize its human resources functions, to the mid-size company that is suddenly realizing it is too big to continue operating as it has in the past, to the larger company that is trying to stay abreast of the latest developments in employment law, employers are finding audits to be well worth the time and expense.

     Reports of multi-million dollar wage and hour awards against Connecticut companies, combined with high profile national cases, such as those involving Texaco or Mitsubishi, have caused companies to examine their practices in the hopes of preventing similar problems. Properly conducted audits can identify practices that should be changed, highlight areas with room for improvement and focus on positive policies that should be continued.

     CBIA provides its members with a Human Resources Audit service designed to meet the individual needs of participating members. Although each audit has its unique aspects, the same types of issues and mistakes crop up repeatedly. Here then is a list of those five areas where employers are most likely to make a mistake:

Misclassification of Exempt and Non-exempt Jobs.
     Almost every company has job positions that have been misclassified as exempt from overtime requirements. Due to the complexity of wage and hour laws and regulations, it is not difficult to wrongly characterize a job as exempt, thereby exposing the company to liability for past overtime. A review of sample job descriptions and a discussion of wage and hour exemptions often assists an employer in determining whether it is properly classifying its jobs.

Inadequate Personnel Files.
     A review of sample personnel files often reveals inadequate documentation of performance issues. For example, disciplinary warnings are informal, vague and/or inconsistent. Personnel evaluations are similarly indefinite, inaccurate or outdated. Medical information is often found in personnel files, despite the fact that the law requires they be kept separate. Accurate and detailed records are essential for employers when defending any type of claim brought by an employee, particularly unemployment compensation claims and wrongful discharge claims.

Prohibited Absentee Policies.
     Controlling excessive absenteeism is a big concern for most employers. However, the complexity of today’s leave laws has made many formerly acceptable absentee control policies unacceptable. Employers struggling with the issues presented by absences that impact worker’s compensation, family and medical leave, disability and pregnancy laws often have policies that either do not comply with relevant laws or grant employees more protection than the laws require. A careful review of company practice and policies in light of applicable laws often requires that policies be revised.

Inaccurate Time Records.
     Connecticut requires all employers to keep a true and accurate record of the hours worked by each employee. Many employers allow employees to fill out time sheets that indicate they have worked a set number of hours each week. For example, it is not unusual to see time sheets that note an employee has worked nine to five, Monday through Friday, with a half hour for lunch, for a total of 37-1/2 hours per week, every week. Such entries are rarely completely accurate since employees often leave early, skip lunch or come in late. If an issue were to arise about whether or not an employee had worked more hours than indicated on the time sheet, the Department of Labor would likely discount the time sheets and rely on the employee’s recollection of hours actually worked. In addition, time clock records are often inaccurate. For example, for reasons of convenience, employees may be allowed to punch in early, even though they do not immediately begin work. However, employers should be aware that during an in investigation the Department of Labor will assume that the time cards are accurate, and require payment for all hours noted on the card.

Insufficient Documentation.
     Reviews of employer hiring practices often uncover inadequate documentation, such as missing or incomplete I-9 forms. Employers may be fined between $100 and $1,000 for each failure to accurately complete an I-9 form. Fines for these violations can add up quickly, with reported cases of proposed fines totaling over $100,000.

     Operating a human resources department today is a complex proposition. As a result, all employers should examine their practices to determine whether they can be improved. It is not uncommon for companies to turn to outside sources for help in identifying issue and solving problems. Such early intervention can help companies avoid serious problems down the road.

If you would like to discuss an audit for your company, e-mail CBIA's Mark Soycher or call him at 860-244-1900.