Each year, employers spend tremendous resources fighting employee lawsuits, complying with the demands of government agencies such as the Equal Employment Opportunity Commission (EEOC) and the U.S. Department of Labor (DOL), to investigate possible violations of employment laws. If violations are found, a company might be required to pay considerable damages awards, penalties or fines, plus attorneys’ fees (their own and the employee’s).
Any business veteran knows that it’s impossible to eliminate the possibility of an agency investigation or an employee lawsuit. What savvy employers know, however, is that the risks associated with such processes can be reduced with an ounce of prevention known as an employment audit.
An employment audit is a detailed review and analysis of a company’s employment-related policies and procedures conducted before the agency investigation or employee lawsuit. Lori Hall Armstrong, an employment lawyer and consultant with Chicago-based Vantage Solutions L.L.C., says, “We consider an effective employment audit to be an employer ‘check-up.’ It’s truly preventive in nature and allows the client to catch any problems and fix them before someone else does.”
According to Armstrong, an employer should have an experienced labor attorney conduct the audit. Generally, the reviewer will gather information for the company through documents or interviews with human resource or supervisory personnel, and after legal analysis of the data, prepare a report for key decision-makers on the company’s legal compliance status and recommend any appropriate corrective action. The key benefits of the audit include:
- Litigation avoidance. It’s simple: happy employees-those who feel they are treated fairly and work for a committed employer-usually don’t sue.
- Litigation defense. The audit will allow the employer to develop policies and procedures to assist in a litigation defense and may serve to limit punitive damages where the employer is found liable.
- Preparing for a government investigation. An employment audit resembles a government investigation; therefore, should the EEOC or DOL or some other government agency come calling, the employer is already prepared. This reduces the expense associated with the investigation as well as the possibility of finding a violation.
- Obtaining employment practices insurance. As a prerequisite for coverage, employment practices insurance carriers often require that an employer have a clean bill of health with respect to policies.
In form, an employment audit resembles an investigation conducted by the government. In substance, however, it provides a proactive and confidential mechanism for companies to develop solutions to problems before the government even knows the problems exist. Doing so might just save you a lot of time and money.