Employers Are Wise to Conduct Periodic Employment and Labor Audits
April 14, 2023
In today’s business environment, employers should not ignore potential risks within their employment practices. The Lynch Law Firm cannot overemphasize the importance of employers conducting periodic employment audits to evaluate their compliance with federal and state employment laws and minimize risk. Like financial audits, which assess an employer's financial health, employment audits are a type of preventative action. A strategic employment practices audit can identify and prevent workplace issues before they evolve into legal action. Employment audits provide the means for employers to determine their exposure to employment lawsuits and to minimize potential liability. Labor audits also seek to assess workers' attitudes toward the employer and identify areas of vulnerability.
An Overview of Employment Audits
The scope of an employment audit depends on the objectives and needs of the employer, but the process generally focuses on two primary areas:
Employment audits must determine the federal and state laws that apply to the employer. Some of these laws include:
Age Discrimination Employment Act (ADEA)
Family and Medical Leave Act (FMLA)
Fair Labor Standards Act (FLSA)
Occupational Safety and Health Act (OSHA)
Title V11 of the Civil Rights Act
Employment audits must also determine whether the employer's policies and procedures comply with state and federal employment laws. This section of the audit entails the review of the professional relationship between the employer and the employee and includes the analysis of the following:
· Updating Your Company's Employee Handbook
All companies should protect their interests by creating a comprehensive employee handbook. In addition to clearly defining the organization's policies and procedures, this evolving document represents the company's mission, codes of conduct and culture. While Texas employers are legally obligated to comply with state and federal laws, the policies they enumerate in their employee handbooks inform workers of their legal rights and obligations. Every year, employers, along with their executive teams and human resources departments, should take the time to review their employee manual for accuracy and language that could give rise to legal claims.
The Benefits of Having an Employee Handbook:
It introduces employees to the company's culture, mission, and values.
It defines the employer's expectations of the employees.
It educates employees about what they can expect from the management and executive teams.
It communicates company policies.
It outlines company benefits.
It can help to create a positive workplace culture.
It ensures the company's compliance with state and federal laws.
ü It can help employers defend themselves against employee claims.
Federal Employment Policies to Address in a Handbook
The United States Department of Labor oversees, administers, and enforces more than 180 federal laws. These laws govern the workplace activities for about ten million workplaces and 150 million workers. The DOL policies cover critical worker rights, anti-discrimination, certain types of leave, and the company's sexual harassment policies. Whenever there is a change to the law, companies should update the employee handbook accordingly. Some of the most significant federal labor laws companies should address in the employee handbook include the following:
Equal Employment and Anti-Discrimination Policy
Family Medical Leave Act (FMLA) Policy (50 Employees)
Jury Duty Leave
Military Service Leave
Sexual Harassment Policy
Ensure Your Handbook Addresses the Following:
Employee handbooks are essential tools for communicating company rules and regulations. It is also vital that they establish that:
An employee handbook is not a legal employment contract and is not intended to create binding contractual commitments.
Employers and employees retain the right to terminate employment immediately, with or without warning, notice, or cause.
The employer retains the right to unilaterally modify, interpret, or discontinue any policies presented in the company handbook.
Employers should create a signature page and ensure that each employee signs this form to acknowledge that they have reviewed and understand the information and disclaimers in the employee handbook.
· Defining Your Anti-Harassment Policy
An organization's anti-harassment policy seeks to define, prohibit, and prevent unlawful types of harassment in the workplace. The company's management team should be trained to recognize, investigate, and prevent inappropriate behaviors. Managers should also be prepared to model appropriate and professional conduct in the workplace. Company policies should be posted on bulletin boards in well-trafficked company areas and published in the employee handbook. The anti-harassment policy should:
Define sexual harassment and other types of unlawful harassment in the workplace.
Identify the company's complaint procedures and the process for all employees to report harassment.
Explain the company's commitment to its employees and how it will respond and initiate a prompt investigation into the complaint.
Assure employees that appropriate remedial action will be taken to stop unlawful harassment.
Assure that employees will not be retaliated against for making complaints of harassment or identifying the perpetrators.
· Reviewing Your Employment Application
Employment application forms should be reviewed to ensure they do not delve into matters and ask questions that are not permitted by law. Application forms should focus inquiries on the issues that will confirm the applicant can perform all the necessary functions of the position. To comply with Title VII, employment applications should not contain questions about birth dates, gender, race, marital status, financial status, or arrest records. For employers to ensure compliance with the Americans with Disabilities Act (ADA), the application should also refrain from inquiries regarding the applicant’s medical history.
· Inquiring into Pre-employment Matters
The ADA prohibits requiring an applicant to submit to a physical examination at the pre-offer stage of the hiring process. An employer may require a medical review after an offer of employment has been made. An employer may also condition the offer of employment on the results of the examination as long as:
All applicants are required to take the examination regardless of disability,
The information collected is maintained confidentially in a separate file, and
The results of the examination must be used in compliance with the ADA.
Employers may require applicants to take a pre-employment drug test before making an offer of employment to the applicant. While alcohol testing is also considered a medical examination, it can only be required of an applicant once a conditional offer of employment is made.
· Implementing Employment Agreements
Companies often require employment contracts for top employees, executives, managers, and key professionals. This tier of essential members of the organization has access to sensitive and confidential information about the company's inner workings and many companies require those who have unlimited access to sign confidentiality agreements.
· Reviewing Job Descriptions
Employers should develop job descriptions that thoroughly detail the position's essential functions. Accuracy is vital to ensure compliance with wage and hour laws and to provide a defense against discrimination charges brought under the ADA. Employment audits often reveal either the absence of a job description, a job description that is no longer accurate, or a list of duties that do not describe the job's essential functions.
· Maintaining Complete Personnel Files
Employment audits should ensure that every employee's personnel file contains the necessary information. Personnel files must contain 1-9 forms and include a separate folder for the employee’s medical information, such as workers' compensation forms, medical evaluations, drug testing, and medical leave requests.
· Evaluating Employee Performance
An employee audit should also determine whether the management team conducts performance evaluations regularly. It can be difficult to terminate a worker for inadequate performance when his or her performance evaluations were never completed.
· Evaluating the Management Team
Employers should ensure that management team members are correctly evaluating and documenting the ineffective performance of employees who are consistent underachievers. It may be difficult to justify the discharge of a poorly performing worker when the performance evaluations of that individual show they are accomplishing their tasks effectively.
· Regarding Discipline and Termination
During an employment audit, employers should examine their policies regarding employee discipline and termination.
Are all work rules being consistently and uniformly enforced?
Have employees received notice of all work-related rules?
Are employees aware of the consequences of not following work rules?
Is discipline promptly and consistently imposed for work rule violations?
Are supervisors uniformly and consistently documenting work rule violations?
Are supervisors imposing discipline in a uniform and consistent manner?
· Sharing Leave of Absence Policies
The FMLA provides all employees with twelve weeks of unpaid leave within a twelve-month period. This time allows the employee to care for the employee's serious health issues, the serious health condition of a member of their immediate family, or the time to take care of a newborn or adopted child. To ensure compliance with FMLA, employers should provide all covered employees with access to FMLA policies.
· Retaining and Maintaining Records
Employers should develop a record of the company's retention policy. Many federal and state laws have different record retention requirements, and an organization's failure to maintain records could be used against the employer in court proceedings:
Title VII requires employers to maintain a file for application forms, resumes, job advertisements, and documentation concerning hiring, promotion, layoff, or termination for one year from when the records were made, or adverse action was implemented.
The ADEA requires employers to keep certain payroll records for three years.
The FLSA also requires employers to keep certain payroll records for three years.
OSHA requires that occupational safety and health records be kept for five years. Failure to keep OSHA records can result in civil fines.
This includes a history of training records, such as those available at Lynch Learning.
· Posting Legal Notices
Federal employment statutes require employers to post notices informing employees of their legal rights in the workplace. These laws require employers to provide their employees with a notice of rights by posting this information where employees and applicants seeking employment can readily see the data. Some of the federal laws that require employer compliance include:
The Fair Labor Standards Act (FLSA)
Family and Medical Leave Act (FMLA)
Employee Polygraph Protection Act (EPPA).
Before the COVID pandemic, when employees typically worked in brick-and-mortar environments, employers could quickly satisfy the legal notice requirements by prominently displaying employment-related information on bulletin boards in well-trafficked locations such as employee break rooms and conference rooms. Because many of these laws were enacted decades before computers and electronic devices became a regular part of doing business, only some of these agencies have addressed the distribution of employment notices electronically.
The Purpose of a Labor Audit
An audit can help employers identify areas of vulnerability. A labor audit aims to determine employee attitudes toward the company. This includes their outlook regarding the employer, the management team, and the job. Labor audits usually involve a series of steps, including the following:
Reviewing the company's policies, procedures, display of legal notices, the employee handbook, and visitor access policies.
They are determining whether all employer policies comply with legal regulations.
Determining if the employer policies convey to employees that the company is concerned with the legal rights of their employees.
Determining how employees are compensated in relation to other employees.
Conducting face-to-face interviews with select employees, managers, and supervisors.
Providing training sessions to ensure the management team is aware and knows how to recognize sources of employee discontent.
The importance of an employment audit cannot be overstated. Due to the significant benefits associated with this process, employers should consider it on par with a financial audit. A labor and employment audit will not only allow employers to identify and correct problems that exist within the organization proactively, but an audit also serves to avoid a far more costly outcome that could result from legal action. Because of the many benefits associated with an employment audit, employers should consider an annual review to protect themselves, their companies, and their employees.
Schedule a Free Consultation with the Lynch Law Firm Now
If you are an employer and need assistance to ensure compliance with the Pregnant Workers Fairness Act (PWFA), call the Lynch Law Firm for help now. Our team is here for you and ready to assist you. Email us or call 512 298 2346.
Or, if you are an employer seeking to resolve a labor and employment issue, protect yourself, your employees, and your business by contacting us at the Lynch Law Firm. Our lawyers can help you navigate the complexities of your legal matter from inception to resolution. Our attorneys can also assist you in developing the following:
Workplace policies and procedures that comply with federal and state laws.
PWFA policies and procedures for accommodation
Unlimited vacation policies
Performance evaluation materials
Drafting legal agreements
Harassment prevention training modules
About Natalie Lynch: Founding Attorney
Natalie R. Lynch, a business and employment law attorney in Austin, Texas, has demonstrated expertise in workplace investigations, employment law, and entity formations. Credentialed through the Association of Workplace Investigators (AWI), Natalie is the only consulting and credentialed expert in Central Texas investigating allegations of harassment, discrimination, and hostile work environment. Having lived abroad in Ghana and Spain, Natalie brings unique perspectives to help organizations achieve business nationally and internationally. As a credentialed dispute resolution mediator, she routinely collaborates with general counsel, internal and external counsel, employment litigators, employment generalists, and senior human resources professionals.
Natalie is the outgoing Chair of the Austin Bar Association's Labor and Employment Section. It serves in leadership roles for the Texas State Bar Association, including the International Bar and Animal Law Sections. In Colorado, Natalie was a two-term president of the Aurora Bar Association, the first recipient of the Colorado Bar Association's Future Leaders award, and a member of the Bar Association's Executive Council. With her extensive business background and solution-focused, purposeful, no-nonsense approach, Natalie excels at:
Workplace discrimination matters.
Employment litigation avoidance
Customized harassment prevention training modules
As a credentialed AWI investigator, Natalie has extensive training in interviewing techniques and a unique and beneficial skill set in the legal field. Natalie insists that each investigation represents the standards of quality and litigation avoidance on which she built the Lynch Law Firm. Before becoming a business owner, Natalie prepared by obtaining her undergraduate degree in international studies from Texas A&M University and her J.D. from South Texas College of Law. She also studied at the University of Denver. Natalie is licensed to practice law in Texas, Wyoming, and Colorado, and she holds certifications from Women-Owned Business (WBE), Minority-Owned Business (MBE), and Historically Under-Utilized Business (HUB).