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Beware of hidden legal risks in annual HR audits

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in HR Management,Human Resources,Office Management,Records Retention

Issue: HR audits can help you identify weak points in your employment-law compliance.

Risk: If you don't act on the audit's recommendations (and employees find out) that mistake can kill you in court.

Action: Don't avoid HR audits; their benefits outweigh their risks. But keep audits private using the following advice.

HR legal audits can do wonders to spot leaks in your employment-law boat. Many employers conduct HR audits annually to help them spot potential problems that could trigger lawsuits or fines from government regulators.

But those same audits, which are supposed to prevent liability, can have the opposite effect if your organization doesn't plug the legal holes that the audit finds.

If current or former employees who are suing your organization learn about the audit's existence, their lawyers can request copies of the audit results during discovery proceedings.

"Some courts allow that and I'm seeing it more often," says Maria Danaher, employment-law attorney with Dickie, McCamey & Chilcote in Pittsburgh. "I think it's because more companies are doing audits."

Bad things can happen when HR audits fall into the hands of employees filing lawsuits, such as:

1. Employees' lawyers can use the report to increase requests for financial damages.

2. Employers who didn't fix the problems exposed in an audit have a tough time proving that they didn't purposely violate the law.

3. Employees' lawyers have an easier time proving that your organization didn't follow the law or intend to correct violations.

Most employers use lawyers to conduct HR audits. But audit results are subject to discovery, regardless of whether they're conducted by lawyers or HR consultants.

While the facts of the audit itself are typically subject to discovery, you can keep some things private. Example: You can use attorney/client privilege to keep private your communications with attorneys about your HR audit, including legal advice and conclusions about the facts.

Advice: Take these steps to keep HR ?audit results as private as possible:


  • Limit the number of people involved in the audit. "Most times, the process involves HR and a lawyer, but not necessarily senior executives unless problems are discovered," says Danaher.



  • Keep the audit locked away from other files. Limit access to the final report to audit group members and senior executives.



  • Tell people involved in the audit not to discuss it with others. But don't ask them to sign a confidentiality agreement. "That creates an aura of secrecy around it," says Danaher.




Final note: FLSA violations are the most common problems revealed in legal audits, resulting mostly from sloppy recordkeeping.

"Our audits have also found medical records in personnel files, no I-9 forms and notes on applications by managers indicating whether employees are too old or have child care issues," says Kevie Mikus, VP of client services for The HR Group.

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