Lawsuits on the rise: Audit your policies to prevent litigation

The economy is a shambles, and employers are doing everything they can to stay in business. That includes terminations, salary and wage cuts and temporary furloughs. Nearly every one of those moves carries litigation risk.

With little to lose, more and more employees are willing to stake bias claims, hoping to score a big settlement. Their allies are attorneys who will look for any reason to sue.

Need convincing? The dramatic increase in EEOC complaints rose 15.2% from 2007 to 2008, illustrating the risk employers take with every layoff decision.

What employers should do

Have your company’s personnel policies and practices had a checkup lately? A comprehensive audit is one of the easiest ways to spot problems.

A labor and employment audit covers all of an employer’s personnel policies and practices. Typically a labor lawyer conducts an on-site review of your personnel and payroll records, as well as your personnel policies. He or she usually interviews executives and managers concerning practices that appear to be out of compliance.

The reviewer then issues a detailed, confidential report to management discussing the status of the company’s compliance. Where necessary, he or she recommends corrective action.

The audit mirrors what an employer could expect if a government inspector walked through the door. But there’s a big difference: Results are reported only to management, which then can take corrective action before any government agency learns of the problems.

Wage-and-hour laws

The Fair Labor Standards Act (FLSA) is a complex statute that contains many categories of exempt employees—some of whom are exempt from both the minimum wage and overtime provisions, and some of whom are exempt only from overtime.

It’s your responsibility to classify your workforce by determining who is exempt and who is nonexempt. Sounds simple, but if the Department of Labor finds out years later that you incorrectly classified your workers, you could owe thousands of dollars in back wages, damages and penalties.

FLSA record-keeping is another potential problem. Employers must maintain pay records of all hours worked. Time clocks can simplify this task.

When paper time sheets are used, detail is important. For example, be sure to use a form that clearly sets out the unpaid lunch breaks. Ensure that employees are completely released from their duties during their meal breaks to avoid later claims that they were required to work through lunch. That brief lunch period, 30 or 60 minutes, can add up to a lot of hours and money if the DOL determines that the time is compensable under the FLSA.

Occupational safety issues

A review of workplace safety and health issues should include the “OSHA 200” or injury log book that many employers are required to maintain. If you are required to maintain the log, you must post a copy in the workplace each year throughout the month of February.

You must keep information regarding hazardous chemicals in the workplace—on Material Safety Data Sheets—on the premises.

You must also have appropriate safety measures in place, such as first aid kits, to protect workers. A good audit will review your past OSHA experience and methods of abating hazards that are discovered.

Discrimination and leave issues

Employers with 15 or more employees are subject to many federal employment discrimination laws. Employers with 50 or more employees must comply with the FMLA. Then there are protections for military personnel and their families.

An audit will include reviewing your personnel policies, forms and legally required posters, and evaluating personnel practices to determine whether there are any compliance issues.

This is important, since many of the rules have changed in recent years. Many employee handbooks have not kept pace.

It’s impossible to eliminate the risk of a government agency or private litigant finding some violation of a federal or state law, but an investment of time to audit your policies and practices can pay big dividends.

Conducting a do-it-yourself employment audit