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HR Self-Audit

HR Vulnerability Self-Audit 

An employment practices audit is a comprehensive program combining supervisory interviews, analysis of employment-related litigation, evaluation of personnel actions, review of personnel policies and practices, and additional efforts to identify potential areas of legal vulnerability. In spotting weaknesses which could result in charges or lawsuits, it assists insurers in assessing the risk to be allocated through the employment practices liability coverage.

Knowing its areas of vulnerability, an organization can take corrective steps to decrease the likelihood employees will feel the need to turn to a labor organization, government agency or court to resolve their disputes. Identifying problem areas also keys the organization in to the need for specific training for supervisors and managers to understand how to comply with employment laws and regulations.

Sections of this audit: Employment Documents and Records, Payroll and Recordkeeping Practices, Independent Contractor Status, Discipline and Discharge, Short Form Preventive Audit

Employment Documents and Records

      A critical element of the preventive audit is the identification of policies or practices that, on their face or as administered, may violate federal, state or local employment statutes or regulations. This requires a full review of employment-related documents, records and recordkeeping practices, including policies addressing recruitment, hiring, compensation, assigning overtime, leaves of absence, staff reduction, promotions, discipline, transfer and similar personnel decisions.
  1. Employee handbook -- The employee handbook is the company’s official source of information about polices and procedures, and, if well drafted, can foster positive employee relations and minimize litigation. Periodically, the handbook should be reviewed for compliance with applicable federal, state and local labor, employment and wage-hour laws. A careful audit should result in better policies, clearer communications, and enhanced ability to avoid and resolve disputes.
  2. Other employment documents -- In addition to the handbook, all other employment documents, including personnel forms and employee communications, should be reviewed. These include:

    • employment application
    • applicant reference request form
    • applicant interview notes
    • employee reference release forms
    • employee evaluation forms
    • disciplinary warning forms
    • leave of absence request forms
    • I-9 forms
    • EEO-1 reports
    • FMLA policies and administration
    • personnel activity data

Payroll and Recordkeeping Practices

      Payroll and recordkeeping practices should be reviewed to verify compliance with applicable state and federal requirements. This includes an evaluation of the manner of storage and length of retention of employment records.

Independent Contractor Status

      Various employment laws, for example, the Fair Labor Standards Act, define the term "employee" for purposes of determining who is entitled to the law’s protection. In addition the Internal Revenue Service has defined the term "employee" for purposes of determining when an employer must make payroll deductions for federal income tax. Employee status also is important for purposes of determining whether an individual is protected by the anti-discrimination laws. If an employer mistakenly classifies an individual as an independent contractor rather than an employee, the employer may be liable for allegedly discriminatory conduct, as well as for income tax withholding and penalties. 

The tests for employee status involve a determination of who controls the employment. Do company supervisors retain the right to control when and how the individual works? If so, independent contractor status is questionable. Does the individual perform an integral function of your business on an ongoing basis? If so, he or she is more likely to be considered an employee.

Discipline and Discharge 

Perhaps the conduct posing the biggest risk of liability for employers is disciplining and discharging employees. A quick review of some basic questions may indicate the source of potential problems and signal an area that needs a closer look before taking adverse action.

  • What was the precipitating cause for the adverse action?
  • What is the employee's past record?
  • Has there been an adequate investigation?
  • Do the facts confirm with reasonable certainty the employee did what he or she is charged with doing? What precipitated it?
  • How was the investigation conducted? 
  • Are there confirming statements or interview reports? 
  • Was the employee given an opportunity to explain what happened?
  • Does the company have written employment rules or policies? If so, are they distributed to ( or at least known by) all employees?
  • Did the employee violate a specific rule? Which one?
  • Is the rule lawful? Does it adversely affect minorities, women or members of a protected class?
  • Has the rule been enforced consistently?
  • What was the most similar instance in which the company terminated someone in the past? How long ago did that occur?
  • Did the company ever warn, rather than discharge, an employee for a similar act? If so, are there significantly different or changed circumstances which would warrant termination in this case?
  • Has the company reviewed the comparative data?
  • Is the employee a member of any class protected by any law against discrimination? 
  • Does the rule have a disproportionate impact on members of any protected class? 
  • What is the composition of the employer's workforce with respect to potentially applicable protected classes?
  • If the discharge is based on company rule, is the rule related to job performance?
  • Have supervisors been trained to recognize, correct or avoid unlawful discrimination? (This can be a significant factor in avoiding damages for a willful violation)
  • Has the facility posted a policy prohibiting sexual harassment and other forms of discrimination, including a published remedial and investigative procedure?
  • Was the employee given any oral or written assurances of continued employment: policy requiring that a particular disciplinary procedure would be followed? 
  • Did the employee receive notice or sign a disclaimer indicating the employment relationship could be terminated at any time and for any reason?
  • Would the discharge give rise to any common-law contract or tort claim?
  • Would the discharge violate any public policy or statute?
  • Has the employee filed any claims against the employer?
  • Has the employee formally testified or provided information against the employer in connection with any legal proceeding?
  • Did the company comply with the notice requirements of the Worker Adjustment Retraining and Notification Act?


     To assist your company in assessing its vulnerability to employment litigation, Jackson Lewis has developed this short form preventive audit. It is intended to highlight potential problem areas, which could result in claims or litigation against your company. It is not intended as legal advice about any particular situation or EPLI policy. For specific advice, please consult with competent employment counsel or your insurance broker.
  1. Has the Company implemented, communicated and consistently enforced appropriate rules regarding solicitation, distribution, trespass and access to the premises?
  2. Are appropriate posters conspicuously displayed explaining state and federal equal employment and federal contractor laws?
  3. Does the Company have an Equal Employment Opportunity policy?
  4. Does the Company maintain anti-discrimination policies and/or written procedures for the selection of employees for hiring, promotion, transfer, layoff, salary increases, work assignments and other employment actions?
  5. Has the Company adopted, communicated to employees, and consistently enforced a sexual harassment policy?
  6. Do all employees periodically receive training in recognizing and preventing sexual and other forms of harassment?
  7. Does the company have a sexual harassment complaint procedure that ensures confidentiality and provides a bypass mechanism for the offending individual?
  8. Are the Company’s employment policies and procedures, including employee handbooks, periodically reviewed by employment counsel?
  9. Is the Company in compliance with the wage-hour laws, including those pertaining to overtime pay and exemptions, time record-keeping, wage deduction prohibitions and payment for training, orientation and "on call" time?
  10. Does the Company administer any tests, including drug tests, to screen applicants or to promote or monitor employees?
  11. Are job descriptions periodically reviewed for accuracy and to distinguish between essential and non-essential functions?
  12. Is there a written safety program and a procedure for handling employee complaints?
  13. Have the Company's five most recent EEO-1 forms been reviewed to determine appropriate representation of women and minorities in each EEO-1 category and the degree which such female or minority representation is increasing or decreasing?

  14. Are all employment applications in compliance with federal and state laws?
  15. Are applications on file reviewed when there are job openings?
  16. Are open positions posted internally and/or with the state job service?
  17. Are employment ads reviewed for accuracy and legality?
  18. Are all interviewers appropriately instructed as to lawful inquiries and equipped with an interview checklist and packet containing both lawful inquiries and questions not to ask?
  19. Are applicants asked to sign a reference consent and are references appropriately checked before an offer of employment is communicated to the applicant?
  20. Is orientation standardized for all departments and an appropriate orientation checklist followed which includes orientation to the physical plant, the Company's problem-solving procedure and its union free philosophy?
  21. Do new hires sign an appropriate handbook receipt/disclaimer and receipt for other orientation material?

  22. Are written performance evaluations completed at the end of an employee's introductory period and on a periodic basis?
  23. Do the standard evaluation forms reflect the evaluator's supervisory status and contain appropriate criteria?
  24. Is an evaluation conference held to review the evaluation and obtain the comments and signature of the employee?

  25. Are current disciplinary rules effectively communicated to employees and supervisors?
  26. Do supervisors in all departments receive instruction on how to enforce the disciplinary rules fairly and consistently?
  27. Is enforcement of the disciplinary rules monitored to ensure fair and consistent enforcement in all departments?
  28. Is a system of progressive discipline followed which provides for a thorough investigation, including an opportunity for the employee to give an explanation, prior to the imposition of discipline?
  29. Is appropriate documentation maintained, including oral warnings (documented), written warnings, and memoranda related to informal reprimands? Do employees sign warning forms?
  30. What is the procedure for reviewing prospective terminations prior to actual termination?

  31. Are employees permitted to bring complaints to supervisors in an informal manner?
  32. Is there a formal complaint resolution procedure which is communicated to employees and allows employees to, in certain instances, bypass their immediate supervisor?
  33. Are supervisors instructed as to their role in the complaint resolution procedure in order to encourage its use and ensure that complaints are addressed in a timely manner?
  34. Are the nature of complaints and action taken appropriately documented?

  35. Are records of hours worked and overtime maintained for non-exempt employees?
  36. Are records of employee attendance, sick leave, vacation, and other leaves maintained?
  37. Are employee benefit programs communicated to employees during orientation, in the handbook and when changes/improvements are made?
  38. Are wage increases given in a fair and consistent manner, based upon as objective criteria as possible?
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Related Articles

Laws Requiring Employers to Conduct Code of Business Conduct and Ethics Training
HR Self-Audit - Employment Documents and Records
HR Self-Audit - Payroll and Recordkeeping Practices
HR Self-Audit - Discipline and Discharge
Terminology Used in the HR Care Publications


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