To reduce the risk of class or collective actions, many employers have taken steps to build the best defense through a good offense. Conducting a comprehensive internal audit of employment practices and policies aids in identifying vulnerabilities, assessing risks, and developing remedial and preventive strategies. Using outside counsel to assist with the audit may establish attorney-client privilege and shield the results during subsequent litigation. Moreover, the audit process can be useful in developing procedures and guidelines necessary to preserve electronic information in anticipation of litigation under new court rules for e-discovery. Conducted before or during litigation, the employment practices audit can help to identify specific trouble spots in particular industries, geographic locations, and job classifications, determine if managers and supervisors are acting lawfully and appropriately, and address employee concerns.

To minimize the risk of a collective action alleging wage and hour law violations, the audit should review pay and compensation practices for compliance with all applicable federal, state and local wag and labor laws. Close attention should be paid to the rule changes for exempt status under the Fair Labor Standards Act. The audit should clarify the employer's objectives, define the parameters of examination, assess the potential liabilities, identify available safe harbors, and suggest strategies to remediate areas of noncompliance to avoid future problems.

• Determine what segments of the business may be most vulnerable, e.g., facilities within the state of California, or classes of jobs involved in recent actions (financial advisors, customer service representatives).
• Detail the areas of recordkeeping and compensation practices to be examined, with regard to compensable time, meal and rest periods, payroll practices, comp time and special compensation issues, recordkeeping and posting requirements, safe harbor protection, independent contractors and vendors, and exempt status.
• Develop and implement remedial measures to reduce vulnerability.
• Install and administer "best" compensation practices.

"Some of the largest employment litigation settlements have resulted from class actions alleging that employers mishandled benefit plan sponsorship and administration," notes Jackson Lewis partner Ashley Abel, co-chair of the firm's Employee Benefits Counseling, Benefits Litigation and Privacy Practice Group. "In many cases, employers can minimize ERISA-based claims by reviewing plan fiduciary activities and decision-making to find and correct deficiencies before litigation ensues."
In addition to the general parameters for conducting an employment practices audit, an internal review of benefit plan practices to assess potential plan fiduciary liability should examine several key areas. Auditing counsel must:

• Determine if executives with ERISA fiduciary duty are protected by directors and officers insurance, and if so, whether the coverage is adequate.
• Review existing fiduciary decision-making processes for objective indicators of reasonableness and good faith, including proper documentation.
• Determine whether the required written investment policy statement is in place and is being followed.
• Review the process for investment fund selection and monitoring to determine compliance with ERISA requirements, including monitoring of outside investment professionals.
• Determine whether appropriate and sufficient information is being shared with plan participants.
• Determine whether it is prudent to offer the employer's stock as an investment vehicle in the pension/401(k) plan.
• Review the new Pension Protection Act and its implementing regulations from the Department of Labor to make sure all investment plan protection afforded by the act is being used to reduce potential liability.

"As employers strive to implement workplace programs that enhance employee health and safety and reduce lost work time, they must understand the rapidly changing climate for leave and disability laws specifically, and employment discrimination generally," cautions Jackson Lewis partner Frank Alvarez, chair of the firm's Disability, Leave and Health Management Practice Group. "Employers should concentrate their efforts on reducing the risk of class actions and intervention by government agencies, such as the EEOC and the Department of Labor."

Employers long have been schooled to prevent workplace discrimination through lawful and effective employment policies and procedures and through workforce training. Nevertheless, the risk level is still high when it comes to multiple plaintiff or class action litigation alleging discrimination based on race, gender, age, national origin and disability. Indeed, renewed enforcement emphasis on systemic discrimination and "pattern and practice" cases by the EEOC and the Office of Federal Contract Compliance Programs underscores the need to insure not only that policies are facially neutral but that their application does not result in disparate treatment of any protected group. To uncover potential vulnerability to classwide claims, auditing counsel should include the following general inquiries:

• Determine whether current policies and practices comply with all applicable federal, state and local EEO laws and regulations.
• Review supervisory and employee harassment prevention training programs.
• Insure job-relatedness of company-wide hiring, promotion, and training program criteria and the absence of disparate impact on protected groups.
• Review procedures for preservation of electronic information that may be subject to e-discovery during litigation.
• Review absence, return to work, injury prevention, safety, wellness, and other broadly applied programs for potential conflict with EEO laws.