Business and Corporate Section Monthly Article


Employment Law Audit: Protecting Employees, Employers, and the Bottom Line

Set forth below is an outline of practical issues corporate or outside counsel may wish to discuss with their employer clients. Ideally, employers should be able to answer the questions in the affirmative. If they cannot, a closer look may be necessary to determine if the employer has run afoul of California’s strenuous employment laws—found in the Government Code, the Labor Code, or federal laws such as ADA, FLSA, FMLA, etc… Many employers overlook compliance issues which can result in costly disputes and litigation. By taking the time to do some “preventative care,” employers can better serve their employees and minimize their exposure to potential liability.

  1. Hiring Practices

    1. Have you reviewed your recruiting practices, employment application, and offer letters to be sure that you are not making unwarranted promises of job security?
    2. Have you made sure that your application does not contain any unlawful or discriminatory questions, and that your hiring staff have been trained not to ask such questions in employment interviews?
    3. Have you obtained confidentiality agreements and/or proprietary information agreements from new employees, where appropriate?
    4. Have you developed adequate job descriptions for your workforce, and have employees and supervisors been made familiar with the essential elements and performance expected of each job?
    5. Have you reviewed your executive employment agreements, if any, with counsel to be sure that the rights of the organization are protected, particularly as to grounds for termination, compensation and benefits?
    6. Do you have on file proper I-9 forms for every current employee hired since 1986 (and former employees terminated within the last three years)?
  2. Employment Policies and Work Rules

    1. Do you have an employee handbook?
    2. Does your handbook contain a properly drafted policy on EEO and harassment, including alternative complaint mechanisms and anti-retaliation provisions?
    3. Does your handbook contain appropriate disclaimers which preserve managerial discretion and guard against the handbook’s being interpreted as a binding contract?
    4. Where progressive discipline is appropriate, do your disciplinary rules permit management to exercise discretion in the choice of discipline, as opposed to setting forth rigid disciplinary steps?
    5. Have your employees acknowledged receipt of the handbook and/or notice of the work rules?
    6. Have you published a written policy on compliance with the Family Medical Leave Act, if applicable?
    7. Have you provided reasonable accommodation to qualified people with disabilities, in accordance with applicable law?  Do you have an interactive process? 
    8. Have you reviewed your attendance and leave policies in general, to monitor compliance with the ADA/FMLA?
    9. Have you established a computer/e-mail policy and/or a policy on electronic monitoring?
    10. Are there established procedures for supervisors to follow in administration of your work rules, and are supervisors being trained and monitored for their compliance with such procedures?
    11. Have you established an appropriate written safety program?
    12. Are you in compliance with OSHA’s Hazard Communication Standard?
    13. Are all recordable injuries and illnesses recorded on OSHA Form No. 200, where required?
    14. Have you established a lawful and properly enforced drug and alcohol control policy?
  3. Compliance with Wage and Hour Laws

    1. Are you paying proper and nondiscriminatory wages and overtime for each job, in compliance with the Fair Labor Standards Act and the Equal Pay Act?
    2. Do your job descriptions reflect the exercise of sufficient judgment and discretion to qualify any claimed exempt employees for that status?
    3. Are you familiar and complying with the Department of Labor’s “pay docking” rules relating to salaried, exempt employees?
    4. Are all consultants properly classified as independent contractors or should they be paid as employees?
    5. Are any volunteers engaging in activities which should be compensated under the FLSA?
    6. Are all hours of work, including travel time, training sessions, etc., being properly compensated?
    7. Does the regular rate of pay for all non-exempt employees include all required payments?
    8. Are all deductions from employee paychecks properly authorized and documented in compliance with state wage payment laws?
  4. Documentation

    1. Have your supervisors maintained incident logs and do they regularly write up employee offenses?
    2. Have verbal warnings, counselings and/or written warnings been recorded in employee personnel files?
    3. Have employees been regularly evaluated?
    4. If so, have the evaluation forms been reviewed by an attorney with regard to their objectivity and potentially discriminatory effects?
    5. Have the supervisory evaluators received training in the use of the forms?
    6. Have all evaluations been reviewed at higher levels and monitored in a centralized manner for discriminatory impact or erratic evaluation patterns?
    7. Have you determined whether and to what extent the law in your state requires you to permit employees to inspect their personnel files?
    8. Do you otherwise maintain strict confidentiality of personnel files as to people other than the employee, except on a clear “need to know” basis?
    9. Have you established a record retention policy (such as at least one year for all employment applications, three years for most payroll records, etc.)?
    10. Have you posted the proper notices required by state and federal law?
  5. Investigating Offenses

    1. Do you prohibit on-the-spot termination in favor of immediate suspension pending investigation by higher level authority?
    2. Do you always have another management witness present when talking to an employee concerning serious discipline?
    3. Do you avoid giving lie detector tests where prohibited by law?
    4. Have you investigated and remedied prior complaints by employees, if any, of harassment and/or failure to accommodate?
    5. Do you have a system in place for alternative dispute resolution of employee claims?
  6. Employment Termination Considerations

    1. Do you have another management witness present when any discharge decision is communicated?
    2. Do you truthfully state the basis for all termination decisions, without misstating (either overstating or understating) the reasons for terminating the employee?
    3. Do you maintain compliance with any applicable wage payment laws, severance policies, administration of benefits, and insurance law requirements?
    4. Do you consider providing post-termination benefits in return for a release?
    5. Do you treat discharged employees fairly with regard to all post-termination issues?
    6. Do you always give so-called “neutral” references regarding former employees in order to avoid charges of defamation and/or discrimination, and have you counseled supervisors to comply with the policy?
  7. Conclusion

    No employment law audit can guarantee success in avoiding employment-related lawsuits by disgruntled former employees. Also, the suggestions above do not constitute legal advice, which can only be offered in response to detailed discussion of specific fact situations. Nevertheless, careful, periodic review of the items listed above are common-sense precautions which should help to minimize an employer’s potential liability for employee claims while further enabling the employer to maintain good employee relations in a complex legal environment.

-- Karin L. Backstrom, Esq.

**This article is intended for informational purposes only and does not constitute legal advice. Any views expressed are those of the author only and not of the SDCBA or its Business & Corporate Law Section.**