While it is standard practice for most companies to audit business operations to protect their financial interests, many organizations do not understand the importance of auditing business functions involving personnel management. If policies and procedures on employment law issues are not in compliance with State and Federal law or are mismanaged, financial liability far beyond the scope of financial or inventory discrepancies can result. Employment Law Compliance Audit examines those policies and procedures to identify compliance problems and potential liability risks.
With the expansion of damages that can be recovered in employment discrimination cases under the 1991 Civil Rights Act to include emotional distress and punitive damages, there has been a surge of employment related litigation. A 1997 survey of members of a national organization of human resources professionals revealed that 57% of their companies have been targets of employment related lawsuits in the previous five years. In addition to the financial exposure from substantial judgments and settlements, the litigation expenses alone to defend this type of case can be devastating to a company's finances.
A company's first priority in dealing with its potential financial liability must be to prevent lawsuits from being filed, not just win them after they are filed. An Employment Law Compliance Audit which focuses on the examination of personnel policies and procedures concerning sexual harassment, discrimination, and wrongful termination is an effective tool to accomplish this goal.
The audit typically involves interviews with upper management and those involved with personnel decisions; review of employee handbooks, postings, applications and performance, discipline and termination documentation; and a written report containing findings and recommendations.