Do An Annual Human Resource Audit

Posted on: January 23, 2016

Authored by: Holden Law Group

Each year we all have the opportunity for a fresh start; at least to some degree. If you run an organization with employees, part of the fresh start should be an audit of your personnel policies and practices. You are very likely to find at least one policy or practice that needs correction to avoid violating one of the thousands of employment regulations. Finding it before a disgruntled employee or his plaintiffs’ attorney could save you many thousands or even millions of dollars. Even if the audit reveals no issues and no risk of liability, you are guaranteed to learn something new about employment law or be reminded of something valuable that you forgot.

A human resource audit should be conducted regularly. This is why I recommend making it an annual practice. It does not, however, need to be a lengthy and costly process every year; far from it. Once a full audit has been performed, it may be quite a few years before another full audit is warranted. That will depend upon the extent of changes to the law and to your operations. In the absence of significant changes, an abbreviated annual audit will be all you need.

Whether the audit is full or abbreviated, you should carefully select the auditor. It is extremely rare for an employee to be an appropriate auditor. Most do not have the expertise necessary, and the few who might are likely within the human resource department and too close to the policies and practices to have the fresh perspective and objectivity necessary. You need a professional with experience. The professional should be an attorney or an expert working under the supervision of an attorney. It is critical to have the audit and the audit report covered by the attorney-client privilege. I cannot begin to impress upon you how damaging it would be to have an audit report which outlines legal violations that are not corrected get into the hands of a plaintiffs’ attorney. Two words make the point: punitive damages.

A good professional will guide you in making preparations for the audit so it can be conducted in the most efficient and effective manner. Make sure the audit is conducted when you have time to be engaged and work closely with the auditor. Your participation will likely improve the efficiency of the audit and will certainly help you better understand the audit report.

Carefully review the audit report. You should look for indications that the auditor did not fully understand your operations or the actual facts. You should ask questions and make sure you understand the auditor’s conclusions and recommendations. The auditor should clearly mark the report as a confidential attorney-client communication. Make sure it is. And, make sure you do not waive that privilege by sharing the report with individuals outside your organization.

Depending upon the auditor selected and her experience with employment litigation and her strategic expertise, you may need to work with an experienced employment attorney to assess the liability exposure, to prioritize issues and to develop a strategic plan of action.