Benefits and Compensation

Could Comp Audit Be Damaging Exhibit #1 in Court?

And the second rule of auditing: Be sure that management is willing to make corrections if infractions are found.

If your own audit shows failure to comply, and especially if you haven’t taken steps since the audit to correct the situation, your audit can quickly turn from a helpful tool to a damaging exhibit in court.

What Should Your Audit Cover?

You may want to do a comprehensive audit, or you may be concerned only about a certain aspect of your operations, or you may choose to "chunk" an audit—that is, cover different areas of your operations one at a time.

However you choose to proceed, here are examples of key areas to cover:

Wage and Hour

  • Review exempt and nonexempt status decisions. Employees who are improperly classified as exempt from overtime could end up costing you a bundle. Problematic categories include, among others, administrative assistants, paraprofessionals, lead persons, low-level supervisors, assistant managers, sales employees, and computer software professionals.
  • Review wage rates for demographic categories of employees, e.g.,male and female.
  • Review overtime pay practices, especially for unpaid work.

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Salaried Employees

  • Review pay rates, demographic categories of employees.
  • Review promotion decisions, raises for demographic categories.

Child labor

Make sure that you are following the strict child labor rules regulating hours of work and the types of work youngsters may perform.

Recruiting Practices

  • Review job applications, advertisements, job descriptions, and interview questions for compliance with state and federal antidiscrimination laws.
  • Make sure interviewers are trained regarding the questions they can and can’t ask under antidiscrimination rules.
  • If you obtain consumer reports or credit reports, be sure you provide the required disclosures to applicants and get their written consent.

Preemployment Testing

  • Evaluate honesty tests, psychological profiles, and other preemployment tests to be sure the questions are job-related and don’t invade personal privacy.
  • Check to be certain the tests don’t discriminate on the basis of age, gender, race, religion, ancestry, sexual orientation, or other characteristics.
  • Eliminate questions about religious beliefs, sexual preferences and activities, and politics.

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Medical Exams and Drug Testing

  • Be sure that medical exams are administered only after you have made an offer of employment. (The offer can be conditioned on successful completion of the exam.)
  • Examinations must be mandatory for all applicants in the same job classification.

(Drug tests are not considered medical examinations, so you can test for illegal drug use without first making a job offer.)

Application Forms

  • Include a clear statement of at-will employment in your applications. Use the term "at will" and explain what it means.
  • Mention that no one in the organization has authority to modify the at-will employment provision, except, for example, the president of the company, and then only in writing.
  • Spell out that, except for your at-will policy, you have the right to modify any and all of your policies or practices at any time, with or without a reason or advance notice in your sole discretion, including the right to change the employee’s compensation, hours, and working conditions.

In tomorrow’s Advisor, audit areas for employment and termination, and an introduction to a widely-respected, state-based compensation resource.

2 thoughts on “Could Comp Audit Be Damaging Exhibit #1 in Court?”

  1. Audits definitely have value, but the problem is making room for them on an already crowded, and often under-resourced, HR plate.

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