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In recent years, employment has become one of the most heavily regulated areas. Employment-related litigation clogs the judicial system and makes up a significant percentage of the state and federal courts鈥� caseload. Even cases that may seem trivial have high verdict potential.

Conducting a human resources audit is one of the best ways to ensure a company is complying with current state and federal employment laws. An audit also can aid enforcement of employment policies.

Employment claims arise out of both action and inaction. For example, a hostile work environment claim could arise out of both action (e.g., offensive touching by a co-worker) and inaction (e.g., a manager who fails to discipline the co-worker who perpetrated the offensive touching).

So, a wise employer will want to make sure that the HR system is working as designed, and that employees are disciplined as evenhandedly as possible. The employer will want to know that it is in compliance with the vast array of federal and state regulations. Planning and prevention are key to minimizing liability.

A timely audit can identify problems so that a company can correct them before they turn into a lawsuit. Failure to audit HR practices can turn into a negligence claim. A timely audit may also help a company identify a potential source of future problems so that it can restructure on its own timeline.

While an HR audit can be invaluable, it is important to keep in mind that the results could be discovered in litigation. Consult with counsel before starting an HR audit.

An HR audit should include these topics:

Compliance threshold

The number of employees often determines whether an employer is subject to certain regulations. For example, both the Uniformed Services Employment and Reemployment Rights Act and Oregon wage and hour laws apply to all employers.

However, the federal Family and Medical Leave Act applies only to employers with 50 employees or more, while the obligation to provide Oregon family leave applies only to employers with 25 employees or more.

Knowing the various compliance thresholds is the first step in conducting an HR audit because it identifies which laws require compliance.

Essential policies

Not all of these policies are essential for all employers, but consider:

鈥� General Equal Employment Opportunity/discrimination

鈥� Anti-discrimination/Anti-harassment

鈥� Family medical leave (essential for employers covered by federal law)

鈥� Wage and hour and payroll policies

鈥� Violence/weapons policies

鈥� Employee monitoring/search/privacy policies

鈥� At-will employment

鈥� Smoking

鈥� Drug and alcohol policies

鈥� Benefit policies (vacations, paid time off, holidays, bereavement leave, severance pay)

鈥� Compensation

鈥� Non-solicitation/Non-distribution

鈥� Trade secrets and noncompetition

鈥� Software control and use

鈥� Business ethics

鈥� Electronic systems use and misuse

鈥� Dispute resolution, grievance and arbitration

Posters

Oregon and federal law requires that certain posters be displayed in the workplace. Visit www.oregon.gov/boli/TA/Pages/Req_Post.aspx to access a list. Take a physical tour of the premises in all locations to see whether all required posters are displayed appropriately.

Drug and alcohol testing

If drug and alcohol testing is performed, review the policy to make sure that it has been updated, particularly with respect to Americans With Disabilities Act amendments and related Oregon statutes. Also, consider how prescription drug use and medical marijuana use will be treated under the policy.

Job safety

All Oregon employers are required to have a safety committee, so make sure one is in place. Also, have appropriate personnel review practices for compliance with OSHA regulations.

Independent contractors

In the last few years, the Obama administration has significantly increased funding for Department of Labor investigators to identify 鈥渕isclassified鈥� employees in an effort to, among other things, recover lost tax revenue from employers.

Oregon law also has a number of different requirements for classifying independent contractors. Therefore, it is especially important that a company鈥檚 relationship with any independent contractor is clearly defined in a contract and conducted in such a way that a state or federal agency will not determine that an independent contractor is in fact an employee.

Auditing the termination process

Review files of terminated employees to see whether the company is:

鈥� Issuing final paychecks on time

鈥� Documenting terminations properly

鈥� Citing proper reasons for terminations

鈥� Providing opportunities for an employee rebuttal

鈥� Providing opportunities for an exit interview

鈥� Receiving returns of company property (keys, credit cards)

鈥� Issuing reminders of any noncompetition, non-solicitation, or confidentiality agreements or policies.

Depending on a company鈥檚 industry, additional topics may be useful as well. Across all industries, however, a periodic review and revision of policies and practices can be an effective way to reduce risky lawsuits.

Laura Salerno Owens is an attorney with Barran Liebman LLP. She specializes in employment litigation and advice. Contact her at 503-276-2111 or [email protected]. To learn more about conducting an HR audit, register for Barran Liebman鈥檚 March 5 Food for Thought breakfast seminar at the Multnomah Athletic Club in Portland. To register, visit www.barran.com or email Traci Ray at [email protected].