Chkmo conducting an_hr_audit_and_using_technology_for_compliance_amy_wilson

Amy S. Wilson Ann Milborn Getz
Frost Brown Todd Automated Payroll Service
awilson@fbtlaw.com agetz@apswfm.com
Conducting an HR Audit and Using
Technology for Compliance

Amy S. Wilson
 Amy Wilson is a Member with Frost Brown Todd in
the area of labor and employment. She concentrates
her practice in employment litigation and general
business counseling.
 Amy represents employers in single plaintiff and class
and collective action litigation in state and federal
court.
 Amy also counsels employers on all aspects of the
employer-employee relationship, provides
management and employee training, conducts HR
audits, and drafts handbooks, agreements, policies,
and procedures.

Ann Milborn Getz
 Ann is a 25-year sales consultant, with a background
in Benefits, HR, Payroll, and Time & Labor
Management software, and is currently with APS
Workforce Management, a Kronos service bureau.
 Her passion is bringing all of the pieces of the puzzle
together to create efficiencies and reduce risk for
employers. Ann’s 5 years of extensive experience
with the Kronos Workforce Ready platform enables
her to customize an affordable enterprise-level
solution for small and midsize businesses.

Learning Objectives
• Identify some of the HR policies, procedures,
documentation and systems in need of a compliance
audit in order to improve the HR function and to ensure
compliance with ever changing laws
• Learn best practices in conducting an audit, including
identifying the scope, collecting data, analyzing
findings, and creating action plans
• Learn the benefits of utilizing technology to assist in
conducting audits and in implementing systems and
tools as a result of the audit’s findings

What is an HR Audit?
 “HR Audit” defined: devoting time
and resources to taking an intensely
objective look at the organization’s
policies, practices, procedures, and
strategies to protect the organization,
establish best practices, and identify
opportunities for improvement.
 Learning Tool, Not a Test

Why conduct an HR Audit?
 effective utilization human resources
 compliance with law
 instill confidence in HR dept
 maintain or enhance reputation
 "due diligence" review for
stakeholders/shareholders
 employee development
 deterrent to litigation
 proactive protections
 cost < litigation

When to Audit
 Audit at least once a year – not just
“panic audits”
 Conduct an audit following any
significant event (i.e., new plans,
management changes)
 Mini-audits allow for some course
correction

Time and cost of audit
 Depends on:
 size and type of organization
 type of information the
organization hopes to obtain
 scope of the audit and tools used
 # of people on the audit team
(including outside counsel)
 desired reporting of audit findings
 action plan and implementation

Will my audit findings be discoverable in
litigation?
 Yes, if not protected by attorney-client
privilege or work product protections.
 Based on type of audit and level of
concern, consider hiring outside legal
counsel to conduct the audit.
 Company may decide to waive
privilege at a later time to use as
defense in litigation.

Audit Steps
 Form the audit team
 Identify the purpose and scope of audit
 Use audit tools to gather information
 Analyze findings with audit team
 Develop plan for compliance and take
action!

Purpose of Audit
 Compliance. Focuses on how well the organization is
complying with current federal, state, and local laws and
regulations.
 Best practices. Helps the organization maintain or
improve a competitive advantage by comparing its
practices with those of companies identified as having
exceptional HR practices.
 Strategic. Focuses on strengths and weaknesses of
systems and processes to determine whether they align
with the HR department's and the organization's strategic
plan.
 Function-specific. Focuses on a specific area in the HR
function (e.g., payroll, performance management, records
retention).

Scope of Compliance Audit
Areas of Vulnerability
 Hiring & Onboarding
 Wage & Hour
 Benefits
 Employee Relations
 Leaves of Absence
 Safety and Security
 Equal Employment Opportunity
 Training and Development
 Employee Separation
 Recordkeeping and General Compliance

Compliance Audit Tools
How to find gaps in compliance?
 Checklists
 Questionnaires
 Meetings and Interviews
 Creation of reports
 Review records and systems

Hiring & Onboarding
Compliance Audit

First—why is hiring & onboarding an area
of vulnerability?
Case Study
 Alice applies for a secretarial position at
Braden Corporation. Alice fills out her date of
birth and country of origin on the application.
 After reviewing her application, Manager Mike
looks up Alice’s public Facebook profile. Alice
frequently discusses a child with a disability on
her wall.
 Mike then schedules Alice for an interview.

Hiring & Onboarding Case Study
 During the interview, Alice says she will need
frequent breaks during the work day. Mike ask
her if the breaks are due to a medical condition
and she reveals she has diabetes. Mike makes
note of her diagnosis and need for breaks in the
comments section of her application.
 Alice is also wearing a back brace. Mike asks if
she is going to be able to lift heavy files in “her
condition.” Alice says yes. Mike tells her that she
must pass a medical exam before her hire.

 Alice files an EEOC Charge alleging race, national
origin, and disability discrimination.
 What evidence will support Alice’s claims?
 What types of audits could have alerted the
company to these liabilities?

 Bob, who also interviewed for the position with
Manager Mike, files an EEOC Charge alleging that
he was not hired due to his race. The EEOC issues
a subpoena for all of the company’s applications for
the secretary position. The company only keeps
paper applications for those actually hired.
 Is this a problem?

Hiring & Onboarding Compliance Audit
 Audit Team: HR and Attorney
 Purpose/Scope: Compliance and Best
Practices audit of hiring and onboarding
practices and policies
 Tools: Create an audit checklist. Interview
managers and review records/systems
when auditing each checklist item.

SAMPLE CHECKLIST
 Applications
• All applicants requested to fill out and sign
application? At will disclaimer?
• Applications refrain from requesting
protected info?
• Applications retained for those not selected
for the job?

• Interviews
• Interviews with applicants conducted in
structured format?
• Interviewers properly trained in
interviewing techniques and various
legal considerations?

• Background checks
• Compliance with FCRA?
• Consistent for all employees?
• Social media check?
• Testing & Exams
• Are all tests used in selection process
necessary and pass legal scrutiny?
• Medical exams required?
• Job Descriptions
• Exist? Up to date? HR review them all?
• Interview questions related to functions?

• Offer Letters
• Are offer letters consistent?
• Do any offer letters contain exceptions to
standard salary and benefits? Approval and
documentation?
• New Hire Checklist
• Use of checklist to ensure all subject areas
have been covered and necessary forms
completed?

• Orientation
• Is there an established written orientation program
for new employees?
• Provided with copies of handbooks and benefit
booklets?
• Trained on policies? Sign acknowledgment?

• Agreements
• Employment Agreements
• Independent Contractor
Agreements
• Non-Compete/Non-Solicit
Agreements
• Confidentiality and Proprietary
Information Agreements
• Arbitration Agreement (waiver of
class claims)

• Document, benchmark and analyze findings
• Create action plan and implement changes
 Discuss any legally non-compliant issues with an
attorney, if necessary
 Know your goals for the employees and the
company
 Be specific and realistic
 Break large tasks into smaller, more
manageable chunks
 Set measurable milestones
• Use technology for ongoing compliance

Using Technology for Compliance
 Electronic files = accurate & secure record keeping
 Where is your data? (paper, cloud, both?)
 Data security, backup plan
 Single platform all data & reports in one place

Evolution of HCM Technology
 Manual:
• Paper & Spreadsheets
• Complex Requirements
• Focus on Errors & Fines
 Challenges:
• Papers misplaced
• Writing illegible
• Papers altered
• Keystroke errors

 Automated:
• Decrease Paperwork
• Focus on Standardization
• System Specific Software
 Challenges:
• Mix of paper & automation
• Multiple logins
• Duplicated data entry

 Data-Driven:
• Single Platform
• HCM Analytics
• Electronic Audit Trail
• ONE VERSION OF THE TRUTH
Manual Automated
SINGLE PLATFORM
Strategic

Hiring & Onboarding: Using Technology
for Compliance
Electronic Application Process- how it works
• Job requisition built in HCM platform
• Link to application on employer website
• Employee self service; apply on web
• Employer sets required fields
• View all applicants in one “house”

Hiring & Onboarding: Using Technology for
Compliance
Electronic Application Process - for compliance
• Avoid asking too much (age, etc.)
• Electronic audit trail for EEO compliance
• No more misplaced paper applications
• No more handwritten notes on paper app.
• Applicant keys data “employee self-service”
Less data entry errors by employer
Less employer risk

for Compliance
Electronic New Hire Onboarding
 EE profile already in database from application process
 Workflows assign EE tasks in “To Do Queue”
 Onboarding checklist (customized to role)
 Electronic signature – handbook acknowledgment
 Add custom forms
 Safety
 Non-compete, confidentiality, arbitration agreements
 HIPAA

Electronic I-9 compliance
Employee can’t submit
to HR until all required
sections are completed
Error message instructs EE
on 4 new “traps”
EE can’t fill out ER section
Electronic signature
Trivia Question!
for Compliance

First—why is wage & hour an area of
vulnerability?
Case Study
 Jeff is an inside sales associate. He usually arrives
around 6:30am, even though his team is scheduled to
start at 7:30am He typically messes around on his
computer, and drinks coffee before his shift start time.
Jeff also sometimes prospects for new clients or
makes a few client calls before clocking in. However,
he takes at least an hour of time a day for smoke
breaks and does not clock out for those.
 Jeff’s manager, Joe, has observed Jeff arriving early,
but has not discussed it with Jeff. Joe reviews time
sheets each week and Jeff regularly clocks in at 7:30
and out at 4:30. Joe also emails Jeff on occasion
during evenings and weekends.

Wage & Hour Case Study
 Jeff is terminated in a reduction in force and brings
a claim under the FLSA for failure to pay overtime.
He claims that he worked one hour before he
clocked in each day of the week. He also claims
that he typically worked another 10 hours each
week at home without clocking in. He says he has
done this consistently for the past three years.
 What evidence will support Jeff’s claims?
 What types of audits could have alerted the
company to these liabilities?

Wage & Hour Compliance Audit
 Audit Team: HR, Payroll/Finance, and
Attorney
 Scope/Purpose: Compliance and Best
Practices audit of wage & hour practices
and policies
 Tools: Create an audit checklist that reflects
your company’s unique time keeping system
and compensation package. Interview
managers and review reports, records and
systems when auditing each checklist item.

SAMPLE CHECKLIST
• All hourly employees receive OT after 40 hours per
week?
• All employees paid for OT worked, even if not
authorized or was not properly recorded on
company time records?
• OT rate at least 1.5 times regular rate for pay
period in which OT was worked?
• Add commissions, bonuses, incentive pay, shift
differential, etc. into regular rate before computing
OT?

• Hourly employees record hours in a reliable and
accurate method (live capture)?
• Employees and supervisors trained on time-
reporting?
• Do all hourly employees record actual hours
worked rather than scheduled hours?
• Employees perform any work before officially
clocking in?
• Employees compensated for off-clock activities?
• Employees working outside of office? Accurately
tracking that time?

 Employees paid for break periods that are 20
minutes or less?
 During unpaid lunches/breaks, are
employees allowed or required to perform
any work?
 Free to leave premises during unpaid break?
 Paid for time spent attending training
programs or other work-related seminars?
• Payroll withholdings proper? No improper
deductions?
• Timely pay wages? Clearly define when
wages “earned” and compliant with law?

TYPES OF REPORTS TO RUN AND REVIEW
 Audit of “Off the Clock” Work
 Missing Time Audit
 Employees failing to enter time?
 Comparison of Time Reporting vs Email/Call
Logs/Calendars
 Evidence of working time not recorded
in time system?

TYPES OF REPORTS TO RUN AND REVIEW
 Review of Changes Made to Time
Records “After the Fact”
 Managers providing written description for
changes in time?
 Employee attestation?
 Exempt vs. Non-exempt

• Analyze and benchmark findings
• Create action plan and implement
changes
• Use technology for ongoing
compliance

Live Punch = Electronic Audit Trail containing who, what, when,
and where for punches and revisions
Manager edits clearly marked with red “e”, time, date, location
Attestation can be required from both employee & manager
Wage & Hour: Using Technology for Compliance
Electronic Timekeeping

Electronic Timekeeping- risk avoidance strategy
 Employees clock in prior to beginning any work-related
tasks
 Employees clock out for all breaks and lunch
 Employees clock in if interrupted during a break
 Avoid automated lunch deductions
 Employees clock in if working at home

Report example - Early / Late / Absent

Missed Punch Audit - Reporting Options
 Open report on supervisor dashboard
 Report emailed daily / weekly / per pay
 Email notification when punch is missed

Electronic Overtime Compliance Tools:
Mobile App / Physical Clock / Web Clock
 Automate and interpret time calculations centrally
 Receive email notifications of potential overtime
situations & ACA compliance issues
 Capture time including remote work, travel, meal,
and breaks via mobile
 Collect hours live-time; no manual entry after the fact
 Electronic audit trail shows detail; date, time,
employee, GPS location

Email Notification Example – Approaching Overtime

Mandatory attestation / explanation
 When employee enters an electronic timesheet change
request, system can be configured to require attestation
or explanation before submitting to manager
 Attestation & explanation can also be required by
manager before approving

Report Examples – Exactly 40 / 80
 Run a weekly or bi-weekly report for non-exempt
employees who record exactly 40 or 80 hours or the
same start / stop times each day

Electronic Acknowledgment of Training
 Electronic signature of policy acknowledgment
 Wage and hour training
 Manager training
 Safety training
 Electronic signature documenting training complete
 Automated email reminders to HR and employee when
training due

Questions?
Amy S. Wilson Ann Milborn Getz
Frost Brown Todd Automated Payroll Service
awilson@fbtlaw.com agetz@apswfm.com

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