Editor’s note: This article was originally published on CCI Aug. 27, 2010.
Because the HR function includes such activities as recruitment, diversity and conduct, to name only a few, its role within the compliance framework is critical.
What role should HR play? How can it positively influence a company’s reputation and values, and how does it need to evolve and change, and thereby limit issues of corruption, fraud and other concerns?
Human resources professionals must understand the consequences of remaining complacent in an increasingly changing and heavily regulated workplace environment.
Gone are the days when the human resources department’s primary function was to provide operational support and perform back-office personnel tasks. In today’s competitive and highly regulated market, the human resources function has developed into a significant advisory role, whereby senior leadership rely heavily on the human resources department to ensure that the company’s overall business strategy is consistent with the many complex laws and regulations that govern the workplace environment.
Each year, new legislation is passed or substantively changed, bringing about more concerns and issues for human resources professionals and highlighting the importance of remaining compliant in a heavily regulated workplace environment. The human resources function must ensure that companies successfully operate by effectively dealing with the many compliance issues that affect the workplace, including employment discrimination, harassment, immigration, employee privacy, unemployment, workers’ compensation, age, race, and sex discrimination, and employee benefits, to name only a few.
As each of these areas continues to change, the human resources function must evolve and change as well. Human resources professionals must avoid complacent and resistant-to-change attitudes. By staying informed of the constant changes affecting labor and employment law, while simultaneously proactively implementing policies and plans that align with these changes on a timely basis, a human resources department can more efficiently assure compliance with the increasingly changing regulatory and legislative landscape that governs the contemporary workplace.
Stay Informed and React Proactively
Undoubtedly, human resources responsibilities extend beyond compliance. Other pertinent human resources functions include interviewing and hiring, employee documentation, job descriptions, staff and management training programs, performance evaluations, and implementing various organizational development programs.
With such an extensive list of responsibilities, human resources professionals often overlook the importance of staying informed of changes in labor and employment law. However, a well-informed and reactionary human resources department is likely to operate more efficiently and cost effectively than one that favors a complacent and resistant-to-change attitude. Proactively implementing policies that align with changes in labor and employment law on a timely basis assists human resources departments in avoiding liability for being noncompliant.
Equally important, human resources professionals should avoid the tendency to engage in cost/benefit analyses that assess the benefits of refusing to comply with the law with the costs associated with compliancy. They should fully understand that the ramifications of noncompliance, which can include various penalties, risk of civil action, and lost profits, often are greater than the costs associated with remaining compliant. Knowing the impact that the noncompliance may have on the overall success of the business is essential for understanding and appreciating human resources’ role within the compliance framework.
Conduct Periodical Compliance Audits
Human resources departments must adopt appropriate checks and balances systems, such as an audit, that allow them to assess their level of compliance. The purpose of an audit is to determine the effectiveness of the human resources department’s current policies, procedures, and systems as they relate to the latest changes and developments in labor and employment law.
While audits can be performed in a number of different ways, the simplest approach is for the human resources department to develop a checklist of key compliance areas that tend to be heavily regulated in labor and employment law. These include hiring, wages and hours, benefits, employee relations, employee rights, and workers’ compensation, to name only a few.
The checklist should probe whether each key compliance area conforms to the laws that govern them. Updates to the checklist should occur periodically but certainly should be undertaken each time substantive changes to existing laws or newly enacted laws become available. Additionally, because so many of the key compliance areas are regulated by employee threshold (i.e., 15 or more employees, 20 or more employees, etc.), checklists also should be updated in accordance with the business’ ongoing growth and development.
Human resources departments that lack the manpower to implement and execute compliance audits should consider hiring consultants that specialize in Compliance and Ethics (C&E) programs. Many large organizations increasingly have began to develop internal C&E programs, hiring C&E professionals to develop an audit checklist and other programs designed to prevent and detect illegal conduct. Such proactive planning may prove to be well worth the investment in the long run as C&E professionals will ensure compliance with the law and make sure that the human resources department understands and follows it.
Create an Effective, Long-Term Compliance Action Plan
In addition to performing periodic compliance audits, human resources professionals also must create effective compliance action plans that can more strategically become a part of the company’s goals and culture and possibly even its mission statement, as opposed to a seemingly mundane, routine task.
Recently, the U.S. Department of Labor (DOL) implemented one such program that is committed to ensuring that companies comply with labor and employment laws: Plan/Prevent/Protect. This new federal regulatory enforcement strategy targets all employers that fall under the purview of the Occupational Safety and Health Administration (OSHA), Mine Safety and Health Administration (MSHA), the Office of Federal Contract Compliance Programs, and the DOL’s Wage and Hour Division. It requires them to develop a compliance action plan and other programs that address certain employment-law-compliance issues within each agency’s portfolio.
The DOL’s three-part Plan/Prevent/Protect strategy involves taking the following steps to ensure compliance with applicable laws:
1.) Plan: Create a plan for identifying and remediating risks of legal violations and other risks to workers. Human resources should provide employees with opportunities to participate in the creation of the plans. Additionally, human resources departments should make the plans available to workers so they can fully understand them and help to monitor their implementation. This level of communication will help to ensure that the plan becomes a part of the company’s goals, culture, and possibly even its mission statement and not simply another human resources procedure.
2.) Prevent: Implement the plan in a manner that thoroughly and completely prevents legal violations. The plan should not be a mere paper process. Human resources should not expect merely to draft a plan and then “put in on a shelf.” An effective plan should be fully implemented and communicated throughout all levels of the company.
3.) Protect: Ensure that the plan’s objectives are met on a regular basis. The plan must actually protect workers from violations of their workplace rights.
While the DOL’s regulatory enforcement strategy is not a requirement for all employers, it is one example of a compliance action plan that any human resources department could easily implement. In fact, an action plan, such as the DOL’s Plan/Prevent/Protect regulatory enforcement strategy, would add another layer of regulatory compliance to any already existing measures taken by human resources departments and serve as an additional reminder of the importance of remaining compliant with labor and employment laws.
By creating an effective, long-term compliance action plan that becomes a vital part of the company’s culture, human resources professionals and senior management are more likely to ensure that successive leaders and employees will continue to follow the plan and remain committed to the vision of achieving compliance in an increasingly evolving workplace environment.
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Mark S. Floyd is a partner in the Labor and Employment practice group at Walter & Haverfield LLP in Cleveland.
Prior to joining Walter & Haverfield, Mark was a partner for several years at two Cleveland based law firms.
He has more than 25 years experience in the areas of labor, employment, employment litigation, OSHA and immigration law.
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