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Employment audits: a valuable tool to prevent legal disputes

Aug 10, 2021 | Employment litigation

Claims involving employee misclassification, harassment and workplace discrimination can disrupt operations at any business.

Having and enforcing policies that align with state and federal regulations is one way to prevent these situations. However, business owners may also want to consider employment audits.

What is an employment audit?

An employment audit is a process of reviewing your employment and labor practices and policies. These audits can happen preemptively by business owners looking to avoid legal claims, or the Department of Labor can choose to audit a company.

Whether an audit is voluntary or ordered by the DOL, it examines:

  • Employee satisfaction
  • Compensation and payroll
  • Employment records
  • Job descriptions
  • Employee handbook disclaimers and signature requirements
  • The anti-harassment policy
  • Employee evaluations
  • Disciplinary practices and policies

Auditors will scrutinize all these components to identify gaps or compliance issues. 

If the audit stems from a complaint by an employee, auditors will notify employers of the results of the investigation. Penalties, settlements and corrective actions may be required. If it was a self-audit, employers can choose how to respond.

How an audit can help your business

Periodic self-audits can allow employers to correct problematic or unlawful situations before they spark an official audit or give rise to a legal claim.

They also give employers and employees confidence in knowing that the business complies with employment laws and actively responds to changes and new requirements. 

Some employers may overlook an employment audit as a tool in preventing legal disputes because of the cost and the number of resources it can take to prepare for one.

However, taking these steps proactively is preferable to responding to a lawsuit or public allegations. In these situations, not only will business owners need to prepare for the audit, but they may also need to manage public relations issues and internal disruptions.

Thus, employers wishing to correct problems before they trigger legal disputes can consider an employment audit.