Reviewing Compliancy with Employment Laws Can Help Mitigate Your Legal Risk

As a responsible member of the legal profession, I sometimes have to remind clients of the value in preventing disputes before they escalate into something more serious. And one of the most effective ways for businesses to be proactive in avoiding unnecessary legal risk is to periodically self-examine their organizational structure and operations, to safeguard their compliance with state and federal employment laws.

An area of compliance often vulnerable to legal repercussions is the typical employee file. What information are you or your human resources department storing in these files, and how is this information organized? Although common practices may suggest that one umbrella file for each employee containing all data is the most centralized solution, that approach may not legally satisfy some compliance standards. For instance, did you know that the Health Insurance Portability and Accountability Act of 1996 requires companies to maintain separate files for employees regarding their health insurance benefits package and medical history? Unfortunately, some businesses could inadvertently be sharing this data in the same file with general information relating to hiring agreements, performance evaluations and disciplinary actions. As a side note, it’s also a good idea to know the time expiration statutes for retaining employee documents within your state.

Another compliance pitfall is Form I-9: Employment Eligibility Verification, which is issued by the U.S. Department of Homeland Security, containing citizenship and immigration information. Aside from errors in completing these forms, I have sometimes observed vulnerabilities in the security and storage of these documents. As with maintaining separate health insurance and medical history files for each employee, I suggest that I-9 forms be placed in secure binders and locked in storage. I also recommend that these documents be electronically scanned for backup purposes and stored in separate, secure locations. I might note, too, that there are paperless methods for completing I-9s and safely storing them off-site.

Company pension and retirement investment reforms over the last decade have also introduced new areas for compliance. Today, you must assure your employees they are receiving updated, clear reporting of their vested financial benefits. This not only requires proper documentation, but it also calls for opening lines of communication that are easy for employees to comprehend. They should always have access to business financial advisers to explain any concerns and answer questions regarding their benefits.

Businesses also occasionally overlook another compliance detail: the displaying of posters pertaining to U.S. labor laws. Although it’s easy to forget this small task, these posters are mandatory and must be placed in conspicuous workplace areas where they can be easily viewed by employees. Similar posters issued to certain organizations by the Occupational Safety and Health Administration and other state and federal agencies also usually fall under the same mandatory rules for compliance.

Finally, have you reviewed or updated your employee handbook lately? I can’t stress enough the importance of maintaining and disseminating this informational guide to everyone in your organization, including high-level management. If you represent a smaller organization, one that doesn’t have a formally published handbook, your employees or co-workers should have an alternative access to pertinent information, such as your organizational mission and values, performance goals and objectives, use of company resources for personal use, standards of conduct and behavior, and disciplinary and termination policies. A well-designed handbook that is regularly updated for employee orientation, retention, and development and training serves as a valuable tool in lowering the risk of company liability in the event of an employee lawsuit.