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Year-end HR compliance check list

December 14, 2017

By Kristen Cifolelli, courtesy of SBAM Approved Partner ASE

It’s hard to believe, but 2017 is rapidly winding down and the HR professional’s work never stops!  The end of the year is often a good time to perform a review of HR processes to ensure compliance with key employment laws and to better systematize your operations for the coming year. Examining the efficiencies of the HR department can be tedious work, but it is one of the easiest ways to reduce risk and HR cost.
 
Listed below is a summary of key year-end HR audit activities that HR should consider tackling: 
 
Clean up personnel files – as any HR professional knows, keeping up on HR filing is no easy task.  This is a good time to catch up on any back filing and pull any terminated employee files out of your active files.  The terminated files should be retained according to your file retention policy.  Be sure to check federal and state record retention guidelines in order to determine if there are documents that are no longer needed and can be purged. ASE members can find the latest federal and state record retention guidelines in ASE’s virtual compliance library, CCH – HRAnswersNow.
 
Update job descriptions – an accurate and well written job description is critical for so many processes within the HR Department.  Recruitment, training, performance evaluations, and compensation activities all stem from information contained in job descriptions.  Updating job descriptions often falls to the bottom of the to-do list and most employers do not have a standardized process for regular review.  Job descriptions should be updated at least on an annual basis and possibly more frequently depending whether there are significant changes to the role. 
 
Audit I-9s – the dreaded I-9 form!  You know you are in trouble when there is a 50+ page handbook to explain a 3-page form.  Review your I-9s to make sure you have a form on every employee and the correct version was used.  There have been several updates to the form over the last couple of years.  I-9 forms should be purged once they meet the record retention period.  Once an employee’s employments ends, I-9s must be retained for either three years after the date of hire or one year after the date employment ends, whichever is later.  Guidelines for auditing and correcting I-9 errors can be found here.
 
Review and update personnel policies – personnel policies are so important in order to have a consistent approach in setting expectations of employees, defining appropriate behavior, and to ensure compliance with required employments laws.  Review your policies to not only update for any regulatory changes, but to determine consistency in how policies are applied.  Inconsistent enforcement of personnel policies is an open door invitation to a discrimination lawsuit. In addition to job descriptions, ASE employers can also access sample policies available in ASE’s online resources, CCH – HRAnswersNow and McLean & Company.
 
Bulletin boards & posters – check each state that you operate in and ensure that you have the right posters and signage displayed at each location.  In the state of Michigan, minimum wage is increasing on January 1, 2018 to $9.25.  Employers need to verify that their Michigan Minimum Wage poster is up-to-date.  (SBAM members – click here to obtain your updated poster).  This is also a good time to review other information posed on your bulletin boards.  Remove old and outdated information and consider putting in a plan to have your bulletin board regularly reviewed.   This should also include review of internal intranet sites.
 
Review employee classifications – employees whose jobs are covered by the FLSA are classified as being either exempt or nonexempt.  Proper classification of employees as either exempt or non-exempt is critical to avoid potential liability for unpaid overtime.  In order to be classified as exempt, an employee has to meet three tests: salary level (paid no less than $455/week), paid on a salary basis, and meet the job duties test.  Click here for detail from the DOL regarding the criteria to classify an employee as exempt.
 
Employers should also review individuals they have classified as independent contractors.  Misclassification of employees as independent contractors is a major area of enforcement.  Employers can use a number of tests to evaluate a worker’s status. The most common is the Internal Revenue Service (IRS) Common Law Test, which is used for federal tax purposes. The Department of Labor (DOL) “economic realities” test is used to determine whether workers are covered by the Fair Labor Standards Act (FLSA).  If an individual is determined to be mis-classified (whether it is their exempt/non-exempt status or as an independent contractor), employers should work with their legal counsel to determine how to appropriately rectify the error in case back overtime or other benefits are owed.
 
Employment applications – verify whether you are in compliance with any local ban-the-box laws.  There are over 150 cities and counties in 24 states that currently have ban-the-box requirements.  In Michigan, there is no state-wide ban-the-box law, but both the city of Detroit and city of Kalamazoo have restrictions applicable to contractors doing work for these cities.  Employers also need to verify whether they are operating in states and cities that ban employers from asking candidates about salary history.  Delaware and New York City already have laws in place.  California and Massachusetts have laws that go into effect in 2018, and Oregon has a law that will become effective in 2019.  Employers in these states may want to proactively update their applications by removing salary history questions.
 
Employee information – year end is a great time of year to get employees to update forms.  HR should consider sending out communications to employees asking them to update their address, personal, demographic, and emergency information in your HRIS or personnel files.
 
While this process is time consuming, these HR audits should be incorporated into your HR department’s annual year-end activities and the results used to develop improvements to departmental functions heading into 2018.

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