Check. Verify. Audit.

February 2012 • Lockton Companies, LLC

L O C K T O N C O M P A N I E S , L L C

STACIE ENGELMANN, SPHRAssistant Vice President

HR Consultant816.751.2230

sengelmann@lockton.com

“We’re shifting our focus to the enforcement side.”—

Equal Employment Opportunity Commission (EEOC)

Director Reuben Daniels, Charlotte office.

Many governmental agencies, not just the EEOC, are growing their enforcement efforts. An internal review is crucial for businesses today, given the number of changes to employment laws and regulations over the past several years.

Why Are Audits Necessary?

Over the past few years, we’ve certainly seen an influx in enforcement. The following provides a brief overview of recent initiatives and progress from a few of these governmental agencies.

Department of Labor (DOL)

The DOL administers and enforces more than 180 federal laws, such as:

� Family Medical Leave Act (FMLA)

� Fair Labor Standards Act (FLSA), Wage and Hour

� Employee Retirement Income Security Act (ERISA)

� Occupational Safety and Health Act (OSHA)

� Uniformed Services Employment and Reemployment Rights Act (USERRA)

2

Cases involving the Department of Labor are often intense and costly.

� The Society for Human Resource Management reported the average cost to defend an FMLA case is $78,000—regardless of the outcome.

� The Wage and Hour Division has employed 350 additional investigators in the past two years to assist U.S. workers through both “complaint-driven and targeted enforcement.”1

� The DOL now has a social media presence—not just a helpful Web site, but staff members blog, use Facebook, and Tweet to reach a greater audience.

� More than 35,000 workers contact the Wage and Hour Division for help annually.1

� As part of the new American Bar Association-approved attorney referral program,2 the DOL is reportedly only handling 3 percent of claims internally—and referring others to attorneys for pursue.

Employers in low-wage

industries are often

targeted for wage and hour

violations, particularly in

these nine industries:

1. Agriculture

2. Day care

3. Restaurants

4. Garment manufacturing

5. Guard services

6. Healthcare

7. Hotels and motels

8. Janitorial services

9. Temporary help

Because pay is generally better in healthcare

industries, it is an attractive target for private

wage-and-hour litigants.1

February 2012 • Lockton Companies, LLC

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Immigration and Customs Enforcement (ICE)

ICE is the U.S. Department of Homeland Security’s principal investigative arm and the federal government’s second-largest investigative agency.

Since January 2009, ICE has audited more than 5,909 employers suspected of hiring illegal labor and imposed more than $72 million in sanctions. Nearly three-quarters through its fiscal year, the government agency had reportedly made 157 criminal arrests of employers, issued $7.1 million in fines, and deported more than 262,282 individuals by June 2011. By September, 2,496 employer audits were reported for fiscal year 2011.3

� Failing to comply with Form I-9 requirements could result in fines ranging from $110 to $1,100 per occurrence (even for legal workers!).

� Approximately 1,000 companies were issued notices of intent to investigate in June 2011 (and more in November 2011).

� State immigration laws lead to uncertainty.

A MAJOR BLUEBERRY producer was

fined $118,000 for immigration

violations— paperwork errors.

A Kansas C ity company w i t h f e w e r t h a n 100

employees was fined approximately

—Paperwork errors—

A large Kansas City company recently agreed to pay nearly $300,000 in civil penalties. The investigation “revealed [the company] required all newly hired non-U.S. citizens and some foreign-born U.S. citizens . . . to present specific and, in some cases, extra work authorization documents beyond those required by federal law.” It’s not that it wasn’t completing the documentation; it was going beyond what is legally acceptable.

EXAMPLES

$40,000

4

Equal Employment Opportunity Commission (EEOC)

The EEOC is responsible for enforcing federal laws that make it illegal to discriminate against an applicant/employee because of race, color, religion, sex (including pregnancy), national origin, age (40 or older), disability, or genetic information.

� 99,920 claims filed ($319 million damages attained) in 2010 (93,277 in 2009 and 95,402 in 2008).4

� Most employers with at least 15 employees are covered by EEOC laws (20 employees in age discrimination cases). Most labor unions and employment agencies are also covered.

� Laws apply to all types of work situations—hiring, firing, promotions, harassment, training, wages, and benefits.

� We find that most employers haven’t updated their policies or provided training for managers in this area.

What Is Involved in a Human Resources (HR) Audit?

Conducting an HR audit is a method of reviewing various policies and procedures within human resources and other areas of an organization. The purpose is to recognize strengths within the human resources function, to identify areas that need change and improvement, and remain compliant with current employment laws and regulations.

It is important for the audit to be conducted thoroughly and in an objective manner. The following are examples of just a few areas you will want to include in your next audit:

� HR forms

� Recruitment process

� Exempt/nonexempt classification process

� Timekeeping practices

� Leave management policies

� Handbook policies

� Independent contractor vs. employee classifications

� Recordkeeping practices

� I-9 forms

� Improper payroll deductions

� Employment posters

We recommend going through this exercise every three to five years—more often if there are significant changes in your organization regarding policies or processes, or if there is a fair amount of turnover.

February 2012 • Lockton Companies, LLC

5

Lockton’s Solution

Lockton’s human resources audit process is an objective and independent assessment providing a comprehensive review of your company’s current state, while helping to identify whether specific practice areas or processes are adequate, legal, or even effective.

The results of the review can help identify gaps in human resources practices and address liability exposures. Gaps are then prioritized to minimize lawsuits and/or regulatory violations, as well as to achieve and maintain world-class competitiveness in key human resources practice areas.

1 U.S. Department of Labor, Wage and Hour Division. http://www.dol.gov/WHD/.

2 “BRIDGE TO JUSTICE: Wage and Hour Division Connects Workers to New ABA-Approved Attorney Referral System.” U.S. Department of Labor. http://www.dol.gov/cfbnp/bridge-to-justice.htm.

3 The Wall Street Journal, November 15, 2011, Crackdown Resumes on Firms’ Illegal Hires, Miriam Jordan; June 16, 2011, More Silent Raids Over Immigration.

4 Equal Employment Opportunity Commission (EEOC). http://eeoc.gov/eeoc/statistics/enforcement/charges.cfm.

Our Mission

To be the worldwide value and service leader in insurance brokerage, employee benefits, and risk management

Our Goal

To be the best place to do business and to work

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