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HR Management: Federal

HR Management requirements by state

Author: Scott Warrick, Scott Warrick Consulting and Employment Law Services


  • An employee's lifecycle with the employer can be broken down into six distinct phases. See Employee Lifecycle Management.
  • HR - as change agent, employer advocate and employee spokesperson - is a vital part of the employer's overall strategies for growth, risk prevention and risk management.See HR as a Strategic Partner.
  • The most effective work rules strike a balance between the need to set clear standards and the employer's need to freely make business decisions. See Developing Work Rules.
  • After carefully reviewing the work rules and agreeing with senior managers and employer's legal counsel regarding the scope, it is important for employers to effectively communicate the work rules to employees.See Implementing and Distributing Work Rules.
  • HR professionals should not wait for a letter from the Department of Labor (DOL) before making sure their recordkeeping and business practices are legally compliant. See Wage and Hour and Internal HR Audits.
  • Employment practices liability insurance coverage insures employers against financial costs associated with losing employment-related lawsuits, including attorney fees, settlements and judgments. See Employment Practices Liability Insurance.
  • When HR professionals are unsure where a document belongs, the document generally finds its way into the employee's personnel file. That may be a mistake. See Employee Records.
  • HR is primarily responsible for ensuring employers keep records for time periods prescribed by statutes, regulations and other applicable legal requirements. Difficulty managing that process arises when record retention requirements implicate several statutes, regulations and other applicable legal requirements. See Record Retention.
  • HR is responsible for ensuring the employer posts required notices and that notices are posted in accordance with applicable statutes and are updated, as needed. See Required Federal Postings.


HR has always been the liaison between the employer and the employer's largest and, generally, its most expensive asset - the workforce. HR professionals have the seemingly impossible task of being the voice of both the employer and the employee, even when their interests seem to be diametrically opposed. In addition, HR's dynamic and ever expanding role, together with increased regulatory oversight, requires more of HR than ever before. Therefore, to be competitive in today's HR market, HR professionals should be prepared to demonstrate their value by:

  • Managing employees' lifecycle with the organization from planning to separation;
  • Acting as a strategic partner, and not a passive bystander, in the employer's business process;
  • Understanding the purpose of work rules and developing work rules that are required by law, necessary to preserve the employer's rights and that are a matter of best practices;
  • Learning to write work rules that are clear, but that do not hinder the employer's freedom to make business decisions;
  • Being prepared to act as the point of contact in Department of Labor (DOL) audits and having the know-how to navigate the audit process towards favorable results for the employer;
  • Being prepared for a DOL audit by performing regular, periodic self-tests;
  • Understanding how to maintain employee records; and
  • Knowing how long employment records should be kept, as a matter of best practices.

Below is an overview of these HR functions and responsibilities.

Employee Lifecycle Management

HR is responsible for managing an employee's lifecycle within the organization from planning to separation. An employee's lifecycle with the employer can be broken down into six distinct phases:

  1. Workforce Planning;
  2. Recruitment;
  3. Offers and onboarding;
  4. Retention;
  5. Training and Development; and
  6. Separation (i.e., retirement, voluntary termination, involuntary termination).

Workforce Planning

Before hiring an employee, HR must identify gaps between the employer's current talent and the work that will need to be done in the short and long-term future. In some cases, recognizing the gap is simple. For instance, if HR knows an employee will resign on a specific date, and the employer will require someone to do the work beyond that date, HR knows it will need to find and hire a replacement. However, HR must also prepare for the unknown by identifying the employer's future talent needs, which will depend on several factors, including:

  • The employer's strategic business objectives;
  • Changes in the employer's internal talent pool (e.g., turnover or terminations); and
  • Changes in the external labor market (e.g., legal or regulatory changes affecting staffing needs).

This talent acquisition and management process is referred to as workforce planning. See HR Strategy, Management and the Law > Workforce Planning.


Once HR determines there is a gap in the employer's talent pool, the next step is to fill that gap by either promoting or transferring a current employee or recruiting quality talent from the external labor market. Since the people are the organization, recruiting the right employees and attracting quality talent are fundamental to an employer's long-term success. See Recruiting and Hiring > Recruiting. To attract quality talent from the internal and external labor markets, HR should:

  • Ensure the compensation offered by the employer is comparable to that offered by the employer's competitors;
  • Offer perquisites (e.g., free onsite parking, tuition reimbursement, discount memberships to fitness facilities or discounts to the theater or sporting events);
  • Implement tools to help employees achieve work-life balance (e.g., job-sharing or telecommuting); and
  • Maintain generous benefit programs that are cost-effective for the employer.

Also, HR should not wait for potential candidates to come to them. Instead, HR should seek out candidates who may not be actively looking for jobs, but may be open to leaving their current position for the right opportunity. For instance, HR can use professional sites such as LinkedIn.com to review an individual's background, job history and even his or her references.

Caution: It is acceptable to reach out to potential candidates using LinkedIn.com or other similar professional sites. However, HR should determine, early on in the process, whether the person is subject to an employment agreement, or any other agreement limiting the person's ability to work for another employer. If so, to avoid potential liability stemming from interfering with another's contractual relationships, HR should considering ceasing its recruitment efforts.

HR should also consider the following recruitment methods:

  • Advertisements (e.g., newspapers or online job boards);
  • Recruiting firms; and
  • Employee referrals.

With respect to employee referrals, HR should consider implementing an employee referral program that encourages employees to recommend colleagues for open positions within the organization. An effective employee referral program should provide incentives to employees who make successful recommendations. For example:

  • A monetary reward;
  • Discounts or coupons; or
  • An additional paid-time off day for that year.

In addition to having built-in employee incentives, the employee referral program should define what constitutes a successful recommendation (e.g., incentives under the referral program will be earned by the employee only if the new hire remains employed with the organization, on a full-time basis, for three continuous months).

Employee referrals are an excellent recruitment method because the employer's employees act as a recruiting firm. They seek out candidates and are paid incentives, which are more cost effective than recruiting firm fees. HR should review all employee referrals in conjunction with any antinepotism policy maintained by the employer.

Offers and Onboarding

Onboarding is the new hire's introduction to the organization. A sloppy or inefficient onboarding process reflects badly on the employer and these initial interactions between the employer and the new hire may alter the new hire's opinion of the organization. An employee will likely form his or her opinion about an employer based upon first impressions received during the onboarding process. While an employer may overcome a negative first impression, it is easier to retain a positive first impression.

The onboarding process commences with HR preparing an offer letter and sending the letter to the client. If the offer is conditional on the employee meeting certain additional requirements (e.g., passing preemployment screening tests), a conditional offer letter should be sent. The conditional offer letter should state, with specificity, the additional requirements. See Employment Offer: Federal.

For at-will employees, the offer letter, or conditional offer letter, should explain that the employee's employment is at-will and what that means. If the terms of the employee's employment will be governed by an employment agreement, it is imperative HR discuss the offer letter with the employer's internal or external lawyers because the offer letter may inadvertently alter the terms of the employment agreement. To avoid this from happening, many employers opt to forgo sending offers letters to employees who will be required to sign employment agreements. See Employment Offer: Federal.

If an offer letter is sent, the new hire should be required to sign it and send it back. The purpose of having the new hire sign the offer letter is to demonstrate the individual's intention to commence employment with the organization and to acknowledge the information contained in the offer letter. If applicable, the offer letter should state it does not create a contract of employment between the employer and the new hire. See Employment Offer: Federal.

In addition to preparing and sending an offer letter, before the new hire's arrival, HR should make sure:

  • To send the employee's new hire paperwork. Sending the paperwork before the employee's first day, gives the employee ample time to review it, formulate questions and complete it.
  • The employee is set-up in payroll;
  • The employee's office or workstation is prepared;
  • The employment verification process is completed;
  • The staff is notified of the new hire's arrival (e.g., send an email introducing the new hire and some details concerning his or her prior work history);
  • The employee's login information has been created for all necessary systems; and
  • Any reasonable accommodation requested by the employee is available.

See Onboarding and Orientation: Federal.

Once the employee arrives, HR should:

  • Conduct a new hire orientation (if a group of employees will start the same week, it is acceptable to wait a few days and do a group orientation);
  • Specifically call the employee's attention to any key workplace policies (e.g., the employer's antiharassment and antidiscrimination policies);
  • Provide the employee with all log-in information;
  • Provide the employee a first-day schedule that consists of:
    • Systems training (e.g., setting up voicemail or using systems the employee is not familiar with); and
    • Lunch with a peer co-worker. If possible, the peer or co-worker should be someone on the employee's team or within the employee's division.
  • Provide the employee with a tour of the employer's offices (e.g., restrooms, break room or kitchen); and
  • Introduce the employee to colleagues.


Staffing costs are most employers' single largest investment. Therefore, receiving the best possible return on this investment is key. Part of that is ensuring the employer's top performers remain with the organization. Employees tend to remain with employers on a longer-term basis if;

  • Employees are engaged in their work;
  • Employees are committed to the employer;
  • Employees believe they are treated fairly in terms of compensation and benefits;
  • The work environment is positive;
  • Employees receive any necessary development or training;
  • Employees have the necessary tools to perform the functions related to their jobs;
  • There is frequent, accurate and productive communication between the employee and the employer;
  • Employers offer opportunities for training and development; and
  • Employees understand what their manager or supervisor expects of them.

Antidiscrimination, antiharassment, diversity and inclusion and employee communication are also important aspects of HR's function that may positively impact its retention efforts.

See Employee Management > Employee Retention.

Training and Development

In addition to being an important part of the employer's retention efforts, training and development helps improve the employer's internal talent and is an effective method for communicating the employer's expectations for employee conduct within the workplace.

Some states have mandatory training requirements. Regardless of whether training is mandatory, it is best practice to provide as much training as practicable. Training may pertain to the employer's policies (e.g., antidiscrimination and antiharassment or organizational ethics) or may be job-related (e.g., leadership training or training regarding a new system used by the employer).

HR must identify the training programs that are necessary or advisable for the employer and choose the appropriate training method (internal training or external training by a consultant). Which training programs are necessary or advisable will depend upon the employer's specific business needs. For example, in highly regulated industries such as the pharmaceutical or financial services industries, ethics training will very important. The employer's training budget and the size and expertise of its HR staff will dictate whether training is done internally or externally.

Some employee training programs include:

  • Antidiscrimination and antiharassment for supervisors;
  • Antidiscrimination and antiharassment for employees;
  • Diversity sensitivity;
  • Ethics;
  • Leadership;
  • On-the-job training by a supervisor;
  • Communication skills;
  • Time management;
  • CPR and first aid; and
  • Conflict resolution.

The performance management process allows HR to measure whether its training initiatives are successful. It also helps employers identify and reward their top performers and identify and rehabilitate (or, if necessary, terminate) their underperformers.

The performance management process involves:

  • Employers setting job-related objectives for the employee to meet during the performance cycle (e.g., annually);
  • Employers communicating those objectives to the employee;
  • Employers ensuring the employee has the tools necessary to meet his or her objectives;
  • In the middle of the performance cycle, advising the employee whether he or she is on track to meeting their performance objectives and, if not, providing suggestions to get the employee on track;
  • At the end of the performance cycle, employers providing substantive and clear feedback regarding whether objectives were met;
  • If necessary, rehabilitating a poor performer; and
  • If appropriate, rewarding an exceptional performer.


Employee Management > Training and Development;

Employee Management > Performance Appraisals.


At the end of the employee's lifecycle, the employee is voluntarily or involuntarily separated from the organization. Some reasons for separation include:

  • Retirement;
  • Voluntary termination (e.g., resignation);
  • Involuntary termination (e.g., constructive discharge, reduction in force or firing); or
  • Death.

When an employee dies, HR, and not individual employees, should be responsible for communicating that information to the employee population. Funeral arrangements should only be communicated with the consent of the employee's family. HR should also:

  • Ensure the employee's final paycheck and any other monies belonging to the employee are properly distributed; and
  • Return the employee's personal belongings.

In the event the employee dies while at work, in addition to the steps above, HR should follow its internal procedures, which should include, at minimum:

  • Notifying the employee's emergency contacts; and
  • Ensuring any applicable procedures were followed, including:
    • Internal procedures for notifying 911;
    • Locating employees trained in CPR and first aid; and
    • Advising building management (if applicable).

HR should also consider having an onsite grief counselor available for the days immediately following the employee's death. The counselor should be seated in a private location.

See Handle the Death of an Employee.

The six phases of employee lifecycle management cannot occur in a vacuum. They need to align with the organization's short- and long-term strategic objectives. For that reason, the trend in HR management is for HR professionals to continue the evolution from task-based problem solvers to indispensable strategic business partners.

HR as a Strategic Partner

HR's role has evolved tremendously. Thirty years ago, HR was referred to as Personnel and was seen as handling the employer's touchy-feely and administrative issues. In that regard, Personnel was predominantly responsible for routine tasks, such as the following:

  • Filing;
  • Completing new hire paperwork;
  • Conducting termination meetings and filling out related paperwork;
  • Placating complaining employees; and
  • Managing employee benefits.

In its task-based role, HR may handle paperwork for onboarding new employees, but would not be expected to develop or implement hiring strategies. Also, when a complaining employee transitioned into a claimant in an administrative proceeding or a plaintiff in a lawsuit, HR was gently pushed aside so the "real" business partners could take over.

Over time, so-called touchy-feely laws and the lack of workplace rules and administrative procedures translated into important issues, such as:

  • Multimillion-dollar verdicts;
  • Regulatory fines;
  • Costly employee turnover;
  • Poor employer-employee communication; and
  • Increased unionization.

Eventually, employers realized that HR - as change agent, employer advocate and employee spokesperson - is a vital part of the employer's overall strategies for growth, risk prevention and risk management. Consequently, Personnel gradually shifted to Human Resources and, with that shift, HR's function evolved. Unlike Personnel, HR's new role is not task-based. Instead, HR is expected to act as a strategic business partner.

Being strategic means HR understands the employer's business strategy, and each task HR completes is in furtherance of that strategy. For example, if the employer's annual objective is to cut costs, HR should not only complete each of its tasks with that objective in mind but should also develop long-term and short-term plans to help the employer meet its objective. Such plans might include the following:

  • Developing creative Workforce Planning strategies;
  • Increasing employee retention to help the employer receive the best return on investment for its new-hire training initiatives;
  • Implementing employee training programs that will allow employers to promote qualified people from within the organization;
  • Meeting with benefit providers to determine ways to reduce associated costs; and
  • Establishing a total rewards program.


Workforce Planning: Federal;

Total Rewards: Federal;

Employee Retention: Federal.

A business partnership is an association in which all involved work toward common organizational goals. For HR, being a business partner means HR assumes an active, not reactive, role in helping the employer meet its objectives - from targeting and hiring the right employees to employee development, training and coaching. A partner does not simply address business needs as they arise but will anticipate the employer's needs and establish short- and long-term plans to satisfy those needs. An HR partner will also bring creative and unique ideas to the table.

Practical Example

Mary is a senior HR generalist for Acme Financial Services Company. Acme's CEO, Joe, advises Mary the company will need to reduce expenses by 30 percent during the following year. "Okay, if there is anything HR can do to help, let me know," Mary says. Mary never hears back from Joe and assumes no action is required from HR.

Practical Example

Anna is a senior HR generalist for Acme Financial Services Company. Acme's CEO, Joe, advises Anna the company will need to reduce expenses by 30 percent during the following year. Anna reviews Acme's current work force costs. Acme's systems design team is primarily made up of consultants. Anna puts together a request for a proposal to determine how much it would cost to outsource the entire systems design function. Anna learns that outsourcing the function will save Acme 50 percent of its current work force costs for the systems design area. Anna puts together a plan and shows it to Joe. Anna also explains the pros and cons of the plan.

In the above examples, Mary took a passive and reactive approach. Anna, however, took a proactive approach, became part of the solution and demonstrated that she is a strategic business partner.

In some organizations, HR is seen as a roadblock instead of a business partner. To avoid that, HR must realize that its role is not to tell the employer that it cannot undertake certain business initiatives. Instead, HR's role is to support those initiatives. In the event that proposed business initiatives conflict with employees' rights, work rules or the employer's legal obligations, HR should help the business find alternatives.

Practical Example

Stan advises Marsha, Acme Import and Export's senior HR director, that his subordinate, Tim, is constantly late for work. In fact, Stan explains that Tim has been late on most days for the past two years. Amazingly, this is the first time Marsha has heard anything about Tim's lateness.

Marsha checks Tim's personnel file and sees there is no documentation (i.e., warnings or emails) showing that Tim was previously notified of, or reprimanded for, being late. The lack of documentation is an issue. Marsha has stressed the need to document with all supervisors, including Stan. Marsha also notes Tim is aged over 40 and is, therefore, in a protected class. Based upon her prior encounters with Tim, Marsha surmises that Tim seems to be a particularly litigious employee. Thus, Marsha wants to ensure Acme does everything correctly and has appropriate documentation to support its actions.

Marsha wants to help Stan. However, simply replacing Tim with another employee without proper documentation will leave Acme vulnerable to an age discrimination claim. So, instead of telling Stan he failed to document Tim's attendance and is consequently stuck with him, Marsha proactively helps Stan document Tim's future instances of lateness. She reminds Stan how important it is to document poor work performance or misconduct.

As Tim's lateness continues, he is coached and given written warnings. When his attendance fails to improve, Stan and Marsha begin to solicit applicants for Tim's position. Tim is terminated and his position is quickly filled. Stan really appreciates the seamless transition and HR working with him toward a resolution.

Developing Work Rules

Part of HR's responsibility as a strategic partner is developing, implementing and enforcing work rules, such as employee handbooks and other policies and procedures that will govern the workplace. See Employee Handbooks - Work Rules - Employee Conduct: Federal. Some HR professionals view work rules as a way to inform employees of their rights in the workplace. Work rules are not a referendum on employee rights. Positioning work rules as such may make employers reluctant to implement them. Instead, HR should develop work rules to do the following:

  • Meet legal requirements;
  • Set expectations concerning the employer-employee relationship;
  • Set standards for acceptable workplace conduct; and
  • Reserve employer rights.

The most effective work rules will strike a balance between the need to set clear standards and the employer's need to freely make business decisions. Work rules should help the employer's business run smoothly and not "tie the employer's hands" or infringe upon management's freedom to make the best decisions for the organization. For example, work rules with inflexible procedural requirements do not leave room for special or unexpected circumstances.

Practical Example

Helen, Acme Manufacturing's HR generalist, decides to establish a process for resolving employee complaints. Helen drafts a complaint procedure that includes the following language:

Within five days of an employee making any complaint or grievance, Acme will respond to the complaint or grievance in writing.

Helen takes her draft to Stephanie, Acme's senior HR manager, for approval.

Stephanie advises Helen the complaint procedure is a good idea. However, Stephanie expresses concern about the five-day rule and other strict employer requirements included in the procedure. Stephanie suggests Helen replace the five-day rule with the following language:

Acme will investigate employee complaints and respond as soon as practicable.

Stephanie's edits take unknowns into consideration, such as HR being busy, a necessary witness not being immediately available, or the investigation taking longer than expected. See Employee Handbooks - Work Rules - Employee Conduct: Federal.

Developing Legally Required Work Rules

In developing work rules, HR should consider the following:

  • Federal, state or local legal requirements;
  • Employer's business needs; and
  • HR best practices.

For example, employers that are covered under federal, state and/or municipal fair employment laws should strongly consider adopting a statement in their handbook aimed at promoting a work environment that is free of unlawful workplace discrimination and harassment.

In addition, employers should consider including statements regarding the following subjects in their handbooks:

  • Commitment to diversity;
  • Employee leaves;
  • Workplace conduct;
  • Employee benefits and compensation practices;
  • Communications; and
  • Separation procedures.


Employee Handbooks - Work Rules - Employee Conduct: Federal;

EEO - Discrimination: Federal;

FMLA: Federal.

Developing Work Rules as a Means of Reserving Employer Rights

While not required to do so, employers should use work rules, including employee handbooks, to reserve their rights. Some rights employers should reserve are as follows:

  • An email policy reserving the right to review any electronic content transmitted through the employer's hardware;
  • A statement reserving the right to consider employees at-will, absent a written agreement between the employee and employer stating otherwise;
  • A dress code reserving the right to institute disciplinary measures (including termination for repeated violations, sending the employee home, etc.);
  • A drug testing policy that reserves the right to test employees who are suspected of using illegal drugs during work hours;
  • A code of ethics, reserving the right to terminate employees for ethics violations; and
  • An attendance policy reserving the right to institute disciplinary measures (including termination) if an employee does not comply.

Reserving certain rights demonstrates the employer is serious about its policies and notifies employees of the consequences for not complying with them.


Multistate Employer;

Ethical Issues in HR: Federal;

Preemployment Screening and Testing: Federal;

Employee Handbooks - Work Rules - Employee Conduct: Federal;

Employee Discipline > Testing Employees for Alcohol and Drug Use.

Developing Other Work Rules as a Matter of Best Practices

HR should develop the following other work rules, as a matter of best practices:

The list above is not meant to be exhaustive. Work rules must be tailored to an employer's specific business.


Employee Handbooks - Work Rules - Employee Conduct: Federal. [Note: XpertHR's Employee Handbooks Tool provides access to hundreds of customizable policy statements coupled with explicit "When to Include" guidance for each statement.]

Implementing and Distributing Work Rules

Before distributing employee handbooks and other work rules, HR should take these steps:

  • Review the rules with senior management and external or internal legal counsel;
  • Consider the practical application of each work rule;
  • Ensure the work rules are tailored to the employer's business practices; and
  • Ensure work rules are not are so overly specific that they do not leave the employer room to navigate.

After carefully reviewing the work rules and agreeing with senior managers and employer's legal counsel regarding the scope, it is important for employers to effectively communicate the work rules to employees. Most employee handbooks and other work rules are communicated by digitally distributing them to employees. If possible, however, HR should review important work rules (i.e., codes of ethics and antiharassment policies) with employees. That can be done at new-hire orientation or during an annual training session.

Employers should ensure employees acknowledge work rules in writing by signing an acknowledgement form. The acknowledgment form should state that the employee acknowledges the work rules and not that the employee agrees with the work rules. Using the terms acknowledges or understands rather than agrees is important. The term agree may be construed as forming a contract between the employer and the employee.

Just as work rules are typically distributed digitally, most employers opt to receive acknowledgement forms in the same manner. Some employers also allow digital signatures. Others allow employees to acknowledge receipt of the handbook by digital signature, but require actual signatures for its most important policies, i.e., antiharassment and antidiscrimination policies. Those employers will generally do the following:

  • Segregate certain policies;
  • Review the segregated policies with employees as part of the new-hire orientation process; and
  • Request that employees acknowledge that they received the policy and that the employer explained the policy.

In all cases, each employee personnel file should include a copy of the employee's acknowledgement form(s).

See Employee Handbooks - Work Rules - Employee Conduct: Federal.

Wage and Hour and Internal HR Audits

DOL Wage and Hour Audits

The Wage and Hour Division of the US Department of Labor (DOL) interprets and enforces various laws, including the Fair Labor Standards Act (FLSA) and the Family Medical Leave Act (FMLA). The DOL has the authority to investigate or audit employers. While the DOL may audit employers for compliance with any of the laws it enforces, HR professionals are more likely to find themselves participating in an FLSA compliance audit than any other kind of audit. These audits may be routine or may result from employee complaints regarding the employer's wage and payroll practices or regarding the employer's compliance with other laws enforced by the DOL.

As soon as an employer knows it will be audited, a team of internal employees should be selected as the auditor's main points of contact. Generally, the HR director and internal legal counsel will be designated as the points of contact. However, another member of the HR team should be included in case the HR director is absent or otherwise unavailable. Having a designated team will help the employer control, and keep track of, the flow of information.

The DOL typically begins an audit by sending a letter to the employer notifying it of the audit start date. However, the DOL is not required to provide prior notice. In the case of a routine audit, if the DOL does not provide notice, and merely shows up on the employer's doorstep, the employer may ask to schedule the audit at a mutually convenient time. Employers may not, however, refuse an audit.

On or prior to the audit start date, DOL auditors will generally communicate with the employer regarding the scope of the audit, records access and the time frame for completing the audit. If the auditor does not provide that information, HR should ask for it. Once the scope of the audit is known, the employer should determine whether its risk exposure necessitates hiring outside legal counsel.

If the DOL notifies the employer that it intends to perform its audit on the employer's premises, the employer should set aside a private work area for the auditors.

During a typical investigation, the DOL will examine the employer's timekeeping practices, compliance with overtime laws, recordkeeping practices and whether the employer has complied with posting requirements. The DOL will also request certain documents. If that part of audit goes well, the DOL may opt to forgo a more in-depth review process.

If, on the other hand, the employer's records are inaccurate, incomplete or do not conform to applicable legal requirements, the DOL will almost certainly proceed with an in-depth review, which may include interviewing employees concerning wage practices. Importantly, interviews will be a part of some DOL audits regardless of how well the employer's books and records are maintained. The DOL may automatically conduct employee interviews if the audit was initiated by an employee complaint or where the employer's business poses a greater risk of noncompliance with the laws enforced by the DOL. For instance, in industries where wage and hour violations are commonplace (e.g., food service), good recordkeeping practices are not likely to dissuade the DOL from conducting employee interviews.

No employer is happy having a third party search through its records and criticize its mistakes. It may feel intrusive or like an unnecessary business interruption. Even so, it is important to be courteous and professional with the DOL's auditors.

After the audit has been completed, the employer will receive written notice of the DOL findings. Thereafter, the DOL will meet with the employer to discuss the findings. The DOL may request changes to the employer's business practices or fine the employer. Also, if the DOL finds the employer's errors resulted in certain employees not receiving their full rate of pay or overtime pay, the DOL may demand that the employer pay any wages due and owing the aggrieved employees. Payment to employees may be in addition to, and not instead of, the DOL fines. HR may minimize risk to the employer by demonstrating that an error uncovered by the DOL auditor was an isolated incident or that HR had discovered the issue on its own and taken appropriate corrective action prior to the audit start date.

See Employee Compensation > Enforcement, Liability, Prevention and Defense.

See How to Respond to a US Department of Labor Audit

Internal HR Audits

The best risk management tool is prevention. Therefore, HR professionals should not wait for a letter from the DOL before making sure their recordkeeping and business practices are legally compliant. Periodic internal audits or self-checks are the best way to ward off adverse DOL findings, employment claims and other similar issues. Some employers hire external auditing firms to perform those audits. Even if an employer uses an external auditing firm, HR should perform a self-checkup prior to the firm starting its audit. While the external auditor's findings will not result in fines or penalties, adverse findings can still be embarrassing for HR.

To conduct an internal HR audit, HR should review employee records, such as the following:

  • Time records;
  • Payroll records;
  • Employee personnel records; and
  • Forms I-9.

For larger employers, it may not be possible to review all records. In that case, employers may review a sample. To perform an internal self-assessment, see HR Self-Audit Checklist.

When an employer decides to engage in self-imposed corrective action, doing so can be somewhat tricky. Therefore, if, based upon the internal audit, HR determines the employer needs to modify its business practices, reclassify employees or correct pay discrepancies, HR should work with senior management and internal or external lawyers to implement the necessary changes. HR should work closely with the employer's lawyers to implement the necessary corrective actions while minimizing the risks associated with alerting employees to the employer's mistakes.

Employment Practices Liability Insurance

Employment law claims have exploded. Today, employers have a better chance of being sued by their own employees than by people outside of the organization. The employer's general liability insurance will not cover most employment-related claims. Therefore, more and more employers are securing Employment Practices Liability Insurance (EPLI).

EPLI coverage insures employers against financial costs associated with losing employment-related lawsuits, including attorney fees, settlements and judgments. Typical claims made under EPLI include the following:

  • Wrongful termination claims;
  • Illegal harassment and discrimination claims; and
  • Other employment-related actions, such as:
    • Slander;
    • Intentional infliction of emotional distress; and
    • Negligent hiring.

EPLI policies, however, generally contain exclusions, such as fines and penalties from government agencies.

HR should take the lead in inquiring whether an EPLI policy is appropriate for the employer. If it is, HR should, in conjunction with internal or external lawyers, carefully examine EPLI coverage, paying particular attention to the following:

  1. Who chooses the attorneys who will handle the case?
  2. Who has the right to settle the case?
  3. Will the employer have the right to veto a settlement that would force it to rehire a terminated employee?
  4. What are the renewal rates?
  5. What are the typical renewal rates for organizations that have made EPLI claims?

EPLI coverage can be a great safety net. EPLI does not, however, replace good HR practices. Prevention of the lawsuit in the first place is still the best policy. See Employee Management > Employer Liability.

Maintaining Employee Personnel Records

When HR professionals are unsure where a document belongs, the document generally finds its way into the employee's personnel file. That may be a mistake. Employees should have separate personnel files, medical files and legal files. Form I-9s and documents related to HR investigations should be maintained separately as well.

Employee Medical Files

Information relating to an employee's medical conditions should be maintained in the employee's medical file. Medical information includes the following:

  • Benefit enrollment forms;
  • Return-to-work slips indicating the employee's medical condition;
  • Medical certification forms; and
  • Forms related to medical leaves of absence.

The Americans with Disabilities Act (ADA), the Genetic Information Nondiscrimination Act (GINA) and laws within certain states require that employers maintain medical records separate from other personnel records. See Disabilities (ADA): Federal. The purpose of separating these records is to ensure medical records are only disclosed to those who need to access them for legitimate business purposes. Segregating medical records from other personnel records not only complies with the law, but it also protects the employer. If medical records are included in an employee's personnel file, anyone having access to the personnel file would gain knowledge of the employee's medical condition. The recipient of this information may, inadvertently or with the best of intentions, use it to make employment decisions. For example, a well-meaning supervisor who receives information concerning an employee's medical condition, may opt to "make things easier" for the employee by reducing his or her hours. While that supervisor's intentions were good, the conduct may expose the employer to liability. Separating medical information and controlling access to it will decrease the opportunity to use medical information unlawfully. In the event that a manager or supervisor needs access to an employee's medical records for a legitimate business purpose, HR should release only the necessary portion.

At times, HR may receive information relating to the employee's medical condition from the employee's health care provider, an insurance company or a third-party administrator. Under the Health Insurance Portability and Accountability Act of 1996 (HIPAA), that information is protected health information. Employers may only disclose protected health information with the employee's written consent. The consent form must meet HIPAA requirements and should be kept in the employee's medical file. See Employee Benefits > Health Information and Privacy (HIPAA).

Employee Form I-9 Records

Employees' Form I-9s should be kept together and organized in a separate file. See Immigration, Form I-9 and Work Visas. Typically, as part of the audit process, the DOL will request Form I-9 records. If those records are kept in the employees' personnel files, the DOL will need to review the files, which may subject the employer to unintended liability. See DOL Wage and Hour Audits.

Immigration and Customs Enforcement (ICE) and the Office of Special Counsel also can inspect I-9 forms during audits. See Immigration, Form I-9 and Work Visas: Federal.

Investigation Records and Legal Files

HR and internal legal counsel work closely on employment agreements, internal investigations, arbitrations and litigation. Therefore, documents pertaining to those issues may end up in the wrong file, i.e., in the personnel file rather than in the employee's legal file.

The following documents should be kept in the employee's legal file:

  • Documents related to pending administrative proceedings, arbitrations or litigation;
  • Communications between internal lawyers (if applicable) and the employer's external lawyers; and
  • Privileged communications between internal or external lawyers and HR.

Employer's lawyers, whether external or internal, should not have unfettered access to employee personnel records. To avoid unnecessary access to an employee's personnel file, employment-related contracts, employment agreements and separation agreements should be kept in the employee's legal file with copies maintained in the employee's personnel files.

When HR begins an internal investigation, an HR investigation file should be opened. With the exception of legal information (e.g., privileged communications or documents related to pending administrative proceedings, arbitrations or litigation), documents pertaining to the investigation (e.g., HR's notes) should be kept in that file. Those documents are HR's work product and are not employee personnel records. Memos from HR to the employer's lawyers, in which HR is seeking legal advice, should be kept in the employee's legal file. Such memos generally contain extremely sensitive information and are typically protected by the attorney-client privilege. Keeping them in the employee's legal file will reduce the risk of inadvertent disclosure to unauthorized third parties.

Employee Personnel File

A complete employee personnel file should include the following documents:

  • Job description for the employee's job positions, including the most current;
  • A copy of contracts or agreements with the employee (any original contracts or agreements should be kept in a separate legal file);
  • Offer letter;
  • Contact information for the employee, as well as emergency contact;
  • Signed employment application;
  • Signed acknowledgement form, acknowledging receipt of employee handbook and other work rules;
  • Performance appraisal review forms signed by the employee's supervisor and the employee;
  • Federal, state and local (when applicable) W-4 tax withholding forms and documents regarding any changes;
  • Direct payroll deposit authorization;
  • Attendance records or reports;
  • Disciplinary warnings or notices signed by the employee's supervisor and the employee;
  • Record of position changes and employment history with the organization;
  • Status change documentation records, i.e., full time, part time, equal employment opportunity (EEO) records;
  • Employee information form with home address and telephone number, birth date, marital status, EEO group, emergency contact, etc.;
  • Records of all compensation adjustments;
  • Records of all payroll status changes;
  • Records of vacation entitlement accruals and payments;
  • Copies of wage garnishments, child support and other court-ordered payments/deductions;
  • Signed authorization for repayment of payroll advancement;
  • Signed authorization for contribution deductions to community service or charitable organizations;
  • Signed authorization for purchase deduction of uniforms, safety equipment, tools and equipment, etc.;
  • Signed authorization for repayment and payroll deductions for any outstanding debt in event of termination of employment;
  • Completed training programs or course work;
  • Any major employment events, such as awards or complaints from customers; and
  • Any termination information, if applicable.

Granting Access to Employee Personnel Records

Third Party Access to Employees' Personnel Records

HR should proactively manage access to employee personnel records. Personnel files should be kept in a secured location. Only HR personnel should have access to the records. Any other employees who require access should be granted access only after they do the following:

  • Request access from HR; and
  • Explain why access is required.

HR should grant access only to managers, supervisors, executives or other employees with a legitimate business reason for accessing the file. In some instances, personnel records and employee legal files may be treated differently. Therefore, even the employer's internal lawyers should consult HR before accessing employee records.

In certain states, all documents of state and local agencies are open to the public. In many of those states, that includes employee personnel records. Generally, in an effort to strike a balance between employee privacy and the need for transparency in government, states place limitations on the type of personnel information public employers may disclose.

Employees' Access to Their Personnel Records

At one time or other, most HR professionals will experience an employee requesting a copy of his or her personnel file. Many employers believe personnel files are property of the employer and the contents do not need to be disclosed to employees. However, that is not necessarily the case. Whether an employee has a right to review his or her personnel records, what constitutes personnel records and the scope of the employer's duty to disclose personnel records to employees is a state-driven issue. Most states require public (state and local) employers to provide employees with the opportunity to inspect their personnel files. Other states extend that right to employees working for private employers. Refer to the state requirements for further information.

Record Retention

HR is primarily responsible for ensuring employers keep employment-related records for time periods prescribed by statutes, regulations and other applicable legal requirements. Difficulty managing that process arises when record retention requirements implicate several statutes, regulations and other applicable legal requirements. For example, an employer's obligations for an employment application may simultaneously involve Title VII of the Civil Rights Act of 1964 (Title VII), Executive Order 11246 and the Age Discrimination in Employment Act (ADEA).

Therefore, an employer may wish to retain records for periods that exceed those required by law as a matter of best practice. In fact, most employers have a records and information management policy that may require HR to retain the above records for longer time periods.

See Federal Record Retention Laws; Recordkeeping for Employee Management Purposes; Recordkeeping for Recruiting and Hiring Purposes.

Required Federal Postings

HR is responsible for ensuring the employer posts required notices. Employers must post notices in accordance with the applicable statutes and update as needed.

In addition to federal posting requirements, states may have their own posting requirements. See Employee Communications: Federal; Federal Workplace Labor and Employment Law Posters; State Workplace Labor and Employment Law Posters.

For organizations that have employees who telecommute or job share, it is a best practice to display posters on the employer's intranet and to mail, fax or email a copy of the poster to the employee. HR should also consider emailing reminders to offsite employees on the employee's first day of work and when the poster is updated.

Future Developments

There are no developments to report at this time. Continue to check XpertHR regularly for the latest information on this and other topics.

Additional Resources

Employee Rights to Access Personnel Records by State