Human Resources is an essential company function for a variety of reasons. HR departments are tasked with talent acquisition, onboarding, employee development, and shaping workplace culture. HR teams have many duties, and amid all of their responsibilities, it can be easy to lose sight of one of the most important – to protect the interests of the company and guard against liability and legal risk. Here, we will discuss some of the most common mistakes that HR teams make, how they can put an employer at risk, and how to avoid them.
Employee misclassification
When a worker meets the criteria for what constitutes an employee, for example, being integrated into a company and subject to control over how their work is conducted, then they must be classified as such, as this guarantees them certain entitlements and protections. However, the misclassification of employees is one of the more common mistakes that HR teams make, especially in instances where employers are hiring across international borders, as laws can differ across jurisdictions.
While it can be an easy mistake to make, misclassification should be taken seriously as it can have significant repercussions. Employers that are found to have misclassified employees as independent contractors can be subject to financial penalties. They can also be ordered to pay substantial back-pay, as well as being liable for taxes and contributions that have gone unpaid. Worse still, there is a risk of considerable reputational damage, as misclassification is often associated with wage theft.
To ensure that you correctly classify your employees, it is essential to use established, government-approved tests to determine how workers should be classified. In instances where you might be hiring globally, it is essential to carry out the equivalent test in the worker’s country to avoid any unforeseen liability. In instances where it is unclear, you can submit a form requesting a determination of a worker’s status by a domestic authority, such as the IRS.
Inadequate documentation and recordkeeping
Documentation and recordkeeping are another area where mistakes commonly occur for HR, and something that warrants close attention. Regulatory compliance is one key reason for this, but the other is that HR’s role is to facilitate the company’s defense in the event of a dispute, and thorough documentation and well-maintained records are essential in this.
In dealing with disputes, HR needs to have complete records to prove an absence of liability. This may include documentation of prior interactions with the employee in question, including performance reviews and any disciplinary actions that may have been taken. In the case of workplace accident claims, records of safety inspections and audits are required. These can set the precedent for the company’s defense and prove fair conduct and legal compliance. However, in instances where HR fails to make documentation in a consistent or timely manner, this can become much more difficult, leaving the company open to potential liability.
To avoid exposing one’s company to this kind of risk, it is essential to put a proper process in place. This means establishing clearly defined protocols for record keeping and standardized formats and templates for documentation. All of this must be applied unilaterally to ensure accuracy and clarity across departments. Your HR department must see to it that files are kept securely and backed up, with access controls in place to ensure confidentiality and regulatory compliance. It is also advisable to conduct routine, periodic audits to ensure that protocols are being followed and that records meet the established standard.
Mishandling of terminations
Of all the tasks that HR is responsible for, termination and severance are some of the most sensitive and can be fraught with issues if not handled correctly. Employee rights laws protect workers against wrongful termination, so there are significant risks should a former employee take legal recourse. While the grounds for a dismissal may be lawful, there is potential for liability in how the matter is handled.
Companies are required to demonstrate due process and clear justification for termination, or they could face scrutiny and penalties from regulatory bodies. So, the key to mitigating risk is to establish a framework for terminations. There should be a clearly defined sequence of steps, including a written notice to the employee, along with a checklist for all required documentation and evidence. To ensure total compliance, decisions on terminations should be thoroughly reviewed to ensure that they are supported by historical records of employee conduct or performance. Severance terms should also be subject to a comprehensive review by your business lawyer to avoid claims of a breach of contract.
In facilitating an employee’s departure from the company, your HR department should ensure that the exit interviews and other communications are carried out fairly and courteously. By maintaining transparency and professionalism, adhering to an established protocol, and prioritizing due diligence, your HR team can ensure protection against litigation and preserve your company’s reputation.
Summing up
HR teams have a wide range of responsibilities in the modern workplace, but safeguarding the interests of the company is far and away the most critical. Even the simplest of legal mistakes can have significant repercussions, so it is essential to adhere diligently to best practices. By understanding these common mistakes and taking appropriate steps to prevent them, your HR team can ensure absolute transparency and compliance to keep your business protected against unforeseen liability.
