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Employee Practices Compliance Systems - A New Compliance Notion

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Article: Employee Practices Compliance Systems - A New Compliance Notion

Article Date: Friday, January 24, 2003

Article Source: HR.com

HR.com_.1.24.03.pdf

Employee Practices Compliance Systems - A New Compliance Notion by Chris Santella
HR.com, January 24, 2003
There is an administrative impasse that stands between Human Resources and the pro-active creation of value-added employee programs. It is called compliance.
“HR Managers spend far too much time dealing with compliance issues,” said Dr. William Pfeiffer, an Associate Professor of Management at Portland State University and former Vice President of Human Resources for Fred Meyer, a major West coast retailer (now owned by the Kroger Company). “The level of redundancy – answering policy questions again and again, generating repetitive paper trails – is stultifying. Many administrators feel akin to gerbils on a wheel. You’re running, running, running, but not really getting anywhere.”
“I’ve spent many years fighting the battle of getting information to employees and managers about the rules of compliance – and putting together training programs and maintaining records,” said Don Kielblock, former Vice President of Human Resources for Portland General Electric, a major Northwest utility provider. “Insuring that employees have the information they need to be in compliance and do their jobs is an overlooked part of the process.”
These sentiments are echoed by Larry Butler, former Vice President of Human Resources for PeopleSoft.
“To be effective, compliance programs must be smoothly integrated into day-to-day operations,” said Butler. If such programs are perceived as ‘compliance-specific,’ people will respond in a negative way, as most view compliance as a painful process.”
Administrative burdens that distract from more significant HR programs are one source of pain. Another is the financial impact of employment-related lawsuits stemming from the failure of compliance programs. Consider the following statistics 1:
• Three out of five companies are sued by former employees every year –and more than 450 companies are hit with employment lawsuits everyday.
• The average civil lawsuit lasts two years from inception to trial, and longer on appeal.
• One-half of all companies defending employment lawsuits spent over $50,000, and one-third spent over $100,000, in litigation costs not including a jury or settlement award.
• The average jury award in an employment lawsuit exceeds $250,000, with 15% of all verdicts exceeding $1 million.
• Nearly one-third of all wrongful termination verdicts contain a punitive damages award equal to or exceeding the compensatory award.
• 56% of all cases tried result in verdicts for the plaintiff (employee).
Some companies have covered weaknesses in their compliance programs with a veneer of employment practices liability insurance. EPLI, however, has only numbed some of the financial hardships that come with poor compliance practices.
An Information Issue Keeping abreast of changes in laws related to the workplace – and then translating those changes into meaningful policies, disseminating those policies to employees, and somehow tracking their comprehension of the policies – is ultimately an information issue.
According to a recent Gartner Group study, the information associated with compliance tends to be viewed as an unconnected series of discrete activities motivated by specific regulatory requests 2. It’s expected that these activities will be driven by HR personnel. Compliance issues are generally managed on an ad hoc basis – often on a department to department basis – and often revolve around documents, as in, “what documents do we need to comply?”
For example – a new piece of regulatory legislation is passed; the HR department scrambles to translate the new legislation into policy, communicate the policy to their employees, and hopefully provide managers with some guidelines for implementing the new policies. Once the policy document has been created, there’s no systemic way to gather data regarding which employees understand the new policies, where additional training might be needed, and how vulnerable the organization might be to potential suits from employees who might claim to not be aware of or understand new policies.
Generally speaking, vendors have focused on the first and second steps of the continuum – providing HR managers with up-to-date legal information, and templates for translating changes in the law to policies. BNA, Inc. (www.bna.com) and HR Comply (www.hrcomply.com), for example, do a good job of providing consistent legal updates, and guidelines for drafting new policies based on additions/amendments to the law. BNA also lets users distribute policies via email, and provides a means for easily drafting customized policies.
While effective at identifying changes in the law, these models fail to provide a means for tying information together in a coherent employee practices management framework that works across the enterprise. A recent SHRM Legal Report states that the only way to ensure healthy best practices (and hence mitigate the threat of lawsuits is to prescribe an employment practices wellness program – a regular regimen of employment law and practices training for managers and employees 3. As compliance activities become a significant work effort for all midsize and larger enterprises, ad hoc or departmental compliance approaches will fall short of the desired compliance goals 4. In this light, organizations would do well to move away from the “document-centric” model that places HR administrators in a “compliance policing” role, and instead adopt an enterprise-wide system that involves employees in the process. Gartner Research recommends a system where compliance-related content is available in an online environment, and can be managed by an electronic workflow process.
Bringing A Process To Play
Qsent, a technology company focusing on applications for real-time contact information located in Portland, Oregon, has recently adopted such a new technology – dubbed an “employee practices compliance system” – from Compli (www.compli.com). For Frank Garbayo, the company’s Sr. VP of Human Resources, the system promises relief from the masses of paper that accompany the compliance process. “Our compliance philosophy is straightforward,” Garbayo said. “We want to do the right thing by our employees, and by doing the right thing, we’ll be in compliance. The employee practices compliance system provides a framework for controlling the compliance-related paper that’s a natural by-product of the compliance process.”
The system works like this: attorneys at Compli monitor state (in this case, Oregon) and federal employment law for changes that impact a company like Qsent. When a change is legislated, Qsent’s HR department is alerted of the change and provided with a package of integrated information that includes a plain language explanation of the change in law and how it affects the company; a suggested new policy, management guidelines; training questions and any related FAQs and forms.
Once Qsent managers review and approve the policy language, all employees are notified of the new policy via email, and provided with training assessment materials to monitor employee comprehension. They are given the opportunity to acknowledge their understanding of the new policy via a secure Web site. In addition to the general policy notification, supervisors receive guidelines for implementing the given policy, to help ensure accurate decision-making. The system also provides an automated tracking process that enables Garbayo and his staff to efficiently follow-up with employees who haven’t acknowledged the policy change.
Perhaps most significantly, Qsent can capture all communications and training scores to a central electronic repository through each step of the compliance process. From this repository, HR can easily assess how well employees/supervisors understand the new policy, and where employees may benefit from further training. Flexible reporting capabilities help identify potential conflicts so they can be resolved – or provide the means to defend against unwarranted lawsuits.
“I especially like how the system lets me distribute training materials along with notification of a new policy, and even lets me test employees’ understanding of the policy,” Garbayo added. “I can receive and track results in real-time, with minimal disruption to the workplace.”
Because the Compli system is a Web-developed and Internet-delivered solution, there’s no software or hardware to buy or maintain, and minimal effect on existing IT systems. The system is accessible to employees wherever they’re working, so long as they have Internet access and a browser.
For Kimberly Sullenger, Director of Finance and Administration for Pleasanton, California-based Pixion (a provider of hosted and installed Web-conferencing products),
a Web-based compliance system means lower legal bills and less paper. “If a compliance-related issue came up in the past, I’d reach for the phone to call our attorneys. Now I can review the law, our policies and guidelines on our (Compli) Web site. Likewise, our people can also access compliance information. Everything is right at their fingertips. This is important for us, as we have employees from very diverse backgrounds and cultures. The Compli system clearly communicates compliance issues to everyone in a common language and format.”
The process the employment practices compliance system imposes upon compliance issues is of great significance. “I’ve used Lawroom (www.lawroom.com) to keep up to date on developments in the law,” Sullenger continued. “The Compli model gives me an automated way to not only stay current with regulations, but to distribute and track compliance activities. Because there’s no paper trail to follow, there’s no paper trail to lose. Employees acknowledge new policies or policy amendments online. They’re engaged in the process, and are very well aware of what they’ve signed off on.”
“Most employers have compliance concerns looming large in the back of their minds,” said Patrice D. Altenhofen, an attorney and Director of Human Resource Development Services for Cascade Employers Association, a human resource and employee relations association based in Salem, Oregon. “We’re always looking for ways to address those concerns and support business success in practical, non-threatening ways.”
“For the past few years, I had been looking for a way to help our employer members publish their policies on-line to ease the update process and provide employees with easy access to individual policies,” Altenhofen continued. “I wanted to provide supervisors with some guidance on the implementation of those policies – like what to do if an employee thinks she’s been harassed or how to respond to an employee’s request for disability accommodation.”
The Employment Practices Compliance System concept was appealing. “It gives anyone with workforce management responsibilities instant access to the latest information on civil rights, wage and hour, family leave and a host of other relevant regulations. In my mind, this alone justifies the cost of the system. The real-time and labor-saving feature of the system is its workflow management and documentation tool. This allows employers to issue policies, forms, evaluations and even disciplinary records electronically. Employees are then able to accept, or acknowledge, the document electronically. All transaction information is recorded and maintained on the system. Employers can track which employees have not completed a required document review, and provide tools to follow up.”
“From an exposure standpoint, an automated and comprehensive repository that captures compliance alerts and employee acknowledgements puts the organization in a better position to ward off potential damages,” said Gregg Miller, President and Chief Executive Officer of Northwest Pump and Equipment, based in Portland, Oregon. “Half of all companies defending employment lawsuits spend over $50,000 in litigation costs – and that’s before plaintiff awards. Any cost-effective means for protecting ourselves from exposure is money well-spent.”
“Compliance should not be viewed as simply a human resources responsibility,” William Pfeiffer added. “It’s a company-wide problem, and should be considered as part of a
larger management mission. A well-run compliance program can actually help retain employees and reduce costs associated with hiring and defending lawsuits. In this light, compliance has a real impact on the bottom-line.”
1EPLI (EMPLOYMENT PRACTICES LIABILITY INSURANCE): UNDERSTANDING THE EXPOSURE AND PREVENTING CLAIMS, published by lawthatworks.com.
2 Compliance Is Not a Document, It’s a Process, K. Harris and D. Logan, published by Gartner Group, 2002.
3Employment Law and Practices Training: No Longer The Exception – It’s The Rule, by W. Kirk Turner and Christopher S. Thrutchley, SHRM Legal Report, July-August 2002
4Compliance Is Not a Document, It’s a Process, K. Harris and D. Logan, published by Gartner Group, 2002