An Employment Practices or Employee Benefits audit won’t increase your profits …BUT it could save your bottom line!
In today’s competitive business environment, employers and HR personnel are all too often put in the position of having to pay insufficient attention to employment and employee benefits legal compliance until problems arise — resulting in dire and costly consequences. Failure to comply with the complex and ever-changing laws in these areas often results in one or a combination of: substantial penalties, steep fines, governmental agency audits, and / or litigation. Unfortunately, all of these options usually have a very expensive price tag attached.
Consider the following:
Employment Practices
- 67% of all employment cases that litigate result in a judgment for the plaintiff
- 1/3 of employment case verdicts award punitive damages
- 75% or more of the total judgment amount awarded in an employment case is usually for punitive damages
- Based on 2000 data, median compensatory awards for employment cases were:
- $268, 926 for age discrimination
- $120,951 for race discrimination
- $100,000 for gender discrimination
- Median compensatory awards rose from $78,592 to $218,000 between 1994 and 2000
Employee Benefits Plans
- From 2000 to 2001 the number of ERISA civil suits filed increased from 9,124 to 10,292 (almost 13%)
- In 2001, the Department of Labor investigated 4,862 businesses and recovered $648 million in penalties and damages
- In 2000, the average defense cost of a fiduciary liability claim was $124,000In 2000, 47% of fiduciary liability claims were based on benefits disputes (including denial of benefits)
How an employer can protect itself:
Self-Audits are reviews that companies usually undertake with the assistance of employment and benefits counsel to identify legal compliance gaps in their plans, policies and/or operational procedures. The audit focuses on areas that could place the company at risk for governmental fines and penalties, as well as expose the company to an increased risk of lawsuits. These audits can be done for either or both a company’s employment practices and employee benefits plans.
The scope of an audit can vary from a basic overview of plans, policies and procedures with identification of possible compliance gaps, to a comprehensive assessment and analysis with specific recommendations for methods of correction of any identified gaps and drafting and/or updating any needed plans, policies and procedures. By conducting these voluntary self-audits, a company can significantly reduce the costs of future problems – costs that can have a huge impact on the company’s bottom line. In fact, the IRS recommends periodic internal auditing of plans. According to their website, in the event of an IRS plan audit, “Self-auditing may demonstrate that the plan is operated with concern for compliance and may contribute to an agent’s decision to limit the examination.”
Employers should consider performing self-audits at least annually. Additionally, when there are major changes to the law or major changes to the business, a self-audit should be done. Employers should work with professionals with experience conducting these audits. Proactively identifying and addressing issues can be the best protection from legal action for an employer.
Please contact the office of Aiken & Aiken at 847-245-2336 for more information on how you can protect your “bottom line”.
Aiken & Aiken is a specialty boutique law firm located in Algonquin, IL that provides advice and transactional services in the areas of employment practices and employee benefits law, including current employment laws, employment life cycle issues, qualified retirement plans, health and welfare issues, fringe benefits, non-qualified deferred compensation plans and executive compensation plans. The attorneys at Aiken & Aiken work with clients to provide strategic, innovative solutions to problems in the complex legal arenas of employment practices and employee benefits.
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