Sometimes it is easy to overlook the importance of human resources and compliance issues.  In fact, human resource departments face significant enforcement and compliance risks.  In addition, the head of human resources is an important partner on compliance.  If a company suffers from weak compliance programs, its human resource department is sure to be a liability for the company.

The Human Resources Chief has significant compliance responsibilities both inside and outside its department.  Within its department, the Human Resources Chief has to ensure compliance with:

  1. The Fair Labor Standards Act which governs minimum wage and overtime pay.  These requirements differ in each state but pose significant risks, especially for those companies that have a large wage-based pool of employees.  Class action suits are regularly brought against fast-food chains, hospitals and other organizations where significant groups of employees are paid hourly wages.  Almost half of all of these class action suits are filed in California where state law is very worker friendly.
  1. Federal Civil Rights laws govern the hiring, firing and terms and conditions of employment.  In general, these laws prohibit consideration of race, gender, age or other “protected” status when making decisions on hiring or firing or setting any other terms or conditions.  Government enforcement at both the federal and state level is aggressive, and private litigation ranging from class actions to individual suits are regularly filed.
  1. The Family and Medical Leave Act grants certain employees the right to take up to twelve weeks of unpaid leave each year in specific circumstances, and to be reinstated with certain protections after any such leave.
  1. The Uniform Services Employment and Reemployment Rights Act provides protections for employees who are called to active military duty and protects them when returning to work after completing military service.
  1. Management of compensation and benefit programs – HR leaders often have to oversee employee compensation and benefit plans which include Employee Retirement Security Act’s reporting, disclosure and fiduciary requirements.  The Patient Protection and Affordable Care Act has imposed a number of requirements, and in 2014 a number of new requirements will become effective for companies providing employer-sponsored health benefits.

The Human Resources Chief must hire and retain individuals that are knowledgeable about HR specific laws and are able to create appropriate policies and procedures.  Once the policies are established, HR must make sure they are effectively communicated throughout the organization.  Also, the Human Resources Chief has to audit its operations to ensure compliance, and has to make sure he/she communicates regularly with senior management and the chief compliance officer.

Outside of these core responsibilities, the Human Resources Chief plays an important role in working with the compliance, legal and auditing offices.  These responsibilities include:

  1. Employee Handbook and Procedures – HR should maintain and regularly update an employee manual on procedures.  This manual should incorporate policies and procedures governing compliance, including anti-corruption, export control, government contracts and other applicable policies
  1. Education and Training – HR should implement education and training programs across the organization and maintain documentation of substance and attendance.
  1. Auditing — HR should coordinate its internal auditing program with the Chief Compliance Officer for HR responsibilities and documentation
  1. Compliance Communications — HR should coordinate with Chief Compliance Officer on the design and implementation of comprehensive communications strategy to promote compliance throughout the organization.
  1. Disciplinary Procedures – HR should work closely with the Chief Compliance Officer and General Counsel to design and implement an appropriate disciplinary program for employee misconduct.
  1. Whistleblower Response and Triage Program – HR should coordinate with the Chief Compliance Officer and General Counsel to develop a whistleblower compliance program to encourage internal reporting and responses to whistleblower complaints, including a triage program. 

As you can easily glean from these lists, the Human Resources Chief faces a number of risks within its own office and has a number of important responsibilities for ensuring the company’s compliance.  The challenge is to divide the responsibilities among the compliance, auditing, legal and HR offices, and ensure that they are coordinating with each other to keep the operation running smoothly.