By December 1, 2000 Read More →

When the Government Comes Calling | Article

man at the door“It was the best of times, it was the worst of times!”† These words penned by Charles Dickens a century and a half ago could have been written yesterday to describe the economy today. The economy has never been better, but the availability of workers to man it has never been worse.

In business, human resources are the single, most valuable asset. The very success of today’s economy only magnifies the importance of hiring, and not losing, good employees. The labor market is tight. Financial auditing procedures keep management constantly abreast of capital resources, cost and earnings.† BUT, what is the state of a company’s human resources?

This question is important to the solvency of any organization, but it is crucial to those companies doing business with the federal government, says George Phares, President of Strategic Direction Resource, Inc. For seven years, Phares’ company, based in Houston, Texas; has specialized in auditing human resources for federal contractors. Why, you may ask, do human resources need auditing?

Because once a year, each federal contractor is required to file a compliance report with the government. Too many companies, according to Phares, wait until the report is due to compile it. Only then are Affirmative Action and Discrimination guidelines taken off the shelf and dusted off.† Human Resource Department staffers then valiantly struggle to compile the report and get it sent off on time. Compounding the difficulty for the in house staff are changes that may have been enacted during the year affecting compliance.

Interpreting the Existing Law

The Supreme Court recently handed down five significant decisions covering fair employment practices.† Two of the rulings were on harassment and three others covered disability.† The decisions on harassment involved Title VII of the Civil Rights Act of 1964, and the disability rulings pertained to the Americans With Disabilities Act of 1990. The important aspect of these actions is that they did not involve new laws. Nevertheless, the Justices are still being asked to interpret them.

Why are the courts changing the rules governing the human resources playing field? “Because state and federal statutes are intersecting one another!”† says Phares.† Different regulations are being overlapped; such as FMLA, ADA, Title VII of the Civil Rights Act, The Rehabilitation Act, and ADEA, to name a few. Add changing times and new issues to the quagmire for good measure, and it becomes easy to understand why judges are scrambling to fill in the blanks. Phares states, “Confusing the issue further is the vagueness of the language explaining Human Resource law.” If you question this premise, try precisely defining the ramifications of ‘significant’, ‘severe and pervasive’, and reasonable’.

Internal Audit Vital

To a federal contractor, April 7, 1999 was a significant date. On that day, the Equal Employment Opportunity Commission (EEOC), and the Office of Federal Contract Compliance Programs (OFCCP) signed two memorandums of understanding.† One allows the OFCCP to act as the EEOC’s “agent” in processing charges filed under Executive Order 11246. This understanding applies if the charges involved violations of Title VII of the Civil Rights Act of 1964. The other memorandum’s intent was to increase enforcement of compensation discrimination cases.

In today’s economy, competition is strong, but resources are scarce. Phares says, “Companies can no longer afford ‘fly by the seat of your pants’ human resource management.† The best intentioned HR programs can fail.”

Informed, systematic evaluation of HR policies and programs is the only sure method to hire and retain good employees. Such evaluation is also the only way to guarantee compliance status if a company is a government contractor and intends to maintain that avenue of business.

The value of Internal Audit Outsourcing is two fold:

  • First: The outsourcer can evaluate the existing HR program with an unjaundiced eye; the trees don’t get in the way of the forest.
  • Second:† The outsource firm is knowledgeable with all nuances of government regulations, both current and on the horizon.

Bring the Outsourcing Firm in Early

According to Phares, the time to engage an internal audit firm is not when trouble is brewing, but long before it begins. By coming in early, the audit professionals can evaluate the HR program, systemize it and train the staff. The government carefully scrutinizes how the company is administering and working the program in place.† Personnel selection, both hiring and firing, are key points of interest. Affirmative Action and Civil Rights are not just buzzwords; they are a litmus test used by government analysts.

The outsourcing internal audit firm can put in place an ongoing system to assure that the client company is compliant in practice, and on paper. It can educate management to monitor and track the programs on a day-to-day basis to ensure that problems don’t arise.

According to George Phares, “Litigation of employment law issues is on the rise.† Several issues contribute to the increase.† Many years of ‘At Will Employment’ has produced a loss of loyalty within a company.† People are employed, but they are not solvent–they need cash. We are also reaping the harvest of ‘cost of defense’ settlements. Businesses look at the cost of defending even a winning position, and plaintiffs see settlement as an option to get something.”

The outsourcer can provide the technical expertise necessary to implement a workable,† Affirmative Action HR program. One that can pass muster for even the most diligent governmental inspection and belay even the scent of a Civil Rights violation.

But lightning does occasionally strike, and a company can be notified of a governmental human resources audit. In such a case, management is given thirty calendar days to respond. Monetary penalties may not be applied for violations, but for a government contractor an adverse finding could result in loss of government business. This may damage, or even destroy, a company’s profitability.† Why run the risk of sanctions, or a legal verdict in favor of a disgruntled employee, when it can be avoided?

Lessons From The Outsourcing Primer:

  • Never just “patch together” a human resource program.
  • Use professional internal auditing help to design the HR program.
  • Don’t fall victim to non-compliance charges by the government.
  • Keep employees contented and motivated. Help is available to accomplish this.


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