Risk Management Through Compliance - "Help" May Be On The Way

I've written recently about creating sound footings for your business that make sustainability possible. Risk management is another one of those tenets or principles that serve to protect your opportunities for succeeding by helping you avoid unnecessary liabilities that can rob your bottom line. Liabilities that can affect either the physical, fiscal or cultural aspects of your business and brand.

In one respect, "compliance" is an important risk management tool, when viewed in the light of helping prevent negative financial liabilities, which can be catastrophic. Agreed it is easier to think negatively about compliance in terms of the imposition, added costs and work associated with doing what regulatory and legal mandates say must be done and reported.

But as a matter of perspective, if the planning, processes, training, leadership's expectations and communications that surface when required to remedy specific issues of compliance were affirmatively integrated into how a business operates, compliance would be a moot point. It then would be the company's own expectations about how work should be done and the "reasons why" would be embraced and understood as part of the culture (assuming honest communications is also alive and well within that culture).

The company's "reasons why" would stem from its greater interest in serving its shareholders by providing quality products and services, excellent customer care, and work environments that create ways for employees to advance and be successful, including employment and reward systems that are fair and equitable and targeted to produce long-term results.

There would be no questions about the importance of high employment standards that are consistently applied along with efforts to protect everyone on the payroll from harm, defined in a variety of ways.

Sound Pollyannaish? To some perhaps, but not to others.

The trend unfortunately is to view compliance as a problem that must be dealt with in addition to running a business. Viewed this way compliance becomes a self-fulfilling prophecy in some companies and a mere set of reports or list of numbers with little connection to workforce, workplace or business improvement. Lost is the realization that behind and driving each employee-related compliance requirement is a consideration for the work lives and treatment of the people who work for or aspire to work for you. Absent fulfilling those considerations the protection and interests of your customers and shareholders are undermined.

Harsh examples of what can happen in a weak compliance environment have popped up recently in the news headlines with problems in the coal mining industry back East and the ongoing dangerous oil situation in the Gulf of Mexico. Now those are problems, but sorrowfully they also have involved the loss of lives.

On a slightly different plain a number of companies continue to be embroiled in the "misclassification of jobs" (overtime eligibility) issue with pending class-action lawsuits. While loss of life is not an eminent danger in these instances the experiences are financially draining to businesses nevertheless, regardless of how the actions turn out.

We are not so naive as to deny that there are some who would take advantage of non-compliance situations to cash in as participants in a claim, which adds to the cost of defense. But this is yet another reason to be proactive with your risk management/compliance processes to begin with.

I'd like to commend to your reading a couple of articles that you may find interesting if any of this resonates with your thinking or experience within your company. The first is a recent piece (dated 5/6/10) published in the HR Week newsletter from SHRM entitled "'Plan/Prevent/Protect': The DOL's Program to Transform Employment Law Compliance for Businesses."

This is a Littler Mendelson summary of the proposed approach from the Department of Labor (DOL), published as part of its Spring Regulatory Agenda. You can also find an explanation at the DOL's site (www.dol.gov) where you can search on Plan/Prevent/Protect as the subject.

The second discussion, also authored by two Littler attorneys, appears in the April 19, 2010 issue of The National Law Journal/Labor & Management, entitled "The Future of Wage-and-Hour Class Actions," where you'll find some staggering statistics both in numbers of class action cases filed in recent years and the average settlements that hover around $8M. This piece also extrapolates what the future could hold as technology continues to affect how and where people work with PDAs as an extension of their jobs in virtually any location and at any hour on the clock. Defining "compensable time" will continue to be a challenge.

So what are our suggestions for managing these risks? Do your homework and don't neglect recent history. Determine once again how you are or could be affected by compliance requirements and make conscious decisions about where you intend to come down. The choices are relatively simple yet carry significantly different levels of risk in an ever-better-funded government enforcement world.

One recommendation we would make is not to be lured into the "what's the worst that can happen" mentality. Recent events make clear what is at stake there.

As always we are interested in your comments and we remain available to work with you on ways to improve your overall business results by proactively addressing these and other critical HR/business issues within your company.

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