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Why Process Matters in HR Decision-Making

It’s a sad reality that when HR lacks process in decision-making, subjectivity creeps in and havoc ensues.
regulations

When evaluating how to structure a process robust enough to withstand regulatory scrutiny, technology can help answer compliance questions, assess risk and document the decision-making process.

It’s safe to say that HR departments strive not just for the right result but ultimately, the most defensible outcomes that best mitigate risk.

In an evolving era of HR and people management, “defensible” decisions are even more critical, as unpopular or controversial decisions can go viral in minutes and damage the culture, reputation and profitability of an organization. As a longtime employment law litigator and former chief legal officer, I’ve witnessed many a corporate witness fall victim not so much to lack of merit in an employment-related decision, but rather an inability to articulate the process by which the decision was made. More times than not, it was the absence of process or lack of adherence that became grist for the grind and turned an otherwise defensible matter into a more complicated one.

The assemblage of discrimination laws in the U.S. require, for the most part, that employers proffer a “legitimate non-discriminatory reason” for why decisions were made. Thus, the ability to show adherence to process in decision-making provides a powerful defensive weapon. As many HR professionals know all too well, where process in decision-making is lacking, subjectivity creeps in and can create havoc.

In terms of how critical and valuable the transparency of process in decision-making can be, one needs to look no further than the Fair Labor Standards Act, which allows a claimant double damages where the company is unable to demonstrate “good faith” in its adherence to the law. Specifically, under the FLSA, employees are entitled to seek up to three different categories of damages: unpaid wages, attorney’s fees and “liquidated” or double damages, meaning two times the amount of unpaid wages.

Under the current state of the law, liquidated damages are presumptively awarded except where the employer can show: “To the satisfaction of the court that the act or omission giving rise to such action was in good faith and that he had reasonable grounds for believing his act or omission was not a violation.” In other words, the burden to avoid liquidated damages is on the employer.

In an audit performed by the Department of Labor, an employer will certainly be asked not only to provide all information relied upon in arriving at the classification being audited (such as an overtime exempt classification), but usually is expected to submit to some form of interview or exchange with an agency investigator. This exchange — whether written or verbal — will almost always involve a discussion around those steps and considerations the employer followed in reaching the decision under review.

With exposure to double damages on the line, it is insufficient to proffer that a classification merely followed pre-selected or default job code classifications in its payroll system. Nor is it sufficient to rely on “advice of counsel” unless a company is prepared to waive its privilege and allow the DOL a window (for better or worse) into the company’s communications with its lawyer.

For an employer to show that a decision-maker believed his or her decision did not violate the FLSA, demonstrated efforts to first read and understand the law are advisable. From there, understanding the required legal tests is in order as well.

It is insufficient to conduct an analysis with respect to one employee and from there, extrapolate those conclusions to a larger class of employees. Instead, courts weighing in on the “good faith” defense have used such phrases as “actively endeavored to ensure such compliance,” or “affirmative steps” to ensure compliance rejecting the notion that informal conversations are enough.

When evaluating how to structure a process robust enough to withstand regulatory scrutiny, technology can help HR professionals answer critical compliance questions, assess risk and document their decision-making process.

Whether utilizing technology or some other internal process, the ability to recreate the decision-making process, the legal support and factual underpinnings of that decision will provide a solid opportunity to beat back wage claims in addition to helping create internal efficiency and consistency in the compensation process.

When this article was first drafted, the DOL’s new overtime laws were due to take effect Dec. 1, 2016. Before that could take place, a Texas federal judge enjoined the DOL’s changes Nov. 22, sending employers scrambling to figure out their next steps.

While employers might have received a temporary reprieve from the minimum salary level required for an exemption classification, nothing about these developments lessens the importance of the process in HR decision-making. Pay practices will remain on the radars of lawmakers and employees alike in 2017 and continue to grab headlines as events unfold.

Lori Brown is president and chief operating officer of ComplianceHR. Comment below or email editors@workforce.com.