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A Strategic Path to Mitigate Financial Exposure



Legal complexities, if not effectively managed, pose a significant threat to an organization's growth. To navigate this intricate landscape, organizations must prioritize a comprehensive understanding of their people's skills, systems, training, and the laws governing their operations.

Recently, a CFO of a local California technology company shared their costly lesson – a $900K settlement for a wage and hour lawsuit stemming from lax meal break timing and insufficient reinforcement of hourly policies by managers. While penalties were paid, the financial impact was substantial as current insurance coverage did not cover this type of claim.

To remedy the situation, The HRrx conducted a risk assessment, yielding several critical findings and corresponding remedies:


  1. Financial Exposure: Conducted Payroll Audit Finding: 983 meal break violations with potential PAGA penalties, resulting in an out-of-pocket cost estimation of $1.7M. Remedy: Implement rigorous monitoring and enforcement of meal break policies, reducing the risk of penalties.

  2. HR Department Turnover and Managerial AutonomyFinding: High turnover in the HR department led to managerial autonomy, with minimal oversight on people management. Remedy: Establish centralized HR guidelines and training programs, ensuring uniformity in policy implementation and fostering a culture of compliance.

  3. Lack of Legal Knowledge in the New HR Team Finding: The new HR team lacked understanding of crucial laws, leading to compliance gaps. Remedy: Invest in comprehensive training programs to enhance the HR team's legal knowledge, covering wage and hour laws, interview protocols, workers' compensation triggers, leave of absence compliance, and accommodation guidelines.

  4. Supervisor Training Deficiency Finding: Supervisors lacked training on their fiduciary roles, contributing to employee relations issues. Remedy: Develop and implement a robust training program for supervisors, emphasizing their responsibilities and promoting effective employee relations.

  5. Outdated Handbook Finding: The handbook was five years old and outdated. Remedy: Revise and update the handbook annually to align with current legal requirements and organizational policies.

  6. Employee Classification Issues Finding: Employees were misclassified, not meeting FLSA testing thresholds. Remedy: Conduct a comprehensive review of job descriptions, employee classifications, ensuring compliance with FLSA regulations.

  7. Inconsistencies in Job Titles Finding: Inconsistencies in the classification of hourly and salaried employees with the same job title. Remedy: Standardize job classifications to eliminate inconsistencies, promote fairness, and minimize legal risk.


We addressed these findings head-on and implemented the recommended remedies along with additional educational sessions for all leaders to assist with navigating through potentially challenging conversations with team members.

Investing in preventative compliance programs helps mitigate risks and ensures that the organization operates within the bounds of the law. Sadly, many companies reached out to us after a costly mistake that, in hindsight, could have been prevented. Therefore, a robust compliance strategy not only limits financial exposure but also builds a solid foundation for compliance, fostering a culture that values and safeguards the well-being of employees. Learn more about our people and compliance services visit https://www.thehrrx.com/services


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