The Impact of HR Investigations in Small Businesses

Feb 16, 2024 | Listen

The Impact of HR Investigations in Small Businesses

Dealing with HR Investigations can be overwhelming for small business owners.

It’s also potentially frightening to experience some type of employee complaint from both inside the business or externally through a governing agency like the EOCC.

From wrongful termination claims to accusations of workplace bullying or harassment, mishandling HR matters can lead to costly legal battles, and that’s a risk no business should take lightly. 

Knowing how to conduct proper HR investigations isn’t just a good idea; it’s essential for safeguarding your business, regardless of its size.

So what should you do if an employee makes a complaint?

How do you ensure it’s resolved fairly and professionally?

And who can help you handle the situation? 

Jill Avey: An HR Expert’s Perspective

In today’s episode, our guest Jill Avey shares her insights on HR investigations. She sheds light on effective strategies for handling complaints when to seek legal counsel, and the crucial role of comprehensive HR documentation and processes in safeguarding your business.

Timestamps for this week’s episode

03:46 What are HR investigations

10:14 Common small business employee claims that lead to HR investigations

14:46 The Ideal timing to create an employee handbook.

15:28 The importance of policies and handbooks for contractors and 1099 workers.

37:58 Recommended actions when your business lacks HR expertise

41:11 Actionable steps to take to protect your business from HR investigations

What are HR investigations? 

HR investigations usually start with an employee coming forward with a concern or complaint about their work conditions, often involving discrimination.

Discrimination covers a wide range of issues, such as wrongful hiring or being passed over for promotion due to someone else being a member of a protected class or whatever reason. 

Other concerns include harassment, sexual harassment, bullying, a hostile work environment, and retaliation. Retaliation is the most common claim made by employees, alleging mistreatment because of actions – perceived or otherwise – against a manager or other team members, like filing a workers’ compensation claim for example. 

It’s important to note that complaints can be based on a person’s perception of what happened as well as the facts. 

What is crucial however is that when an employee approaches their employer with a concern, it’s an opportunity for the company to address it properly, ensuring fairness and support for the individual coming forward.

Sometimes we take things internally and we adjust them to our narrative. And so it might not be 100% factual, and that doesn't mean intentionally, although, it can be.

Common small business employee claims that lead to HR investigations

HR investigations in small businesses are often caused by disputes over wrongful termination and internal issues like bullying, sexual harassment, and a harsh work environment. 

Even though some of these complaints might not be illegal, they create uncomfortable workplaces. For instance, when managers are too strict or not very friendly. Being tough isn’t against the rules, but having a respectful workplace is really important.

Finding the balance between accountability and respect is key, and taking repeated complaints seriously is vital for fostering a positive workplace.

“Even with 1 employee, we wouldn’t want an employer to be without any form of policy because they need to be protected.” – Jill Avey

The ideal timing to create an employee handbook

Creating an employee handbook depends on where you are and your company’s size. Every state has its own rules, especially in places like California, Colorado, Illinois, and Ohio. Federal laws don’t apply to everyone, it depends on how many people you employ. 

You technically don’t legally need policies until you have  15 employees. But it’s smart to have rules about discrimination and harassment in place even if you’re smaller. This includes a process for investigating claims as well. 

What is important is that you abide by the EEOC guidelines and keep a respectful workplace.

The first thing you say (when an employee shares a complaint) "I can see this is important, and we want to get this right for you." That is an HR employment mantra: We want to get this right for you.

The importance of policies and handbooks for contractors and 1099 workers

Policies and handbooks are vital for businesses dealing with contractors and 1099 workers. When you have contractors instead of employees, it’s important to maintain a clear distinction. 

Some key points are: 

  • Don’t control the contractor

  • Use contracts not offer letters

  • Define work scope not job descriptions

Contractors should not sign your employee handbook but it helps if they align with your company’s values and anti-discrimination policies. You should also communicate in a way that avoids directing or assigning tasks to contractors, ensuring they maintain control. 

If a contractor faces harassment, the process will be different from employees. While the behavior is unacceptable, addressing it involves a separate approach. You must support the contractor but within the limitations of the non-employment relationship you share.

Sometimes, small businesses don’t have the HR expertise or a full-time HR person on staff. If this is the case, reach out to an HR consultant for guidance.

Make sure they’re certified and have experience in conducting HR investigations. 

Think of it as a green flag if they’ve teamed up with HR attorneys as well, you’ll get that extra layer of protection when needed. 

Also, when you start consultations, take advantage of those free first conversations, both with the HR consultant and employment law attorney. 

Having them on your side ensures you stay updated on new HR regulations and have a support system in place in case someone files a complaint.  

“Communicate. Keep the lines open (with your employee who has a complaint) because in the absence of your communication, it’s MSU, And that’s making stuff up.” – Jill Avey

Actionable steps to take to protect your business from HR investigations

The next actionable step to take to protect your business from HR investigations is to prioritize HR education. There are many online programs available that provide valuable insights into handling complaints and fostering a culture shift within your company. 

Remember, your company’s culture starts with the people you hire, so make sure they align with your values from the get-go. It will lead to better teamwork, increased employee satisfaction, and a stronger commitment to your company’s mission.


  • HR investigations start with employee complaints over discrimination and harassment or bullying they’ve experienced at work.

  • Common causes of small businesses HR investigations include wrongful termination and harassment, requiring a balance of accountability to restore a positive workplace.

  • Creating an employee handbook depends on your business location and size, and should include essential policies to ensure a respectful environment at work.

  • Policies and handbooks are vital for businesses working with contractors, offering protection for both you and your contractors. 

  • For business without HR expertise, talk to HR consultants and lawyers. Not only will they help during crisis situations, they will also update you on HR regulations.

  • The next step to take to protect your business from HR investigations is to beef up HR education and align your new hires with your company values, mission, and vision.


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About guest – Jill Avey, SPHR, SHRM-SCP 


Southwestern HR Consulting, Inc.

Jill Avey, SPHR, SHRM-SCP is the founder and owner of Southwestern HR Consulting, Inc. (SWHRC). Jill has more than 25 years of business expertise in Human Resources (HR). 

Collectively, her team of 9 HR Professionals brings 200+ years of HR experience to the care and support of their clients throughout NM, in 24 states and 4 countries. SWHRC builds extraordinary employers to create extraordinary work environments. 

Jill currently serves as an instructor for the preparatory course for the global SHRM HR certification program supporting the Human Resource Management Association(HRMA) local to ABQ.  

Jill is also the Owner of a local employment background check company, Maximum Reports.  Maximum Reports has been supporting businesses throughout the United States as well as supporting numerous Native American Tribes throughout the country for 20 years providing thorough and accurate pre-employment screenings from live data within 24-48 hours in support of our clients. 






About host – Kathy Svetina

Kathy Svetina is a Fractional CFO for growing small businesses with $10M+ in annual revenue.

Clients hire her when they’re unsure about what’s going on in their finances, are stressed out by making financial decisions, or need to structure their finances to keep up with their growth.

She solves their nagging money mysteries and builds a financial structure with a tailored financial strategy. That way they can grow in a financially healthy and sustainable way.

Kathy is based in Chicago, IL and works with clients all over the US.

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