HR Compliance: Important Employment Laws to Know

Companies everywhere have certain rules that keep them safe and above board — in other words, these rules keep companies in compliance. Ensuring compliance with certain laws and regulations often falls to the HR department, and this can be a lot to juggle. For example, the IRS estimated that 90% of businesses are out of compliance with COBRA standards…and that’s just one set of rules!

HR departments have dozens of tasks, but helping enforce compliance rules and preventing potential lawsuits due to non-compliance is a critical one. Not only do these laws protect the company, they also protect employees from unfair labor practices and other issues. So, of all your responsibilities, HR compliance is not one to take lightly if you want your company to function legally.

But, hey — this doesn’t mean HR compliance has to be a constant stressor. Especially when you look at compliance as an opportunity to improve your workplace, it can be one of the most transformative parts of your human resource efforts! If you want to learn more about human resource compliance and the essential components your team needs to stay on top of it all, stick around! We’ll cover all of that and more.

What Is HR Compliance?

HR compliance is how your company adheres to all applicable labor laws, whether those laws are federal, state, or local. You also have to consider the size and reach of your business. The bigger your organization is and the more geographic regions you operate in, the more regulations to keep track of and comply with.

Once again, it falls to HR leaders to create policies and procedures that ensure employee compliance with labor laws, which come from a wide variety of organizations and acts. Laws vary widely and include topics like safety, anti-discrimination, wages, and many other work-based legislations. Some of the more common regulations that companies must comply with include:

• Fair Labor Standards Act (FLSA). This act deals with minimum wage, overtime pay, recordkeeping, and youth employment, and the standards for these can vary by location.
• Affordable Care Act (ACA). The ACA is centered around health insurance — increasing coverage for those who are uninsured and reforming the market.
• Family and Medical Leave Act (FMLA). This requires covered employers to provide employees with job-protected unpaid leave for qualified families and circumstances.
• Title VII of the Civil Rights Act. This is one of the most significant acts in the U.S., which prohibits employers from discriminating against employees based on race, color, religion, sex, or national origin.
• Occupational Safety and Health Act (OSHA). OSHA is one of the more well-known safety labor laws that require organizations to practice workplace safety standards to protect workers from hazards.
• Equal Pay Act (EPA). This act aims to abolish the wage disparity based on sex for all forms of compensation, including salary, overtime pay, bonuses, benefits, and more.
• Americans with Disabilities Act. Another civil rights law, this act prohibits any discrimination in the workplace based on disability.

These are some of the most common examples of what HR must understand and regulate. There are many compliance laws, however, so it is important to do thorough research to make sure you are aware of every one that is applicable to your region or industry.

Why Is HR Compliance Important?

HR compliance makes your workplace a safe environment to work in, both literally and ethically. By not following labor laws, you open up your company to some pretty severe consequences.

First of all, you can avoid hefty fines and penalties that come with being non-compliant. Employees can also sue the company for failing to comply with HR regulations, and a lawsuit settlement can bankrupt an organization or send it into a serious downward financial spiral. For example, a wrongful termination case can cost upwards of $100,000, depending on the situation.

Second, ignorance is not bliss in this case: Not knowing or understanding (or claiming you didn’t know or understand) your compliance obligations is not an acceptable legal defense. It is HR’s job to monitor any changes or updates to all relevant compliance regulations and legislations and then make sure everyone and everything is compliant.

Government audits are increasing and labor mandates are constantly changing, so you don’t want to be caught unaware and face an expensive fine or lawsuit! That’s why establishing strong HR compliance procedures is a core element of any HR strategy.

HR Compliance Issues Every Employer Should Know

These are some of the most common HR compliance pitfalls that all employers and HR managers need to fully understand and actively work against.

Discriminatory Job Listings

Job postings shouldn’t use any language that shows a preference for a candidate based on protected information or characteristics. You should be proactive in creating a diverse work environment and workforce when it comes to talent acquisition, so it’s important that this and all of the following hiring procedures protect against any form of discrimination, even if it’s unintentional. For example, you cannot ask how old someone is due to potential ageism issues — even asking for “recent graduates” can be problematic.

Illegal Criminal Background Checks

To ensure there’s no type of bias during the hiring process, background checks should be conducted by someone other than the hiring manager. They should also only be conducted after a conditional offer of employment has been made to a candidate. 

Unsecure Documents

When people apply for jobs, they have to cough up some private information that must remain confidential on the employer’s part. Once employed, that information must also remain secure and not be shared with anyone who isn’t authorized. Save completed applications, resumes, I-9 forms, and other paperwork in a secure location and ensure only authorized people have access to that location.

Late New Hire Reports

You have 20 days (or sometimes fewer days in some areas) to notify your designated state agency when you hire or rehire an employee. This is significant because child support agencies use records from the National Directory of New Hires to find parents who may owe child support.

Misclassified Workers

Employers must distinguish employees from independent contractors and anyone who is non-exempt from FLSA to determine who is entitled to minimum wage and overtime. Misclassifying workers can result in a costly penalty for employers since employee classifications impact a company’s tax payments and medical expenses.

Improper Training or Orientation

When onboarding new employees, everyone needs to go through the proper orientation and training so that HR can set expectations for behaviors and activities according to policies and codes of conduct. After all, it wouldn’t be fair to punish an employee for failing to follow procedure if they weren’t adequately trained on the task! Training employees on acceptable behaviors and how to report incidents can limit your risk for lawsuits, too, so a thorough orientation and training process is a smart move.

Hazardous Working Conditions

What constitutes a safe work environment can vary quite a bit based on your field, so make sure your employees have adequate tools and training to meet your industry’s standards. Whether you’ve got employees out in the field or in an office park, everyone needs to feel safe and understand the safety procedures, especially in times of emergency. You can use work environment surveys to understand what people know about their role in maintaining a safe work environment and fill the gaps from there.

Inaccurate Payroll and Tax Payments

Paying employees on the correct day (and with the right amount) is an easy way to keep up with HR compliance, boost company morale, and avoid wage claims. (It is the law, after all!) It’s similarly important to accurately calculate payroll taxes and file them with the right government agencies to avoid expensive audits or fines.

Inadequate Health Coverage

A surefire way to lose workers is to not offer the right employee benefits, and this is especially true when it comes to health insurance — you may be obligated by law to offer it depending on the size of your business. For companies with 50 full-time employees or more, according to the ACA, you must offer health care that is affordable and meets minimum standards.

Successfully Handling HR Compliance Audits

Navigating compliance audits requires meticulous attention to detail. Preparation begins long before the audit with careful record keeping of employee data like hiring documents and performance evaluations. Keeping updated and well-organized files can demonstrate compliance with various labor laws.

Another important part of conforming to labor laws is applying policies and procedures consistently. This helps make sure all employees are held to the same standards. You can regularly update your employee handbook to reflect any changes in laws or company practices and then communicate these updates to employees. 

HR professionals can consider collaborating with their legal department or external council to conduct internal audits that can identify potential compliance gaps. This enables you to implement corrective actions. It is also important to familiarize yourself with industry-specific regulations and adjust your practices accordingly. After all, there is no one-size-fits-all approach to company policies. 

Your organization can demonstrate a commitment to compliance through thorough documentation and ongoing training. Take a proactive approach to addressing any identified issues and stay informed about changes in employment laws. Doing so can help you adapt your practices accordingly and maintain a culture of continuous improvement in HR compliance.

Diversity and Inclusion in HR Compliance

Diversity and inclusion policies often play an important role in HR compliance. Legal requirements mandate equal employment opportunities and prohibit discrimination based on factors like race, gender, age, and disability. To align with compliance standards, organizations must adhere to these laws.

However, best practices for ensuring a diverse and inclusive workplace go beyond legal compliance. Employers can establish proactive diversity and inclusion policies that encourage a culture of respect and equity. This means implementing inclusive hiring practices and creating channels for reporting discrimination or harassment. 

Periodic internal audits can help identify areas for improvement so that HR practices stay aligned with inclusion goals and compliance standards. Organizations committed to diversity often set measurable targets and then regularly assess progress. This approach enhances organizational culture and employee engagement.

Tips for Improving HR Compliance

So, what are the best ways to stay HR compliant? These key steps will get you started.

• Document company policies. Whatever rules you set to stay aligned with laws and regulations, make sure they are formally written down, shared during onboarding, and accessible to your employees. This usually looks like a company handbook that keeps everyone on the same page.
• Stay up-to-date with labor laws. At the end of the day, HR is responsible for keeping up with labor laws and the impacts those laws have on a company, especially regarding benefits and the hiring process. Read press releases published by legislators, subscribe to updates from the Department of Labor, and conduct regular audits as needed. You can also network with other HR industry leaders to stay on top of regulations.
• Communicate with your employees. For so many people, employee relations is a huge part of their experience with a company. When employees understand expectations and receive healthy, frequent communications, you can avoid a lot of personnel issues that may otherwise lead to compliance problems. Also, discuss ethical behavior and best practices regularly — everyone can use a good reminder from time to time.

Securing Organizational Peace of Mind

Keeping your employees happy, healthy, and satisfied often starts with ensuring you are HR compliant with labor laws and other regulations. A healthy organization that holds itself to the highest standards is conducive to a healthy workforce that tries to accomplish the same.

Another key element to employee satisfaction is making sure your company offers competitive benefits. If you really want to keep your employees happy outside of your compliance efforts, look into a wellness program. Plus, 100% of HR leaders say wellness programs are important to employee satisfaction. You can better support the wellness of your employees and retain your top talent with a benefit like this.

Talk to a Wellbeing Specialist to see how you can boost your workforce wellbeing today!

References:

• 18 HR Compliance Issues to Avoid. (February 27, 2020). Deluxe. Retrieved January 5, 2024 from https://www.deluxe.com/blog/18-hr-mistakes-to-avoid/.
• DeLoatch, Pamela. (January 29, 2018). 7 Compliance Issues Every HR Leader Should Know. HR Dive. Retrieved January 5, 2024 from https://www.hrdive.com/news/7-compliance-issues-every-hr-leader-should-know/515271/.
• HR Compliance: What Business Owners Need to Know. (April 26, 2019). Paychex. Retrieved January 5, 2024 from https://www.paychex.com/articles/human-resources/balance-hr-strategy-compliance.
• HR Compliance: What Employers Should Know. (September 1, 2022). ADP. Retrieved January 5, 2024 from https://www.adp.com/resources/articles-and-insights/articles/h/hr-compliance-what-employers-should-know.aspx.
• Kingsley, Eric. (February 3, 2021). How Much Compensation Can You Get in a Wrongful Termination Case? Kingsley & kingsley. Retrieved January 5, 2024 from https://www.kingsleykingsley.com/blog/2021/february/how-much-compensation-can-you-get-in-a-wrongful-/.