One key responsibility of a human resource leader within a business is to ensure a safe, healthy, fair, and equitable workplace for employees. This involves overseeing the organization’s compliance with laws and regulations governing labor practices to uphold what is known as HR compliance
What is HR Compliance?
HR compliance refers to ensuring that your company policies and actions align with labor laws in your country, state, or municipality. This encompasses everything from developing and documenting policies to implementing them in order to maintain ongoing compliance.
What are common HR compliance challenges?
HR leaders responsible for HR compliance should be aware of these common issues that may conflict with U.S. and state labor laws.
Discriminatory Job Listings
A number of U.S. laws oversee and define discrimination in hiring practices, including the Fair Labor Standards Act (FLSA), Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Rehabilitation Act of 1973, the Equal Pay Act (EPA), the Age Discrimination in Employment Act of 1967 (ADEA), the Genetic Information Nondiscrimination Act of 2008 (GINA), and the Americans with Disabilities Act (ADA).
These laws prohibit discrimination in hiring based on protected classes, which, as defined by the U.S. Equal Employment Opportunity Commission, include “race, color, religion, sex (including pregnancy, sexual orientation, or gender identity), national origin, age (40 or older), disability, and genetic information (including family medical history).” Consequently, they also forbid language in job listings that indicates favoritism based on these classifications.
Noncompliant Interview Questions
Due to the regulations prohibiting discrimination in hiring, HR compliance necessitates careful oversight of the questions posed to prospective hires during job interviews. Hiring managers should avoid any questions that specifically inquire about protected classes—such as “How old are you?”, “Where are you from?”, “What year did you graduate?”, or “What are your plans for having children?”
It is crucial to thoroughly train all individuals involved in the interview process and to prepare questions that center on the interviewee’s work experience and relevant qualifications for the position.
Lack of Security
The personal and health information of employees and candidates must remain confidential, which involves safeguarding electronic documents and digital information from unauthorized access. Establish a consistent protocol for receiving, storing, and sharing information such as job applications, résumés, tax forms, bank account details, and health care plan information, ensuring adequate security measures are in place.
Printed documents should always be stored securely, ensuring they are not accessible to unauthorized personnel, and digital files should be password protected and shared exclusively with authorized employees.
For online applications and document storage, HR management (HRM) software can facilitate streamlined processes and secure storage solutions.
Employee Misclassification
The classification of workers as either employees or independent contractors significantly affects their pay, tax obligations, rights, benefits, and the responsibilities you have as a company. Misclassifying employees as contractors deprives those workers of the compensation and protections they are entitled to under the law.
Intentionally misclassifying employees as contractors to reduce costs is a clear red flag. Assuming this is not the case at your organization, compliance issues may arise from improperly managing your contractors. You cannot dictate the schedule or location of contractors’ work, nor the manner in which they complete their tasks. For instance, if your company expects contractors to be present in the office or imposes a set schedule, you might be violating tax and labor laws. It may be necessary to adjust your working relationship with contractors or to reclassify their roles as those of employees to ensure they receive the correct tax treatment, compensation, and benefits.
The FLSA mandates payment of minimum wage and overtime wages for certain employees who work more than 40 hours per week. Employees are classified as either exempt or nonexempt under this law based on their job duties, so it is essential to classify and pay them appropriately. Additionally, many states have higher minimum wage standards than federal requirements, so be sure to understand and adhere to state laws as well.
Incomplete Documentation of Eligibility to Work
All new employees must complete a Form I-9 attesting to their authorization to work in the U.S. and provide documentation verifying their identity and work authorization. Acceptable documents may include a U.S. passport, permanent resident card, employment authorization card, state-issued driver’s license, Social Security card, or other documents that establish identity and/or work authorization. You are responsible for reviewing these documents as part of the process of completing and submitting the form.
If you employ an individual residing in the country on a visa—such as a work or student visa—they must additionally possess authorization to work. While the visa allows them to enter and remain in the country for work or study, it does not serve as a work permit. If you sponsor a work visa and subsequently terminate that employee before the authorized period of stay concludes, you may be held responsible for the cost of their return home.
Union Interference
According to the National Labor Relations Act (NLRA), you cannot interfere with employees’ rights to organize and collectively bargain regarding their employment terms and conditions. Once employees form or join a union, you are obligated to bargain in good faith over essential matters, including wages, working hours, vacation time, insurance, and safety.
Examples of noncompliance with the NLRA include: failing to bargain in good faith, threatening to terminate employees or close the business if they organize, questioning employees about their union affiliations or activities, firing or punishing employees for organizing efforts, or retaliating against employees who report unfair labor practices.
Best Practices for HR Compliance
Follow these HR compliance best practices to ensure adherence to internal policies and external labor laws.
Practice Policy Documentation
All policies and practices should be properly documented and accessible to all employees. New hires should receive thorough orientation to ensure they understand their rights and responsibilities within the organization, as well as how to report noncompliance.
Stay Current With New Regulations
Labor regulations at the federal, state, and local levels can change over time. Part of an HR leader’s role is to stay informed about new regulations. To learn about developments as they occur, subscribe to trusted resources such as:
- U.S. Equal Employment Opportunity Commission
- U.S. Department of Labor and your state and local DOL
- Society for Human Resource Management
Use an HR Services Provider
HR software for processes like payroll and applicant tracking can include compliance measures, making it easier for you to manage your responsibilities effectively.
Be Transparent With Employees
In addition to providing compliance training and resources for new hires, maintain communication with employees about their responsibilities in adhering to tax and labor laws. When a company policy changes, inform all affected employees and collect signatures to acknowledge they’ve received the information. Ensure that this notice remains accessible for their reference at any time.
HR Compliance Checklist: Necessary Items
Consider the following items when crafting your HR policies and training.
- Recruiting and Interviewing Practices
- Avoid discriminatory or preferential language in job listings.
- Prohibit inappropriate interview questions.
- Standardize hiring and interviewing procedures to ensure fairness.
- Onboarding Procedures and Company Policies
- Document all company policies and ensure they are easily accessible to employees.
- Provide a thorough orientation for new hires that includes their responsibilities for HR compliance and clearly explains the reporting process for noncompliance.
Employee Handbook
- Document company policies and employee responsibilities in an accessible and easy-to-navigate employee handbook.
- Make the handbook available to all new hires, and cover policies thoroughly during orientation.
- Collect signatures from new hires to document their receipt and review of the handbook.
- Notify all employees of any changes to the handbook, and collect signatures to confirm receipt and review of changes.
Harassment
- Document federal, state, and local laws prohibiting workplace harassment.
- Clearly define what constitutes harassment.
- Create a standard procedure for reporting, investigating, and responding to harassment. Include this in the employee handbook and train all employees.
I-9 Forms
- Collect an I-9 form from all employees to document eligibility to work in the U.S.
- Examine original documents for proof of identity and eligibility to work within three days of the employee’s start date.
- Store I-9 forms and other personal information securely in either print or electronic format.
Unemployment Benefits
- Classify workers properly as employees or contractors to ensure access to entitled unemployment benefits.
- Report employee wages to your state’s unemployment benefits agency as required, and pay the corresponding UI tax.
Workers’ Compensation
Familiarize yourself with U.S. DOL workers’ compensation laws that provide workers with disability benefits if injured on the job, as well as state laws and procedures for filing claims.
Post required documentation and notices of workers’ rights to compensation and the process for reporting injuries.
Union Contract Compliance
- Understand employer responsibilities under the National Labor Relations Act.
Employee Benefits and Leave
- If you have 50 or more employees, offer minimum essential health care coverage to all full-time employees.
- Meet the minimum standards for retirement and health care plans as established by the Employee Retirement Income Security Act (ERISA).
- Provide information about Healthcare.gov, the health insurance marketplace.
- Provide a summary of benefits and coverage (SBC) during open enrollment periods.
- Distribute adequate plan information to employees who enroll in health care and retirement plans, as required under ERISA.
- Distribute Forms 1094-C and 1095-C regarding employee health care coverage to employees by February 28 if filing on paper, or by March 31 if filing electronically.
- Comply with paid and unpaid leave requirements under FMLA.
HIPAA and OSHA Regulations
- Store employee health plan records with proper security measures and access controls to ensure health information privacy in accordance with HIPAA regulations.
- Conduct periodic audits of processes involving personal health information to verify adherence to proper procedures and identify any potential breaches.
- Provide employee job safety training that complies with OSHA requirements.
- Maintain accurate safety records, including a log of work-related injuries and illnesses, and supply employees with OSHA Form 301 immediately following any accident, injury, or illness.
- Report injury and illness data to OSHA each year by March 2.
Employee Contracts
- Collaborate with legal counsel to draft comprehensive employee contracts that outline essential details, such as work hours, paid time off, work location, compensation and benefits, start and end dates, and worker classification.
- Familiarize yourself with local contract regulations if you hire employees residing outside of the U.S.
Conclusion
Ensuring compliance with tax and labor laws is vital for creating a safe and secure workplace for employees, providing fair compensation, and fulfilling your company’s tax obligations. Staying informed about changing regulations and rulings on HR compliance can also help prevent errors that may expose your company to legal risk.
