It involves complying with various labor laws, industry standards, and government regulations to protect the rights and well-being of employees. HR compliance covers many areas, including employment laws, contracts, minimum wage, hiring practices, employee classification, health insurance and healthcare, wages and overtime, employee benefits, workplace safety, anti-discrimination and harassment policies, privacy regulations, and more. By ensuring HR compliance, organizations can mitigate legal risks, maintain a positive work environment, and uphold the rights of their employees.
Why Does Compliance Matter for Human Resources?
HR professionals need to be aware of labor laws and what non-compliance looks like, but with changing regulations from the Department of Labor, individual states (particularly California and New York), and employee handbooks, it becomes difficult to create an HR compliance checklist.
So why should HR leaders care about compliance?
Compliance matters for human resources (HR) for several reasons:
Compliance ensures that organizations meet legal requirements set by federal, state, and local laws. Failing to comply with these laws can result in legal consequences, such as fines, penalties, or lawsuits. HR compliance helps organizations stay on the right side of the law and avoid legal risks.
Compliance protects the rights and well-being of employees. It ensures fair treatment, non-discrimination, and proper handling of sensitive employee information. Compliance measures such as anti-discrimination policies, safety regulations, and privacy protections create a safe and inclusive work environment where employees feel respected and valued.
HR compliance standards enhance an organization’s reputation. It demonstrates a commitment to ethical practices and respect for employees’ rights. Compliance helps build trust among employees, customers, and stakeholders, which is crucial for long-term success and positive brand image.
Compliance minimizes organizational risks. By following HR regulations, organizations reduce the likelihood of legal disputes, grievances, and regulatory violations. Compliance also strengthens internal controls and reduces the risk of fraud, misconduct, or unethical behavior within the organization.
Compliance can be a competitive advantage. Organizations that prioritize HR compliance attract top talent who value ethical and fair workplaces. Compliance also helps organizations win contracts, secure partnerships, and maintain good relationships with regulatory bodies.
HR compliance is essential because it ensures legal compliance, protects employees, maintains a positive reputation, mitigates risks, and provides a competitive advantage for organizations.
What Are Some Examples of HR Compliance Issues?
Every area of Human Resources has applicable laws and classifications that need to be considered when creating company policies for full-time, part-time, non-exempt, and contract employees. While not all of the tasks carried out by HR departments fall into these categories, there are a few areas of human resource management where we see the highest number of HR compliance issues. They include:
When making a new hire, recruiters and HR professionals can make a few mistakes that lead to compliance issues within their onboarding programs. These include:
- Failure to obtain proper consent for background checks from job applicants.
- Neglecting to follow the guidelines outlined by the Fair Credit Reporting Act (FCRA) when conducting background checks.
- Using information from background checks inappropriately, such as making hiring decisions based on protected characteristics like age or disability.
Background screening software can help ensure employee and occupational safety while decreasing the amount of time leaders have to spend on the screenings themselves.
One of the more common areas HR leaders will make compliance mistakes is performance management. While most HR departments will label performance management as retention or engagement opportunities, it is one of the HR policies with the highest number of compliance concerns (particularly for small businesses). These can include:
- Inconsistent application of performance standards or evaluation criteria.
- Failing to provide employees with clear performance expectations and feedback.
- Not addressing performance issues promptly or consistently.
- Discriminating against employees based on protected characteristics when assessing performance or making promotion decisions.
Hiring new employees is an HR compliance challenge beyond background screenings. Some other areas where HR departments see compliance issues include:
- Making discriminatory hiring decisions based on protected characteristics such as race, gender, religion, or disability.
- Asking illegal interview questions related to protected characteristics (e.g., marital status, sexual orientation).
- Failing to provide reasonable accommodations during the hiring process for applicants with disabilities, as required by the Americans with Disabilities Act (ADA).
Hiring software can help ensure you follow best practices and adhere to things like the Equal Employment Opportunity Commission.
Hiring foreign-born employees comes with its own set of compliance risks set by government agencies and federal laws. Some of the more common offenses include:
- Incomplete or incorrect completion of Form I-9, which verifies workers’ employment eligibility.
- Failing to reverify work authorization for employees with temporary work permits or certain visa classifications.
- Retaining I-9 forms longer than law requires or failing to properly store and dispose of them.
I-9 solutions help to provide the framework for HR departments to stay compliance when managing I-9 forms.
It’s vital for organizations to stay updated on relevant federal laws and regulations to ensure compliance and avoid legal complications.
Tips to Improve HR Compliance
Improving HR compliance is crucial for organizations to mitigate legal risks and create a fair and inclusive workplace. Here are some tips to help improve HR compliance:
Regularly review and stay updated on relevant laws, regulations, and industry best practices. Subscribe to newsletters, attend conferences or webinars, and utilize reputable HR resources to ensure you have the latest information.
Develop clear policies and procedures
Create comprehensive HR policies and procedures that align with applicable laws and regulations. Communicate these policies effectively to employees, providing training and resources to ensure understanding and compliance.
Conduct regular audits and assessments
Regularly review your HR practices, policies, and records to identify any potential compliance gaps or issues. This includes conducting internal audits of HR processes, such as hiring, performance management, and record-keeping, to ensure they align with legal requirements.
Provide proper training
Offer training programs to HR staff and managers on compliance-related topics, such as anti-discrimination, harassment prevention, ADA accommodations, and proper record-keeping. Additionally, educate employees on their rights and responsibilities through training sessions and easily accessible resources.
Maintain accurate and up-to-date documentation of HR processes, policies, procedures, and employee records. This includes keeping records of training sessions, performance evaluations, disciplinary actions, and any accommodations provided.
Foster a culture of compliance
Promote a culture of compliance and ethical behavior throughout the organization. Encourage open communication, provide channels for reporting complaints or concerns, and take prompt action to address any issues raised.
Seek legal counsel
When in doubt or facing complex compliance issues, seek legal counsel from an experienced employment attorney who specializes in HR compliance. They can provide guidance tailored to your organization’s specific needs and help navigate complex legal requirements.
Remember, compliance is an ongoing effort, so it’s essential to regularly assess and adapt your HR practices to ensure ongoing compliance with changing laws and regulations.
What are Some Common HR Compliance Laws?
HR professionals should have a good understanding of several key compliance laws and regulations. Here are some important ones to be aware of:
- Title VII of the Civil Rights Act (1964): Prohibits discrimination in employment on the basis of race, color, religion, sex, or national origin. It covers various aspects of employment, including hiring, promotions, pay, and termination.
- Americans with Disabilities Act (ADA): Protects individuals with disabilities from discrimination in employment and requires employers to provide reasonable accommodations to qualified individuals. It applies to employers with 15 or more employees.
- Family and Medical Leave Act (FMLA): Provides eligible employees with up to 12 weeks of job-protected unpaid leave for qualified medical and family reasons. Employers with 50 or more employees are generally covered.
- Fair Labor Standards Act (FLSA): Sets standards for minimum wage, overtime pay, recordkeeping, and child labor. It defines who is exempt from overtime pay and establishes rules for classifying employees as exempt or non-exempt.
- Occupational Safety and Health Act (OSHA): Ensures safe and healthy working conditions by setting standards for workplace safety, providing training, and enforcing regulations.
- Equal Pay Act (EPA): Requires employers to provide equal pay for equal work regardless of gender. It prohibits pay discrimination based on sex when jobs require equal skill, effort, and responsibility.
- Immigration Reform and Control Act (IRCA): Requires employers to verify the identity and employment authorization of all employees hired after November 6, 1986, using Form I-9.
These are just a few examples, and depending on the industry and location, there may be additional laws and regulations to consider. It’s essential for HR professionals to remain up-to-date with the evolving legal landscape to ensure compliance and protect the rights of employees.