One important role of a human resource leader within a business is to ensure a safe, healthy, fair and equitable workplace for employees. That means overseeing an organization’s adherence to laws and regulations governing labor practices to ensure what’s called HR compliance.
What Is HR Compliance?
HR compliance means ensuring your company policies and actions adhere to labor laws in your country, state or municipality. It involves everything from creating and documenting policies to enforcing them to ensure ongoing alignment.
Common HR Compliance Issues
HR leaders in charge of HR compliance should be aware of these common issues that can run afoul of U.S. and state labor laws.
Discriminatory Job Listings
Several U.S. laws regulate and define discrimination in hiring, 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, according to 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).” By extension, they also prohibit language in job listings that shows favor based on these classes.
Noncompliant Interview Questions
Because of laws prohibiting discrimination in hiring, HR compliance requires careful oversight of questions prospective hires are asked in job interviews. Your hiring managers should steer away from any questions that directly seek information 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 kids.”
Thoroughly train anyone who will be involved in the interview process and prepare questions that focus on an interviewee’s work experience and qualifications for the open job.
Lack of Security
Employees’ and candidates’ personal and health information must be kept confidential, and that includes protecting electronic copies and digital information from unauthorized access. Ensure a consistent system for receiving, storing and sharing information such as job applications, résumés, tax forms, bank account information and information related to health care plans that comes with sufficient security.
Printed documents should always be stored properly and should never be accessible to unauthorized employees, and digital forms should be password protected and shared only with authorized employees.
For online applications and document storage, HR management (HRM) software can ensure streamlined processes and secure storage.
Employee Misclassification
Whether workers are classified as employees or independent contractors impacts their pay, tax responsibilities, which rights and benefits they’re entitled to and which requirements you face as a company. Misclassifying employees as contractors means depriving workers of the compensation and protections they’re entitled to under the law.
Deliberately misclassifying employees as contractors to save money is a clear red flag. Assuming this isn’t happening at your company, where you might run into compliance issues is instead in misusing your contractors. You can’t dictate when or where contractors work or the manner in which they complete their work. For example, if your company expects contractors to be in the office or sets a schedule for them, you could be violating tax and labor laws. Adjust your working relationship with contractors or reclassify the roles as employees to extend those workers the proper tax treatment, compensation and benefits.
The FLSA also requires you to pay minimum wage and overtime wages for certain employees who work more than 40 hours in a week. Employees are classified as either exempt or nonexempt under this law based on their job duties, so make sure you classify and pay accordingly. Many states have a higher minimum wage requirement than the federal requirement, so understand and follow state laws as well.
Incomplete Documentation of Eligibility to Work
All new employees are required to fill out a Form I-9 attesting their authorization to work in the U.S., and provide documentation proving their identity and authorization to work. This could include a U.S. passport, permanent resident card, employment authorization card, U.S. state driver’s license, Social Security card or other documents that establish identity and/or work authorization. You’re required to review these documents as part of completing and filing the form.
If you hire an employee who is living in the country with a visa—such as a work or student visa—they must also have an authorization to work. The visa lets them enter and stay in the country as long as they’re working or going to school, but it isn’t a work permit. If you sponsor a work visa as an employer and terminate the employee before their authorized period of stay ends, you’ll be liable for transportation costs for their return home.
Union Interference
Per the National Labor Relations Act (NLRA), you cannot interfere with employees’ rights to organize and collectively bargain for terms and conditions of employment. Once employees form or join a union, you’re required to bargain in good faith about mandatory subjects, including wages, hours, vacation time, insurance and safety.
Some examples of noncompliance with the NLRA include: not bargaining in good faith, threatening to fire employees or close the business if they organize, questioning employees about union sympathies or activity, firing or punishing employees who organize, or retaliation against employees who air 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 of your policies and practices should be properly documented and accessible to all employees, and new hires should receive a 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 slightly or significantly over time. So part of an HR leader’s job is to stay on top of new regulations. To learn when new developments 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 such as payroll and applicant tracking include compliance measures that can make it easier for you to stay on top of your responsibilities.
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Be Transparent With Employees
In addition to making compliance training and resources available to new hires, you should stay in communication with employees about the responsibilities of their various roles in complying with tax and labor laws.
When a policy at the company changes, you should notify all affected employees and collect signatures to note they’ve received it. And the notice should remain available and easily accessible for their reference any time.
HR Compliance Checklist: Necessary Items
Keep these items in mind 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 fair hiring.
Onboarding Procedures and Company Policies
- Document all company policies and ensure easy access for employees.
- Provide a thorough orientation for all new hires that includes their responsibilities for HR compliance and clearly explains policies for reporting 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 include a thorough discussion of policies during new hire orientation.
- Collect signatures from new hires to document their receipt and review of the handbook.
- Notify all employees of any changes to the employee handbook, and collect signatures to document their receipt of the notification and review of changes.
Harassment
- Document federal, state and local laws prohibiting harassment in the workplace.
- 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 start of employment.
- Store I-9 forms and other personal information securely in print or electronic form.
Unemployment Benefits
- Classify workers properly as employees or contractors to ensure access to unemployment benefits they’re entitled to.
- Report employee wages to your state’s unemployment benefits agency as required, and pay the UI tax due.
Workers’ Compensation
- Become familiar with U.S. DOL workers’ compensation law that entitles workers to disability benefits if they’re 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 procedure for reporting injuries.
Union Contract Compliance
- Become familiar with the employer’s 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 minimum standards for retirement and health care plans as set in 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.
- Provide adequate plan information to employees who enroll in health care and retirement plans, as defined under ERISA.
- Distribute Forms 1094-C and 1095-C, regarding employee health care coverage, to employees by February 28 if filing on paper or 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 and access controls to ensure health information privacy per HIPAA regulations.
- Conduct periodic audits of processes that include personal health information to ensure proper procedures and spot breaches.
- Provide employee job and safety training according to OSHA training requirements.
- Keep proper safety records, including a log of work-related injuries and illnesses, and provide employees OSHA Form 301 as soon as any accident, injury or illness happens.
- Report injury and illness to OSHA each year by March 2.
Employee Contracts
- Work with legal counsel to draft thorough employee contracts that cover details such as work hours, paid time off, work location, compensation and benefits, start and end date and worker classification.
- Become familiar with an employee’s local contract regulations if you hire employees who live outside of the U.S.
Bottom Line
Ensuring your company is compliant with tax and labor laws helps create a safe and secure workplace for employees, provide fair compensation and ensure your company keeps up with its tax obligations. Staying aware of changing regulations and rulings on HR compliance can also help prevent errors that could make your company vulnerable to legal action.
Frequently Asked Questions (FAQs)
How do I ensure HR compliance?
Proper documentation of policies, thorough training and following HR news for changing regulations can help HR leaders stay up to date on their responsibilities and help all employees follow policies and regulations and avoid misconduct.
Why is compliance important in HR?
HR compliance with tax and labor regulations ensures a safe and secure environment for employees, fair labor practices, equitable hiring and equal pay for workers; and helps companies avoid infractions that could lead to lawsuits.
What does an HR compliance specialist do?
An HR compliance specialist is an expert in work-related legislation, health and safety practices, industry regulations and more, and can audit a company’s policies and practices to ensure it adheres to these requirements.
What are HR compliance reports?
An HR compliance report is an overview of a company’s policies and practices that documents potential violations of labor, tax and workplace safety regulations.
