The Employer’s Guide To HR Compliance: What You Need To Know

Human resources (HR) is a vital department in every organization. It is responsible for managing a company’s most important asset: its employees. HR ensures that all aspects related to employees, such as hiring, onboarding, training, compensation, and benefits, are taken care of effectively and efficiently. 

The HR department is also responsible for ensuring an organization’s compliance with federal, state, and local laws related to employment.

Non-compliance with HR laws can have severe consequences for your organization, including heavy fines, lawsuits, and damage to the company’s reputation. By complying with HR laws and regulations, you can avoid these consequences and create a positive work environment for your employees, thereby improving morale and reducing risk.

The following is an in-depth guide to HR compliance, covering everything from the laws and regulations you need to know to the best practices for implementing compliance in your organization.

What Is Human Resources (HR) Compliance?

HR compliance refers to the process of ensuring that an organization’s policies and practices regarding employees align with federal, state, and local laws and regulations. These laws cover all aspects of employment, such as hiring, employee rights, discrimination and harassment prevention, workplace safety, compensation, benefits, and termination. 

Without proper compliance measures in place, you run the risk of violating these laws and facing serious consequences.

Why Is It Important To Stay Compliant?

It doesn’t matter how small or large your organization is, HR compliance is essential for the success of any business. To better understand the importance of compliance, here are some key reasons why HR compliance should be a top priority for employers:

Legal Compliance

One of the primary reasons for complying with HR laws and regulations is to avoid legal consequences. Non-compliance can result in various consequences, including heavy fines and penalties. It can also result in lawsuits, which can be time-consuming, costly, and damaging to your company’s reputation. 

While larger corporations may have more resources to handle legal consequences, smaller businesses may struggle to recover from these expenses.

Employee Protection

HR compliance is not just about following laws and regulations; it’s also about protecting employee rights. By complying with HR laws, you can prevent discrimination, harassment, and other harmful practices in the workplace. 

This leads to a positive work environment where employees feel safe and valued, ultimately resulting in higher employee satisfaction and retention rates. This, in turn, can drive business success and growth while saving costs on employee turnover and training.

Risk Management

By following HR laws and regulations, you can identify and address any potential risk factors related to your employees. This includes ensuring a safe workplace environment and adhering to fair employment practices. Non-compliance can put your employees at risk of harm, leading to legal and financial consequences for your organization.

Reputation And Brand Integrity

Non-compliance can have a significant effect on the reputation and brand integrity of your organization. If your business is non-compliant with HR laws, it can damage your company’s reputation and brand image. This can cause a loss of stakeholder trust and negative publicity, ultimately affecting your company’s potential success. 

As a result, retaining top talent and attracting new customers can become exceedingly difficult when your company has a negative reputation.

Legal Framework Governing HR Compliance

Many federal, state, and local laws govern HR compliance. To avoid legal consequences, you must understand and adhere to these laws. 

Some of the essential state and federal laws that employers should be familiar with include:

Equal Employment Opportunity (EEO)

EEO is a right protected by law that prohibits employment discrimination based on color, race, religion, age, sex, national origin, or disability. This right was granted and protected by the Civil Rights Act of 1964, which prohibits workplace discrimination.

The Equal Employment Opportunity Commission (EEOC) was created to address complaints of discrimination in hiring, termination, promotion, or other employment practices. The EEOC’s role is to investigate complaints of discrimination in employment and enforce federal laws related to equal employment opportunities. 

This includes conducting investigations, mediating disputes, and filing lawsuits on behalf of employees who have been discriminated against. The EEOC also provides resources and guidance to help employers understand their obligations under these laws.

Fair Labor Standards Act (FLSA)

The Fair Labor Standards Act (FLSA) was passed in 1938 to establish U.S. minimum wage and overtime pay standards. Additionally, the Wage and Hour Division of the Department of Labor was created to help enforce various labor laws that cover private-sector employees as well as state and local government workers. 

Over the years, the FLSA has been amended several times. Currently, the FLSA includes the following standards for employers:

• Minimum wage: The last time the federal minimum wage was updated was in 2009, when it was set at $7.25 per hour. However, states may have their own minimum wage standards. Presently, 34 states enforce minimum wage standards surpassing the federal baseline.
• Overtime: Employers are required to pay overtime to non-exempt employees for every hour worked over the standard 40-hour workweek. Overtime pay is set at one and a half times the regular hourly wage. Additionally, overtime pay is not required for holidays or weekends unless the employee worked overtime hours on these days.
• Hours worked: According to FLSA guidelines, hours worked are defined as all the time an employee is required to be present at the employer’s premises, performing duties or tasks assigned by the employer. This also includes time spent on breaks, training, and other work-related activities. 
• Record keeping: The employer must display an official poster listing the FLSA requirements in a prominent location within the workplace and maintain accurate employee time and pay records.
• Child labor: Employers must follow specific guidelines for employing minors, including restrictions on hours worked and types of work allowed based on age. These provisions prevent minors from being employed in dangerous or harmful working conditions. 

Non-compliance with FLSA regulations can result in the following consequences:

• Recovery of back wages: A two-year statute of limitations applies for recovering back pay, extending to three years in cases of willful violations. This means that unless the violation is intentional, recovery of back wages can only be pursued within two years from the occurrence of the violation.
• Penalties: Employers who repeatedly or willfully violate minimum wage or overtime pay laws can face penalties of up to $1,000 per violation. Violators of child labor provisions may be subject to a penalty of up to $10,000 for each underage worker employed in violation. 

Additionally, FLSA violations can be prosecuted and lead to fines of up to $10,000. Subsequent convictions could result in imprisonment. 

• Hot goods provision: Under the FLSA, it is prohibited to ship, offer for shipment, or sell any goods in interstate commerce produced in violation of minimum wage, overtime pay, child labor, or special minimum wage provisions. 

If an employer does not voluntarily correct these violations, the Wage and Hour Division has the authority to prevent the shipment of these goods.

Family And Medical Leave Act (FMLA)

The Family and Medical Leave Act (FMLA) was signed into law on February 5, 1993, to support working families in times of need. Today, the FMLA remains a primary administrative responsibility for HR departments and has provided millions of American workers with access to job-protected leave for various life situations. 

The FMLA grants qualified employees working for covered employers the opportunity to take unpaid, safeguarded leave for specific family and medical circumstances, all while retaining their group health insurance coverage under the original conditions, as if they hadn’t taken any leave. 

With that in mind, eligible employees have the privilege to:

• Take 12 workweeks of leave within a 12-month period for:
  
  • Childbirth and caring for a newborn child within one year of birth
    
  • Completing the process of adopting a child via adoption or foster care and providing care for the child within one year of placement
    
  • Providing care for the serious health condition of the employee’s spouse, child, or parent
    
• Take advantage of 26 workweeks of leave over a 12-month period to care for a covered servicemember dealing with a severe illness or injury — as long as the eligible employee is the child, parent, spouse, or next of kin (referred to as military caregiver leave) of the service member.
  
• Take any necessary leave due to the employee’s own severe health condition, which hampers their ability to carry out their job responsibilities.
  
• Take leave for any qualifying situation resulting from the circumstance that the employee’s child, parent, or spouse is a covered military member on active duty.

The FMLA also provides certain benefits for eligible employees, including job protection while on leave and continued group health insurance coverage under the same terms as if they had not taken leave. The law also requires employers to maintain any existing employee benefits during the leave period. 

To be eligible for FMLA, employees must meet certain criteria:

• Employment with a covered employer, which includes private sector employers with 50 or more employees, all public agencies, and all public or private elementary and secondary schools
• Have worked for the employer for a minimum of one year
• Have worked at least 1,250 hours during the one year prior to the start of leave
• Employment at a site with a minimum of 50 employees within a 75-mile radius

Employees who meet these criteria are entitled to take FMLA leave for qualifying events without fear of losing their jobs or other benefits. 

Finally, failure to secure required disability and Paid Family Leave benefits insurance is a misdemeanor and can result in the following consequences:

• A fine of $100 – $500, or imprisonment for up to one year, or both
• Additional violations can result in larger fines:
• A second violation within five years may result in a fine of $250 to $1,250
• A third or subsequent violation within five years may result in a fine of up to $2,500
• The employer may also be liable for:
  
  • The total value of any disability or Paid Family Leave benefits claims paid by the Special Fund during the period of non-compliance, or
    
  • One percent of the employer’s payroll during the period of non-compliance, whichever is greater. 

Americans With Disabilities Act (ADA)

The Americans with Disabilities Act (ADA) was passed in 1990 to forbid discrimination against individuals with disabilities in various aspects of public life, including employment. 

According to the ADA, a disability is any physical or mental impairment significantly restricting one or more major life activities, such as walking, speaking, hearing, or learning. It also protects individuals who have a history of a disability or who are perceived to have a disability. 

As stipulated by the ADA, employers with a workforce of 15 or more individuals are obligated to offer reasonable accommodations for qualified persons with disabilities in every facet of employment, including recruitment, advancements, and job responsibilities.

Reasonable accommodations may include:

• Modifications to the application process
• Adjustments to work schedules or policies
• Providing necessary equipment and aids
• Modifying workspaces

Employers must only provide reasonable accommodations if they do not cause undue hardship to the business. Undue hardship refers to significant difficulty or expense. 

The ADA further bars discrimination against individuals with disabilities in various other aspects of public life, such as access to transportation, telecommunications, and public accommodations, including restaurants, hotels, and retail stores. 

Additionally, the law requires that all new construction and modifications to existing structures be accessible to individuals with disabilities. 

Non-compliance can result in stiff penalties for employers, including:

• Fines of up to $75,000 for the first violation and up to $150,000 for subsequent violations
• Legal fees and damages resulting from lawsuits brought by individuals with disabilities
• Loss of federal funding for non-compliant government entities
• Additional state penalties may also apply

Workers’ Compensation

Workers’ compensation is a compulsory insurance program at the state level that offers benefits to employees who become sick or injured as a direct result of their work duties.

The goal of workers’ compensation is to provide medical treatment, wage replacement, and other necessary benefits to employees who are injured on the job without having to go through the court system. 

It also protects employers from being sued by their employees for workplace injuries. Every state has its own workers’ compensation laws. In California, the program is administered by the Department of Industrial Relations. 

The California Labor Code outlines the rules and regulations for workers’ compensation in the state. This law requires that all employers with one or more employees carry workers’ compensation insurance or have a valid self-insurance certificate. 

Most employers choose to purchase an insurance policy from a private insurer, while larger companies may have the resources to self-insure. 

When an employee is injured on the job in California, they are entitled to the following benefits under workers’ compensation:

• Temporary disability payments: In cases where an employee cannot perform their duties due to a job-related illness or injury, they may be eligible for temporary disability payments, which serve to compensate for a portion of their income loss.
• Permanent disability payments: In instances where an employee sustains an injury or illness leading to a lasting impairment, they may be entitled to permanent disability payments for the duration of their lifetime.
• Medical treatment: Workers’ compensation covers all reasonable and necessary medical treatment related to an employee’s work-related injury or illness. This includes doctor visits, hospital stays, surgeries, and any other medical expenses.
• Vocational rehabilitation: In cases where an employee is unable to resume their prior employment because of an injury or illness, workers’ compensation may offer vocational rehabilitation services, including job training and support in securing alternative employment opportunities.

Employers are responsible for notifying employees about their rights under workers’ compensation and for reporting any workplace injuries or illnesses to their workers’ compensation insurance carrier. Failure to secure workers’ compensation insurance can result in significant penalties, including:

• Fines ranging from $10,000 to $100,000
• Misdemeanor charges and imprisonment for up to one year
• Legal fees and damages resulting from lawsuits brought by injured employees
• Stop-work orders that prohibit the employer from conducting any business operations until proper insurance is obtained

Title VII Of The Civil Rights Act Of 1964

Title VII of the Civil Rights Act of 1964 stands as a federal statute barring discrimination in employment on grounds of race, color, national origin, sex, and religion. It extends its coverage to employers with a workforce of 15 or more individuals, safeguarding employees against discriminatory actions across various facets of employment, including recruitment, termination, advancements, pay, and terms and conditions of work.

Within the realm of Title VII, it is illegal for an employer to:

• Refuse to hire or promote individuals based on their protected characteristics
• Establish a work environment characterized by hostility based on an employee’s protected attribute
• Pay different wages or provide different benefits based on an employee’s protected characteristic
• Take retaliatory actions against employees who report discrimination or engage in activities related to anti-discrimination proceedings

Title VII also mandates employers to offer reasonable accommodations for individuals with disabilities and religious convictions, mirroring the provisions of the ADA. Additionally, it prohibits retaliation against individuals who exercise their rights under the law. Employers found guilty of violating Title VII may be subject to:

• Compensation for lost wages experienced by the employee

• Injunctive relief, such as reinstatement or changes in policies or practices
• Legal expenses and any other costs incurred by the employee
• Civil fines of a maximum of $50,000 for employers with 15 to 100 workers, and up to $300,000 for employers with more than 500 employees

State Disability Insurance (SDI)

State Disability Insurance (SDI) was enacted in California in 1946. This program, mandated by the state, offers short-term wage replacement benefits to employees incapable of working because of non-work-related illnesses, injuries, or pregnancies. Administered by the Employment Development Department (EDD), its funding comes from deductions made from employee payrolls.

To be eligible for SDI benefits, employees must have paid into the program through their payroll deductions. 

They must also meet the following requirements:

• Be incapable of working for a minimum of eight consecutive days
• Experience a condition unrelated to work such as illness, injury, or pregnancy, hindering them from carrying out their usual job responsibilities
• Be employed or actively looking for work at the time of their disability

The following are the benefits provided by SDI:

• A maximum of 52 weeks of partial wage reimbursement is available to qualified employees
• Benefits totaling approximately 60-70% of an employee’s earnings from their base period, defined as the first four of the last five completed calendar quarters before the occurrence of illness or injury
• Paid family leave benefits for up to six weeks to bond with a new child or care for a seriously ill family member

Under California law, employers are required to provide their employees with information about SDI and how it works. This includes posting a notice in the workplace and giving new employees an SDI pamphlet upon hire. 

Employers must also continue to pay employee’s health insurance premiums while they are receiving SDI benefits. Moreover, employers are barred from engaging in discriminatory or retaliatory actions against employees who seek or obtain SDI benefits.

Finally, employers must keep accurate records of any payroll deductions made for SDI and ensure that these funds are properly remitted to the EDD. Failure to comply with SDI requirements can result in penalties and legal action brought by the EDD or affected employees. 

Not adhering to these stipulations may lead to:

• Penalties and fines of up to $100 per employee per day for each failure to provide required information
• Legal fees and damages resulting from lawsuits brought by employees
• Suspension of business operations until proper compliance is achieved

Anti-Discrimination Laws

Although there are numerous federal laws in place to protect employees from discrimination, many states have their own laws that provide additional protections. For example, California has several anti-discrimination and harassment laws that go beyond the scope of federal laws such as Title VII. 

These include:

• The Fair Employment and Housing Act (FEHA): FEHA prohibits employment discrimination based on a broader range of protected characteristics, including sexual orientation, gender identity, and military or veteran status.
• The California Family Rights Act (CFRA): The CFRA affords qualified employees a period of up to 12 weeks of unpaid leave for pregnancy, childbirth, and adoption.
• The California Labor Code: This law prohibits discrimination based on an employee’s political activities or affiliations.

California employers must abide by these laws in addition to federal anti-discrimination laws. Failure to do so can result in penalties and consequences similar to those outlined above for violations of Title VII. Additionally, employers may face legal action brought by state agencies or affected employees. 

Other Relevant Legislation (State-Specific)

In addition to anti-discrimination laws, there are other state-specific laws that employers in California must comply with. 

These include:

• Meal and rest break laws: In accordance with California Labor Code Section 512, non-exempt workers have the right to an unpaid meal break lasting at least 30 minutes for every five hours worked, as well as a compensated 10-minute rest break for every four hours worked.
• Minimum wage laws: The California minimum wage is currently $16/hour. The minimum wage is $20/hour for restaurant workers.
• Paid sick leave: As outlined in the Healthy Workplaces, Healthy Families Act of 2014, eligible employees have the right to accumulate one hour of paid sick leave for every 30 hours worked.
• Privacy laws: The California Consumer Privacy Act (CCPA) and the California Privacy Rights Act (CPRA) provide consumers with certain rights over their personal information. Employers must comply with these laws in how they collect, use, and protect employee data.

As an employer in California, you must be aware of all relevant state-specific legislation and ensure compliance to avoid penalties, legal action, and damage to your reputation. Staying informed about these laws and regularly reviewing company policies can help create a safe and fair workplace for all employees.

Emerging Trends In HR Compliance

HR compliance isn’t a static concept. As laws and regulations evolve, HR professionals must adapt and stay informed to comply with all relevant legislation. In recent years, there have been several emerging trends that are challenging the standard way of doing business in the HR department. 

The following are a few examples of these trends and their potential impact on HR compliance:

Impact Of Technology (AI, Data Privacy)

Technology, including artificial intelligence (AI) and data gathering, is becoming more widespread in workplaces. While these advancements can bring efficiency and convenience, they also raise concerns about compliance with laws such as the General Data Protection Regulation (GDPR) and the ADA. 

Employers need to be aware of potential biases in AI technology and ensure that employee data is being collected, stored, and used in accordance with privacy regulations.

Remote Workforce Compliance Challenges

The emergence of remote work has introduced new hurdles concerning HR compliance. Employers need to make sure they classify their remote employees correctly, provide the appropriate compensation and benefits, and give access to necessary training and resources. 

Compliance with state-specific laws and regulations may also vary for employees in different locations, making it essential for employers to stay informed on all applicable legislation.

Diversity, Equity, And Inclusion (DEI) Compliance

There has been a growing emphasis on diversity, equity, and inclusion in the workplace over the years. This includes not only compliance with anti-discrimination laws but also promoting a diverse and inclusive work culture. HR professionals must stay informed on relevant legislation and take proactive measures to promote DEI within their organization.

Future Regulatory Landscape Predictions

Looking ahead, there are several potential changes to the regulatory landscape that may impact HR compliance. This might involve modifications to current legislation, like potential amendments to anti-discrimination laws or adjustments to minimum wage rates on both federal and state levels. 

Additionally, new legislation may be introduced in response to emerging issues such as data privacy and remote work regulations. Companies need to stay informed on potential changes and be prepared to adapt their compliance strategies accordingly.

Toughest Compliance Issues That An Employer Encounters

Staying in accordance with all relevant laws and regulations can pose a significant challenge for employers. After all, non-compliance isn’t always the result of intentional wrongdoing but can also stem from a lack of understanding or oversight. 

The following are some of the toughest compliance issues that employers may encounter:

• Changes in market compliance: Compliance requirements are not static and may change over time. To remain compliant, employers must stay informed about any updates or revisions to relevant laws and regulations.
• Mishandling of payroll management: Effectively managing payroll is a vital component of HR compliance, and errors in this area can result in penalties and legal repercussions. This includes correctly classifying employees, accurately calculating and recording hours worked, and adhering to minimum wage laws.
• Limited access to relevant agencies and entities: Employers may struggle to keep up with the various agencies and entities responsible for enforcing different laws and regulations. This can make it challenging to stay informed on updates or changes that may impact compliance. 

These agencies don’t always have the resources to provide individual guidance, so employers must proactively seek information and consult legal counsel when necessary.

• Discriminatory practices: Discrimination in the workplace can lead to costly lawsuits and damage an organization’s reputation. Employers must ensure they are not engaging in discriminatory practices, whether intentional or unintentional.
• Inadequate protection against workplace harassment: Employers are obligated to create a safe and harassment-free work environment for their employees. This encompasses the establishment of policies and protocols to deter and handle harassment, alongside offering training on suitable workplace behavior.
• Data privacy and cybersecurity breaches: With the increasing use of technology in the workplace, employers must also be aware of their responsibilities regarding data privacy and cybersecurity. 

This includes protecting sensitive employee information from breaches and complying with regulations such as GDPR and the Health Insurance Portability and Accountability Act (HIPAA).

How To Develop A Robust HR Compliance Strategy

Because so many laws and regulations impact HR compliance, it can be overwhelming to try and address each separately. Instead, employers should incorporate compliance into their overall business goals and develop a comprehensive HR strategy to ensure continued compliance with all relevant legislation. 

The following are the steps that you can take to build a robust HR compliance strategy:

Establish Company Goals

Before developing an effective compliance strategy, you need to have a clear idea of your organization’s goals and objectives. This will help you identify what laws and regulations are most relevant to your business and prioritize them accordingly. 

For example, if your company is expanding into a new state, you may need to focus on compliance with state-specific laws in that location.

Set Policies And Procedures

Well-defined policies and procedures are essential to upholding compliance standards. For instance, it is crucial to have a code of conduct that outlines expected behavior at work and regularly update these policies to reflect any changes in laws. Equally important is ensuring that all staff members are familiar with these policies and understand their duties in upholding them.

Hire The Right People

One of the best ways to ensure compliance is by hiring the right people for your organization. This includes their qualifications, skills, values, and commitment to ethical business practices. Conducting thorough background checks and using effective interviewing techniques can help you identify individuals who are most likely to uphold your company’s compliance standards.

Implement Effective HR Compliance Training

Proper training is crucial for ensuring compliance across all levels of your organization. This includes not only HR professionals but also managers and employees who may have compliance-related responsibilities. 

Training should include relevant laws, regulations, and company policies. It’s important to refresh this training regularly to keep everyone up to date on the latest compliance requirements.

Enhance Communication Channels For Compliance Issues

Open and effective communication is essential for addressing compliance issues and preventing them from becoming larger problems. You should have clear channels for reporting potential violations as well as a system in place for handling these reports in a timely and appropriate manner. This can also include conducting regular audits to identify any areas of non-compliance that may require attention.

Conduct Regular HR Compliance Audits

Consistently reviewing your HR processes and procedures can help pinpoint possible compliance concerns and deal with them promptly. This may entail examining payroll records, employee classifications, policies and procedures, and conducting employee interviews to ensure employees understand company expectations. 

In addition, audits can also help identify areas for improvement in the overall compliance strategy.

Need To Ensure Compliance? Review Our HR Compliance Checklist

Keeping a checklist is an effective strategy for making sure that your organization meets all of its HR compliance obligations. Be sure to regularly review and update this checklist as needed, depending on changes in laws or regulations. 

Here are some key areas to include in your HR compliance checklist:

• Employee onboarding: Employee onboarding is crucial for maintaining compliance with relevant laws and regulations. During the onboarding process, new employees should receive training on company policies and procedures and any relevant laws or regulations that they will be subject to in their roles. This can help prevent potential compliance issues from arising due to a lack of knowledge or understanding.
• Wage and hour: You must adhere to federal and state regulations concerning minimum wage, overtime compensation, meal and rest breaks, and any other wage and hour obligations. It’s important to regularly review payroll records and employee classifications to ensure compliance with these laws.
• Safety: You are legally obligated to ensure a safe working environment for your employees. This involves adhering to Occupational Safety and Health Administration (OSHA) guidelines and offering adequate training on workplace safety procedures.
• Diversity, equity, and inclusion (DEI): Establish policies and protocols fostering diversity, equity, and inclusion in the workplace. This entails preventing discrimination and harassment rooted in protected attributes like race, gender, or religion.
• Cyber security: Maintaining compliance with data privacy and cyber security regulations is critical in today’s digital age. You can do this by implementing proper safeguards for sensitive employee information and staying up to date on any changes in relevant regulations.
• Data protection and privacy: You must comply with laws and regulations related to collecting, storing, and using employee data. This can include obtaining proper consent for data collection, having secure processes in place for managing personal information, and regularly reviewing these processes to ensure compliance.
• Risk assessment: Regularly conducting risk assessments can aid in identifying potential compliance issues so you can address them proactively. This can involve reviewing company policies and procedures, as well as assessing potential risks related to employee behavior, workplace safety, and data security.
• Termination and offboarding: Employers have legal obligations when terminating employees, including providing proper notice and following correct procedures. Regularly review your termination and offboarding processes to ensure compliance with relevant laws and regulations.

Tackle Compliance Head On With A Professional Employer Organization (PEO) 

If navigating the complexities of HR compliance seems overwhelming, consider working with a PEO like O2 Employment Services. A PEO is a third-party company that provides comprehensive HR solutions to businesses, including managing payroll, benefits administration, and, most importantly, ensuring compliance with federal and state laws and regulations.

Here at O2, our team consists of seasoned HR professionals who stay abreast of the most recent laws and regulations, guaranteeing our clients’ compliance at all times. We can help with everything from employee onboarding and training to conducting regular audits and risk assessments. 

Our HR services also include providing guidance on DEI initiatives, data protection, and privacy practices, as well as managing termination and offboarding processes.

By partnering with O2 Employment Services for your HR compliance needs, you can focus on growing and running your business while we handle the complex and ever-changing landscape of compliance. Contact us today to learn more about how we can help ease the burden of HR compliance for your organization.