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Compliance Conundrum: 6 HR Compliance concerns to consider and 2 solutions!

hr best practices hr compliance hr essentials hr for small business Aug 15, 2022

There is so much to get done in a day – who really has time to keep up with all the HR compliance concerns? But you know you need to do it. Employees can file a complaint with government agencies online in a few clicks. There is even a free app from the Department of Labor that helps employees determine if they are being paid properly and where to file a complaint if they find an issue. You can’t afford to ignore these issues.

Some compliance issues lead to lawsuits more often than others. The areas below are those where we see the most litigation. However, if managed appropriately, you can address these critical concerns of HR compliance.

Diversity Equity and Inclusion

There is a heightened awareness of how employees should be treated in the workplace and it impacts all businesses. Replying to an allegation with the EEOC on any issue of diversity, which includes harassment, will cost you in the range of $7,500-$15,000 in legal fees, even if you haven’t done anything wrong. And the last thing you want is to end up on the six o’clock news. The most effective deterrent is to have a well-written policy on harassment and review it annually with employees and managers. Managers have the added responsibility of enforcing the policy. And be sure you know if your State requires mandatory training and do it!

The critical components of an effective anti-harassment and discrimination policy include:

(a) Define harassment and discrimination.

(b) Describe how to report harassment and make sure you have both men and women available to receive these reports.

(c) Create an investigation process and be sure all managers know what to do if a claim is made.

(d) Confidentiality should be maintained “to the extent possible,” but you can’t promise complete confidentiality.

(e) State that valid claims will be protected from retaliation.

I-9 Compliance

The Form I-9 is the form that demonstrates the ability to work legally in the United States. All businesses with three or more employees must complete the form within 72 hours of a new hire starting work. The forms have changed often over the years, so don’t be surprised if you have a variety of I-9s. Make sure you have one I-9 completed for each employee. You’ll also need to keep the form for specific employees that have left your company. You can destroy the I-9 after one year from the date of termination or 3 years from the date of hire. If you use an outside payroll vendor, it is likely they can help with I-9 completion and retention. There is usually a nominal cost for this service, but the security in knowing the forms are filled out properly is well worth the fee.

Wage and Hour Laws

Paying employees isn’t always as easy as it sounds and this year it could get much more complex. We are anticipating a change from the Department of Labor to go into effect this fall that will raise the minimum wage for a salaried employee - again. You will have to make a decision whether to raise their salary to the new minimum or move them to hourly status and pay overtime. The only way to make the decision of salaried or hourly is on a case by case basis. Consider what each employee is earning today, the amount of overtime they are likely to work, and what the new minimum is. If they don’t work over 40 hours on a regular basis, it may be advantageous to have them go back to hourly and pay the overtime.

State and Local Law

There is an increasing number of municipalities that are getting into the employment compliance market. It’s not only at the state level but often at the local level as well. They are impacting paid time off, hours of work, minimum wage, training requirements and other areas of employment we don’t generally see litigated at the state and local levels. To stay abreast of the latest change, I would recommend signing up for a free newsletter from an employment attorney in town or from your chamber of commerce, state, and local government. However, you get the information, but sure to read it. New requirements tend to phase in over 3-6 months, so there is generally time to adapt and prepare for the new compliance concerns that should be on your radar.


The use of both medical and recreational marijuana is spreading quickly state by state. Since marijuana is still illegal on a federal level, it is acceptable for you to maintain your business as drug-free, even if marijuana is legal in your state. The one place leaders need to be careful is with the Americans with Disability Act. This is the law that provides reasonable accommodations to employees with a qualifying disability and applies to businesses with 15 or more employees. If your state allows medical marijuana, you are obligated to start an “interactive conversation” with employees about the needs they have before you say no outright. This is ever-evolving as marijuana law is still very new – so watch those newsletters I mentioned for more details.

Employee Handbooks

To have or not to have, that is the question. Generally, once you have multiple employees and can’t be around to answer every question, it’s time for a handbook to handle those HR compliance concerns. I recommend a handbook when a company reaches approximately ten employees. State and local law changes are making employee handbooks even more essential. When disagreements occur, your handbook serves as an objective determination of the rules. Each year, you should review your handbook to ensure it still reflects the policies and processes of your business. The situations discussed in this article are particularly critical to review, and you should update the handbook if necessary. Many of your benefit brokers and payroll providers will have templates you can use as a starting point, but it’s always advisable to have an attorney review the final product.

Insurance Protection for HR Compliance Concerns

A very effective way to protect yourself from these issues is an insurance policy called Employment Practices Liability Insurance, or EPLI, which is sold as part of your property and casualty insurance. These policies not only cover costs associated with an employee complaint or litigation, but the issuing insurance carriers often have resources to help ensure that you stay out of trouble to begin with!

Keeping up with HR compliance concerns could be a full-time job all on its own, even for the smallest of organizations. The most difficult piece of the puzzle is determining what you don’t know. Sign up for newsletters and other HR publications, and see if your community has an HR legal update seminar. These are often inexpensive and held annually by law firms and can give you a quick update on what’s new in your area.

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