It’s well-established that we live in a litigious society, and running an organization of any size comes with subsequent legal risks. HR compliance risks are just as sizable as product liability risks, and HR law noncompliance costs can be just as deleterious as violating safety regulations.
The effects of HR noncompliance include significant fines, potential damage to your brand and reputation, onerous legal fees and settlements, or even jail time for the culpable parties. Learn how to mitigate HR compliance risks so that you can reduce your risk of consequences arising from noncompliance.
Understanding HR Compliance
What is HR compliance? HR compliance falls under a mix of employment-specific legislation, with some crossover from tax, labor, immigration, and employee benefits laws. Key legislation includes:
- Equal Opportunity Employment Act
- Fair Labor Standards Act
- Equal Pay Act
- Age Discrimination in Employment Act
- Americans with Disabilities Act
- Pregnancy Discrimination Act
- Family and Medical Leave Act
- Civil Rights Act of 1964 (Title VII)
Laws pertaining to employee benefits, like the Affordable Care Act and Employee Retirement Income Security Act, also affect HR policies and procedures. State-level pay transparency laws, nondiscrimination laws, and wage and hour regulations also play a role in HR compliance measures.
For small and medium sized businesses in particular, compliance with these laws comes with challenges. Smaller employers may be subject to different provisions in these laws, or not at all. It can be difficult to navigate as smaller companies usually lack staff attorneys or compliance departments that larger firms tend to have, and the legal fees to navigate compliance management are untenable. However, small and medium sized businesses still must make good faith effort to comply with these laws.
Financial Implications of Non-Compliance
Direct HR law non-compliance costs include penalties for noncompliance, such as $110 per violation of Equal Employment Opportunity laws. These fines can significantly rise with subsequent violations, while other laws come with higher noncompliance penalties, such as knowingly hiring workers whose I-9 forms did not deem them eligible to work in the US.
HR noncompliance costs also include indirect costs like litigation, arbitration, and settlements, which can be far higher than any civil or criminal penalties assessed by the government. If a former employee accuses the organization of discrimination, it may not reach the appropriate regulatory bodies. Settling out of court is expensive but avoids even more expensive trials. Ongoing legal fees quickly mount and can place burdens on small and medium-sized businesses that are sizable enough to disrupt operations.
Legal Consequences
There may be direct legal actions against businesses that willfully violate HR laws, or are not in willful violation but don’t do anything to address noncompliance. Legal consequences include:
- Having a lawsuit brought against you by a governmental authority
- Being sued by an employee, contractor, or other interested party
- Penalties
- Civil judgments
- Criminal judgments
- Arbitration and settling out of court
- Cases that go to trial
Reputational Damage
Noncompliance with HR laws can cause long-term damage to an organization’s reputation. This can stem from court cases and other legal and regulatory actions that are on public record. If any matters are settled out of court, they can still be discussed in the press and online even if the plaintiffs sign NDAs. No matter what the other party doesn’t expose about your business, social media and journalists will work fast.
Even if you pay any fines and settlements, it can be impossible to undo reputational damage and loss of public trust by employees, customers, partners, and other parties. These relationships can erode or completely end, causing the business to cease operation if it can no longer sustain itself.
Strategies to Ensure Compliance
- Work with an attorney to ensure your organization is compliant with both HR laws and basic legal frameworks. Check-in with them at least once or twice a year to ensure that your business is still compliant after laws update, sunset, or new laws are enacted.
- Keep thorough records of all communications, interactions with the government, and employee interactions. Make sure these records can be easily retrieved at a moment’s notice.
- Use compliance tools such as those offered by ASAP Payroll to stay on top of compliance measures with checklists, automation, and more.
Don’t let compliance issues derail your business. Contact ASAP Payroll for expert HR compliance support and ensure your company meets all legal requirements.
