Protect Your Clients from these 4 Compliance Blunders
Compliance isn’t something to take lightly. Employment laws can be frightfully complex, and failure to comply with them can result in costly fines and lawsuits. There are also a lot of them, particularly at the state and local level, where assemblies and councils are busy bringing popular laws to their respective areas.
Employment laws usually apply to organizations based on the number of people they employ, so if your clients are growing, chances are they are now or soon will be subject to additional legal requirements. Many employment laws, however, apply to companies no matter what their size. Whether they’re expanding, growing, or holding steady, your clients need to know what they’re facing.
Let’s take a look at a few of the major compliance risks so we can keep your clients out of trouble:
1. Exempt or non-exempt, that is the question
Exempt and non-exempt are classifications under the Fair Labor Standards Act (FLSA), a federal law requiring that most employees receive at least minimum wage for each hour worked and overtime pay for hours worked over 40 in a workweek.
We hear all the time from employers wanting to know whether they’re classifying their employees correctly. Unfortunately, many others aren’t even aware that they may be doing something wrong, and they find out only after one of their employees complains to the Department of Labor.
If the Department of Labor were to investigate any of your clients and determine they’d misclassified an employee, they could have to pay back wages, liquidated damages, and even civil penalties. To prevent inconvenient investigations and costly penalties, your clients need to understand when their employees can be exempt from the FLSA’s minimum wage and overtime requirements.
Any position can be classified non-exempt, meaning employees in that position are entitled to both minimum wage and overtime pay. Trouble comes when employers try to classify a position as exempt, and that position doesn’t meet the criteria.
For a job to be exempt from minimum wage and overtime pay requirements, it needs to qualify for one of the exemptions listed in the FLSA. The most commonly used (particularly in office settings) are the executive, administrative, and professional exemptions. But, to qualify, each position must pass a three-part test:
- Duties: The employee must perform specific tasks (such as managing at least two people) and regularly use their independent judgment and discretion.
- Salary level: The employee must make at least $455 per week ($684 per week starting January 1, 2020).
- Salary basis: The employee must be paid the same each week regardless of hours worked or the quantity or quality of their work.
If a position meets all the criteria under one of these exemptions, your client may properly classify that position as exempt. If the position does not fit all the criteria under a specific exemption, your client should classify it as non-exempt and pay at least minimum wage and overtime when applicable.
Highlight areas of risk with our free HR Audit Checklist!
2. Onboarding paperwork snafus
We all know the hiring process has a lot of paperwork. Some of it is simply helpful, and there’s no cause for alarm if something is forgotten or improperly done. Not the Form I-9, though. That’s paperwork that needs to be done right and on time!
All too often, however, companies neglect to complete I-9s. That’s a recipe for legal trouble.
The rule is pretty simple. All new employees must complete Section 1 of Form I-9 on or before their first day of employment. Then, within three business days of their start date, they should submit acceptable proof of their identity and eligibility to work in the United States. Your clients need to ensure that this happens. Without those identifying documents, your clients can’t complete Section 2 of the I-9, which also has to be done in those same three business days.
Tip: Your clients should schedule time to complete the I-9. Rushing the process last minute only makes mistakes more likely.
One more thing: I-9 forms shouldn’t be forgotten after the onboarding process. They may need to be updated if certain documents expire. It’s also important to note that an I-9 form should be destroyed one year after the employee’s termination date or three years after their date of hire — whichever is later. It’s not, strictly speaking, a requirement to destroy I-9s at this time, but if those old forms had errors or incomplete sections, and those were discovered in an audit, the employer could face penalties.
3. Super risky terminations
A lot of employers assume that they can terminate employees without risk because they operate in a state where employment is at-will. At-will employment means that either the employer or the employee can legally terminate the employment relationship at any time, with or without notice, and with or without cause. However, it does not permit an employer to terminate employment based on the employee exercising a legal right or belonging to a protected class (e.g., race, sex, religion, national origin). Firing someone because they’re a member of a protected class would be an example of illegal discrimination.
Your clients might assume that as long as they’re not willfully terminating someone for a retaliatory or discriminatory reason, they’re in the clear. But that’s not the case, and your clients need to protect themselves.
Terminations always come with some risk because a terminated employee can always claim that they were let go for an illegal reason, and it’s on the employer to prove otherwise. If your clients aren’t documenting instances of behavior problems, poor performance, and corrective action taken, then they have nothing to show that any terminations were based on a reason permitted by law.
Your clients could also be putting themselves at risk by failing to follow their disciplinary policies consistently. If they fired one employee for a certain behavior, but didn’t fire another employee for the same, the termination could look discriminatory, and the perception of discrimination is enough to cause trouble.
4. Being stuck in the past
Imagine trying to build a physical workspace on ground that’s constantly changing. Today the soil is hard and flat, but tomorrow a stream will appear right where you’ve decided to put the foundation. The legal and regulatory landscape can feel like that. New federal laws may be few and far between, but state and local governments are in the fields, digging trenches, building dams, clearing forests, and planting trees.
Building and maintaining a successful organization are challenging and stressful on their own. These days, your clients also have to fashion their policies and base their practices on new employment laws and regulations. If they’re unaware of the latest changes that might affect them — like paid sick leave, ban the box, salary history inquiry bans, and predictive scheduling — they’re putting themselves into serious legal danger.
A big obstacle you clients may be facing is that they don’t have a single source that can rely on keep up-to-speed on all the latest changes. A big part of an HR manager’s job is researching answers to complex questions they have, either because they’ve heard about a new change or because some issue has come up with an employee. If that manager has to check a variety of sources, perhaps using a list they’ve made and now maintain, they’re taking more time than they need to, and they have a greater chance of missing something.
To help them make wise decisions, you and your clients need to stay in-the-know with a single source you can trust. ThinkHR Comply gives you access to thousands of up-to-date tools, documents, checklists, and forms, as well as the latest news and information that support best practices in compliance for any type or size of organization. Reach out and request a consultation. Total compliance may be difficult, but taking that first step is easy.
