Underestimating the importance of remaining compliant with employment laws and regulations is one of the biggest mistakes you can make as an employer.
The cost of being audited or sued and found non-compliant can put a serious dent in your profits and your company’s reputation. It can even impact your ability to hire.
If you think most laws and regulations don’t apply to your company because you have a small number of employees, think again. When it comes to compliance, small businesses are often subject to the same laws and regulations that govern large corporations.
And if you do get caught, pleading ignorance will not be an acceptable excuse.
Let’s look at five of the most common compliance mistakes.
1. Classifying employees incorrectly
A misconception exists that companies have a choice about how to classify employees as exempt or non-exempt, and therefore whether an employee is paid a salary or hourly. The fact is the Department of Labor has very specific rules that outline what constitutes exempt and non-exempt positions.
Just because someone works in an office, versus at a cash register or on a manufacturing line, doesn’t mean they are exempt from being paid overtime. Job duties, responsibilities and pay rate all factor into whether an employee is declared exempt (not paid overtime) or non-exempt (paid overtime).
For example, many managers might assume that an accounting clerk or inside sales are white-collar jobs that should be exempt. However, if the person in that job has no decision-making authority or discretion in how they perform their work, it’s likely the position is non-exempt and eligible for overtime pay.
It’s important to get these classifications right because the required record keeping of attendance and timesheets differs depending on the employee’s status.
2. Not handling hiring paperwork properly
It sounds simple enough, but when hiring new employees many businesses fail to check the correct eligibility-to-work documents, fail to record their documentation, or keep missing or incomplete I-9 forms. Failure to keep adequate records can get you into legal hot water quickly.
Before you file any hiring paperwork, be sure all forms are completely filled out, including dates and signatures. You must also confirm that there is proper and valid supporting eligibility documentation with the I-9 form.
Often, employees fail to provide the correct supporting documentation, such as a driver’s license and social security card, because their employer doesn’t properly inform them of what’s acceptable.
To avoid this confusion, provide new hires with an I-9 form, allow them to review the list of acceptable documents and make their own selection. It can be hard to know if the documentation you are checking is valid. However, if the documents presented appear to be genuine and relate to the employee presenting them, you should be fine.
I-9 forms must be kept current. For example, if an employee offers a temporary work visa, you must also be sure to update their I-9 form.
And everything needs to be completed within three days of your new employees’ hire date. Miss the deadline, and you will be subject to fines.
Ironically, the best practice is to destroy all I-9 forms for former employees one year after their termination or three years from their date of hire, whichever is later. If you don’t, you’ll face a greater risk of being fined.
3. Ignoring safety regulations
If you haven’t reviewed the state and federal Occupational Safety and Health Administration (OSHA) rules that apply to your business, you’re putting your employees and your business at significant risk.
Many smaller businesses may not realize that some safety regulations apply to all businesses, not just those over a certain size. In particular, OSHA’s General Duty Clause requires every employer, regardless of size, to provide every employee with a place of employment that is free from recognized hazards.
This usually takes the form of forklift drivers getting safe operations training, and encouragement to use provided protective gear such as hard hats, ear protection and eye protection for employees who need it.
Safety rules must be communicated regularly both verbally and in writing. Typically, this means a staff meeting, training session and a copy of the regulations posted in a break room or lunch area.
Another common mistake: Failing to post injury logs annually. In fact, the government requires businesses to officially record any lost-time injuries using the OSHA 300 form each year.
While creating and posting safety guidelines is helpful, nothing can replace a comprehensive safety training program. These programs provide hands-on instruction so that your employees know exactly what to look out for and what to do if an incident occurs.
If there’s an accident at your business, be sure to take action immediately. Failure to document, track and implement corrective measures in response to any incident can jeopardize compliance.
4. Failing to stay compliant during rapid growth
Particularly during times of rapid growth, it can be easy to forget that larger employee numbers usually means greater compliance exposure.
For instance, due to the costs of complying with the Affordable Care Act, some businesses may try to stay below the 50-employee threshold by reclassifying some workers as independent contractors. However, it’s not that simple.
There are specific rules for what constitutes an independent contractor. It may help to think of contractors as a business of one person who sells their services to multiple parties.
Generally, that means they provide their own tools and resources, set their own hours and pay their own benefits. You can’t tell an employee they are now a contractor who works the same hours in the same location with the same responsibilities as before without running afoul of labor law regulations.
Unpaid internships are frequently non-compliant from a Department of Labor perspective and another area that can get your company in trouble.
5. Not keeping current
One of the top HR mistakes business leaders make is a simple failure to keep up with the many regulatory agencies and rulings that govern the organization.
The number of agencies and their associated employment laws has grown tremendously over the last few years, and that shows no signs of changing. You need to be aware of the agencies that govern areas such as:
- Sick leave policies
- Employee privacy laws
- Hiring regulations, such as “ban the box” rules
- Workplace safety and health laws
- Payday laws, such as final pay rules and payroll deduction rules
- Recordkeeping requirements
- Overtime pay laws
- Anti-discrimination and anti-harassment laws
- Local, state and federal family leave laws
The trend for municipalities to enact regulations that are more stringent than state or federal laws adds another layer of complexity for business leaders trying to stay current.
Don’t want to risk your company’s reputation or valuable resources because you weren’t compliant? Download our e-book: Employment Law: Are You Putting Your Business at Risk?