2021 HR Compliance Checklist
New York–The Hunter-Tannersville School District violated federal law by paying lower wages to a female superintendent than it paid to a male superintendent performing work that required substantially equal skill, effort and responsibility, the U.S. Equal Employment Opportunity Commission (EEOC) charged in lawsuit.
California–A Department of Labor investigation determined that LAX airport committed FMLA violations. The DOL found that employees waited for months for requests to be approved, and were sometimes subjected to illegal disciplinary actions when requesting leave. Investigators also discovered that FMLA requests went through five levels of administrative review before reaching HR, typically one month later, with some requests pending for months.
Arizona – Southwest Windows & Doors was ordered to pay $577,997 to 109 employees for violations of the Fair Labor Standards Act (FLSA) overtime requirements. The company failed to pay overtime to employees paid on a piece-rate basis when they worked more than 40 hours in a work week. Investigators also determined the employer didn’t maintain complete and accurate records of all the hours employees actually worked.
When was the last time you did an HR compliance checkup? If it’s been a while, we recommend putting it at the top of your to-do list.
Use a checklist for a systematic audit of your Human Resources practices to ensure that your company is compliant. It’s important to do this annually and spot-check when laws change.
What to know before you do an HR compliance checkup
Many small businesses don’t have a dedicated HR director. If this describes your situation, make sure you understand compliance basics including the following:
- All state, local, and federal regulations to which you are subject
- The HR-related procedures your administrators, payroll processors, and managers follow (including any outsourced HR services)
- Upcoming changes to local or state employment regulations
When you understand the myriad laws you need to follow, it’s time to start your compliance checkup. First, we start with hiring and then discuss each functional area of Human Resources. Following that, we’ve included some issues that don’t neatly fall into a functional area.
Recruiting and Hiring
Compliance begins with recruiting. HR and hiring managers shoulder the burden of hiring compliance.
- Use templates for non-discriminatory job descriptions, interview scripts and standardized candidate scorecards
- Follow state laws on questions regarding previous salary or criminal record
- Don’t ask about marital status, religion, sexual preference or citizenship (it’s okay to ask if applicant can legally work in the US)
- Be aware that asking adult candidates their birthdate, age, or year of graduation could put you at risk of an age discrimination challenge
- Keep all application forms and interview evaluations to document reasons for hiring or rejecting in case of an EEOC investigation
- Provide equal compensation for equal work (regardless of internal job descriptions) and ensure pay practices are compliant
- Check your state department of labor for laws on background checks
- If you need to increase diversity at your organization, evaluate the job boards and other places you advertise–you may need to use diversity job boards to reach more candidates in underrepresented groups
TIP: An applicant tracking system has job description templates, customizable screening questionnaires, interview scripts and audit-ready documentation. Plus, you can post to mainstream and diversity job boards from the software without needing to log into each one separately.
Employee Onboarding and HR Management
Now that we’ve addressed recruiting, let’s move to onboarding. Of course, there are a host of requirements in play once the employee is hired.
- Obtain complete, signed I-9 and tax forms before new employees start working
- Obtain written consent from the employee if you do a credit check as part of a background screening
- Follow privacy laws and data security best practices for personnel files
- Keep your employee handbook and workplace posters up to date
TIP: A secure, cloud-based HRMS ensures you never lose an I-9, W4 or other critical paperwork.
Payroll, Timekeeping and Leave Management
These are the processes that affect employees every day and are necessary for payroll. Clearly, if you don’t get these right, you could be on shaky legal ground with the US Department of Labor and the IRS. In addition, you could have ticked off employees.
- Track all time for onsite and remote employees, don’t allow off-the-clock work, use a geofencing app for mobile clock-in
- Pay overtime to non-exempt employees
- Track FMLA, COVID leave and PTO separately and accurately
- Pay at or above the legal minimum wage (if state wage is different than federal, you must comply with the higher wage)
- Follow all state and local shift scheduling laws (predictive scheduling fair work week, stable scheduling, etc.)
- Make sure managers understand compliance rules, how to avoid illegal conduct and how to prevent sexual harassment
- Comply with laws for final paycheck and unused PTO
TIP: An automated timekeeping system helps you manage attendance policies, FMLA and COVID leave, and compliant shift schedules.
The IRS estimates that around 30% of employers classify incorrectly. Therefore, pay special attention to the rules.
- Check that exempt employees meet the duties test
- Make sure independent contractors meet all requirements set out by the IRS
TIP: A unified HR system tracks employee classifications.
You could comply with all the laws mentioned previously and still fail this one if you don’t keep good records. When in doubt, don’t throw it out!
- Keep for 3 years: Payroll records, union contracts
- Keep for 2 years: Timesheets, piecework records, wage rate tables, work schedules, and record of additions to or deductions from paychecks
TIP: An HRMS automatically retains audit-ready payroll and HR records.
Employer retaliation is one of the most frequently filed charges with the EEOC. Retaliation is when an employer punishes an employee for a protected action. For example, whistleblowing or filing a complaint. Because it’s so pervasive, scrutinize your policies. If you are convinced that they are legal, make sure everyone understands them. If your employee handbook has instructions for managers, you are less likely to get into a messy situation.
As your workforce grows, additional regulations apply to your business. Let’s discuss the main ones.
First off, many provisions of the FLSA apply to all employers. You can review the rules here: Wage and Hour Division, US Department of Labor. From the very start, for example, you must provide equal pay for equal work to male and female employees–regardless of the number of people on your staff.
Secondly, if you have 15 to 19 employees, you are covered by the laws that prohibit discrimination. The protected characteristics include race, color, religion, and sex (including pregnancy, sexual orientation, or gender identity). Plus national origin, disability and genetic information (including family medical history).
The American with Disabilities Act (ADA) applies to employers with at least 15 employees.
Employers with 20 or more employees are subject to the ADEA (Age Discrimination in Employment Act). This law prohibits employers from discriminating against applicants over 40 years of age.
FMLA applies if you employed at least 50 employees for at least 20 workweeks in the current or preceding calendar year.
Two important components of the Affordable Care Act (ACA) also become effective at 50 employees. These include the employer shared responsibility provision and reporting rules for minimum essential coverage.
AAP (Affirmative Action Program) kicks in at 50 employees as well. Employers are required to take active measures to recruit persons in designated classes: women, minorities, disabled, covered veterans. Be sure to keep records of AAP hiring programs.
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Small business HR compliance has never been more complex. It’s critical that small business owners understand regulations and create a culture of compliance at their organization. We will discuss the following compliance categories that apply to small business employers: Hiring Laws Family Medical Leave, COVID Leave, and Paid Time Off Exempt vs Non-Exempt Employee Classifications…Read More