Top HR Compliance Issues Facing Small Businesses

The constantly evolving legislative landscape means more requirements for employers to stay abreast of. And small businesses are no exception. The following are some of the top compliance concerns facing small employers today.

Title VII of Civil Rights Act. This law protects against discrimination in all phases of employment based on race, color, religion, gender, national origin, and genetic information. Small businesses can face unique compliance challenges because their size and resources often limit formal approaches, placing them at risk. For example, it’s illegal to allow the harassment of employees. So a company should have strong bullying, non-aggression or anti-violence policies, and communicate them in writing. Regular trainings should also be provided that show clear examples of inappropriate behavior and a company must have complaint procedures in place so employees know how to file charges.

Americans with Disabilities Act (ADA). Employers can’t discriminate against qualified people with disabilities–those with a physical or mental impairment that substantially limits one or more major life activities. Even if you’re a small company, reasonable accommodation must be provided for individuals with disabilities unless it creates an “undue hardship.” And you must adhere to the same practices as larger companies when it comes to preventing discrimination in the hiring process. So when interviewing, don’t reject applicants just because you think their disability would prevent them from doing the job. And stick to questions about the candidate’s ability to perform the job’s essential functions, not those that would reveal a disability.

Family Medical Leave Act (FMLA). Depending on state law, if your business has more than 50 full-time employees, your workers must be allowed at least 12 weeks of leave each year for birth, adoption, foster care, or their own serious health problem or that of a family member. (In Rhode Island, the latter also applies to in-laws.) When the employees come back from leave, they must be reinstated to their original position.

Age Discrimination in Employment Act. Organizations of any size can’t discriminate against applicants or employees older than 40 based on their age. So that means smaller companies can’t take a person’s age or proximity to retirement into account when making decisions on hiring, firing, pay, benefits or promotions.

Fair Labor Standards Act. This act sets the federal minimum wage, governs overtime requirements and places limits on teens’ work hours. To comply, be sure to follow recordkeeping requirements for each covered employee. And be aware of one of the most common causes of litigation: misclassification of employees as independent contractors or exempt from the overtime pay requirements.

Equal Pay Act. The “Equal Pay for Equal Work” law prohibits discrimination in compensation and benefits based on gender. However, remember that the Act doesn’t prohibit pay differences based on a system of seniority or merit, the quality of what the employee produces or other factors besides gender.

The Uniformed Services Employment and Reemployment Rights Act of 1994. This act prohibits discrimination against employees who volunteer or are called to military duty. And employers must reemploy employees returning from active duty (tours less than five years) to their previous or equal job. And be careful: when an employer challenges a reservist’s bid to get their old job back, courts typically side with the employee.

Occupational Safety and Health Administration. This comprehensive law requires employers to provide a workplace free from physical dangers and that meets specific health and safety standards. Even small employers must provide safety training, inform employees about hazardous chemicals and notify the government about serious workplace incidents. And you must keep detailed safety records and maintain them for five years. A great way to avoid potential penalties for an OSHA violation–which can run from a small fine to incarceration–is to conduct a mock audit to identify areas for improvement.

Pregnancy Discrimination Act. Passed in 1978, this law prohibits job discrimination on the basis of “pregnancy, childbirth and related medical conditions.” That means that employers can’t deny an employee a job or promotion because she’s pregnant. Nor can you fire her or force her to go on leave. Instead, treat pregnant employees the same as other employees: on the basis of their ability or inability to work. For example, if you provide light duty for an employee who can’t lift boxes because of a bad back, you must make similar arrangements for a pregnant employee.

Immigration Reform and Control Act. To comply with this act, complete I9 forms are required for each employee. Be sure to keep one file (not in the employment file) of forms for active employees and one for terminated workers, either for one year from the date of termination or three years from the date of hire, whichever is longer.

Failure to follow these laws’ requirements can leave a company vulnerable to both civil and criminal charges. And remember, from the courts’ perspective, ignorance of the law is no excuse for non-compliance. And if a manager or supervisor violates the law, the organization is responsible for their action. That means training for managers and supervisors is critical.


By Karyn Rhodes, Vice President of Human Resource Consulting, Cornerstone Group

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