HR Compliance: 4 Things Your Company Can Do to Avoid a Lawsuit

The human resources (HR) departments of most organizations today have assumed more responsibilities, not the least of which is ensuring compliance with labor and employment regulations. These include having fair employment practices, ensuring workplace safety, and maintaining up-to-date records, among many others.

And those businesses operating on a global scale must not only continuously review their practices, policies, and procedures for local employees (e.g., state, federal, and local), but also consider those of the province or country of their global workforce.

In this article, I'll focus on some of the most important HR compliance regulations affecting small to midsized companies in the United States (US). For a comprehensive list of regulations, visit the United States Department of Labor Web site

Don't let these norms scare you. Here are four things your company should do to comply with the appropriate HR regulations. 

  1. Know the laws and regulations
  2. Prepare and be ready for audits
  3. Maintain up-to-date documentation
  4. Provide compliance training to managers and employees


1. Know the laws and regulations
To ensure legal compliance and avoid having to pay hefty fines and penalties, your company first and foremost needs to know the laws and regulations that apply to it. I don't portend to provide a comprehensive list here, but I provide an overview of some of the important regulations and laws that pertain to five main areas of HR. If you go to each Web site I provide, you'll find reference and links to specific regulations—make sure you read them and discuss with your HR department representative.

  • Recruitment—Your company's recruiters and hiring managers must be familiar with the guidelines on eligibility for employment in the US set forth by the U.S. Citizenship and Immigration Services Department. They need to verify that job applications have all the documents listed in the I-9 form, which are required as proof of eligibility for employment in the US. They also need to consider other legally-binding questions including

    • what kind of questions they can (and cannot) ask a potential candidate,

    • how they should perform background and credit checks, and

    • how do social networks play a part in the hiring process.

  • Employee Relations—Your organization must comply with federal laws that make it illegal to discriminate against a job applicant because of the person's race, color, religion, sex (including pregnancy), national origin, age (40 years or older), disability, or genetic information, as outlined by the U.S. Equal Employment Opportunity Commission and with the safeguards of employee rights established and enforced by the National Labor Relations Board. Companies in noncompliance can be held liable to claims of unfair employment practices and face lawsuits on discriminatory employment practices. Your HR department should have access to materials that explain in detail your company's obligations to maintaining an equal employment opportunity workplace. 
  • Compensation (payroll, wages, benefits)—The Fair Labor Standards Act (FLSA) is the US regulatory body that governs employee compensation. The FLSA requires that employers adhere to the Federal minimum wage, overtime, child labor, and recordkeeping requirements. For example, employers need to pay their employees for compensable time, which includes time spent traveling during normal work hours. As an employer, you need to abide by all regulations relating to employee compensation, which your HR department should be very familiar with.
  • Record Keeping and Communications—Every employer covered under the FLSA must keep certain records for every nonexempt employee that is under employment. These records must include accurate information about the employee and detailed data about the hours worked and the wages earned. In addition to document retention, there are laws stipulating strict requirements for securing the access to data in storage (electronic records). Unfortunately, this is an area that many organizations—given their current technology network and configurations—have a challenge meeting. All organizations must implement clearly defined records management practices and comply with the Sarbanes-Oxley Act 2002 (SOX), and your company is no exception.
  • Workplace Health & Safety—For the most part, all employers—regardless of company size or industry—are accountable to the Occupational Safety & Health Administration (OSHA), the governing body that publishes and enforces guidelines pertaining to workplace safety is the US. Employers need to have compliance methods in place, such as training programs on safety, reporting requirements, and maintenance of workplace incidence logs, to ensure they provide a safe working environment for employees. By providing adequate training on safety issues, your company can effectively reduce the number of injuries to your employees. And finally, it is critical that your company complies with both federal and state guidelines, where applicable.


2. Prepare and be ready for audits
For today's businesses, audits are a reality. And your company should expect to be audited at least once in its lifetime. A good way of preparing for these imminent audits conducted by internal or external groups, is to have your company's HR personnel periodically audit their own HR policies, procedures, practices, programs, and systems. And while legal compliance is extremely important, an effective HR audit should also move beyond legal compliance into the area of general HR management best practices. Once the HR audit is complete, the results should prompt action items with timelines for completion to improve your company's auditability. 

We all know that memories fade over time—and a lack of documentation can leave you company open to potential HR noncompliance claims. It's critical that your company document and retain all compliance-related items including (but not limited to):

  • employee personal information
  • compensation information (i.e., payroll)
  • employee evaluations
  • workplace accidents
  • disciplinary actions

And the period of time you need to maintain these employment records depends on the documentation and the applicable regulation. To be ready for audits, keep the following records, at the place of employment or in a central records office, for the time period indicated below:

  • Payroll records and collective bargaining agreements for at least 3 years.
  • Records on which wage calculations are based (e.g., time cards, wage rate tables, work and time schedules, etc.) for 2 years.
  • All personnel or employment records for 1 year.

For a complete list of employment record retention requirements, download this pdf.


3. Maintain up-to-date documentation
As documentation is a critical component of compliance, managers need to put into practice proper procedures for documenting all employee-related programs, activities, and incidents that fall under the HR compliance regulations.

If your company feels in any way that it is in danger of noncompliance with local, state, or federal regulations and laws, it can save itself from litigation by building an arsenal of compliance-related tools and materials. Here are some typical compliance tools your company should consider distributing to its employees:

  • Employee handbooks
  • Company policy manuals
  • Job description manuals
  • State and federal law handbooks and resources
  • Workplace safety manuals 
  • Compliance posters (posted around the office)

In fact, your company may also request that all employees sign these distributed copies as proof they have read and understood your company's policies. Finally, a copy of all written records should be kept on file.

4. Provide compliance training to managers and employees
As HR laws are constantly changing, your company must stay current of the laws and regulations governing HR compliance so it can establish appropriate policies and communicate them to its managers and employees. Policy manuals should be reviewed regularly with each manager within your organization. These managers must uphold expected standards and act as role models for other employees. As an employer, you must also build employee awareness of the behaviors that are expected of them in the workplace. An HR manual shouldn't be something employees read once and forget about. Updates to policy manuals and retraining on important issues, such as sexual harassment, should be given periodically (ideally every quarter).

With this brief introduction, you now have the basic tools for establishing best practices within your organization to achieve HR compliance. Spend some time visiting the following Web sites for a comprehensive understanding of how HR compliance can affect your organization.

And if you're a small to midsized business and don't have an HR department, well, don't you think you have enough reason to have one?

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