I. Employment Compliance Is Costly for Small Businesses, but Non-Compliance Can Be More Costly
As a small business owner, you have a lot on your hands. Keeping up with your compliance obligations as an employer and the ever changing laws can be a headache, but the risks of non-compliance are serious. They include:
- Grievances and lawsuits by employees.
- Administrative fines and penalties by regulatory agencies.
The landscape of compliance obligations is constantly changing. The employer’s obligation is to comply with Federal employment laws as well as the state and local laws of every state where a company employee works. Compliance with state and local laws can be more onerous than compliance with Federal laws.
You have enough on your hands. Outsource these burdens to expert legal counsel with experience in employment and personnel laws. Let an expert help you with the employment compliance challenges you face in this important aspect of your small business.
II. Common Employment Compliance Challenges and How to Manage Them
1. Keeping Up With Changes in the Law. For any business, especially small businesses, keeping up with changes in the law is among the top of the most difficult employment compliance challenges. Keeping up means not only staying on top of changes in Federal, state, and local laws, but also meeting the deadlines for implementing them by reviewing and updating company programs and policies. How can you possible manage all of it effectively? The best way is to hire a compliance expert whose sole responsibility is staying abreast of it all and helping you manage the implementation of new laws. Outsourcing the HR function is now commonplace. Alternatively, you can retain a compliance expert or employment attorney to keep up with changes that are relevant to your company, and handle the implementation in-house.
2. Employee Attempts to Unionize. A recent decision by the National Labor Relations Board (NLRB) made it easier for employees to unionize. In this decision, the NLRB reinstated the traditional “community-of-interest” standard for determining the size of an appropriate bargaining unit. Under the National Labor Relations Act, the NLRB must decide in each case whether the group of employees a union seeks to represent constitutes a unit that is “appropriate” for collective bargaining. The union has to show that the employees share a community of interest among themselves. In prior cases, an employer could take the position that the smallest appropriate unit would have had to include employees who had been excluded from the proposed unit. In those cases, the NLRB would not rule for the union unless the excluded employees shared an “overwhelming” community of interest with the petitioned-for group.
The NLRB abandoned the second part of that standard, known as the “overwhelming” community-of-interest standard. In reaching its decision, the NLRB stated that “there are sound policy reasons for returning to the traditional community-of-interest standard that the Board has applied throughout most of its history, which permits the Board to evaluate the interests of all employees—both those within and those outside the petitioned-for unit—without regard to whether these groups share an ‘overwhelming’ community of interest.” If you have a group of employees that is seeking to organize, you are advised to work with experienced legal counsel to develop a sound management response.
3. Outdated Compliance Technological Systems. Replacing hardware and software is the most expensive of these employment compliance challenges. One way to mitigate those costs is through cloud technology. The cloud provides a less expensive means to update because it removes a lot of the cost of hardware. Suppliers take care of servers for you and provide regular software and security updates. The cloud offers many other benefits, too, which can relieve you of a lot of hassle and expense.
4. Growth in Staffing. As the company grows, its compliance obligations increase. For example, increase in staffing from 14 to 15 subjects the company to compliance with the Americans with Disabilities Act, and the company may have to retrofit the office space to comply. Business managers can use the EEOC’s small business resources center to determine if there are ways to reduce the compliance burdens. Other growth milestones you should be aware of are when your business reaches 20 employees and then 50 employees. Reaching these milestones triggers the obligation to comply with additional EEOC and Department of Labor obligations. As your business approaches those staffing levels, you should consider consulting with experts to help you with compliance. Growth also puts demands on payroll systems. Consider outsourcing the payroll function to minimize the administrative burdens.
5. Lack of Adequate HR Policies and Training. Your business needs to provide ongoing training and written policies and procedures to ensure all employees know what conduct constitutes discrimination and harassment. You should also have someone on staff responsible for keeping up with these and other Federal, state, local laws and regulations applicable to your personnel.
Changes in laws can affect HR policies in less obvious ways. For example, does the company have a policy on the use of medical marijuana in states where it is legal? Are insurance benefits available to same-sex married couples on the same basis as other married couples? You will need to make sure all employees understand and comply with the company HR policies. If your workforce is unionized, some changes to the policies will require bargaining. Changes to policies do not require bargaining if they are similar in kind and degree with an established past practice consisting of comparable unilateral actions.
Experienced labor relations counsel can provide your business with good advice in these matters.
6. Identify and Classify Employees Correctly. Contract employees are not company employees. If you blur the distinction between contract and company employees, you could expose yourself to liability for their pay and benefits and employer tax withholding obligations. You can help protect your business against this if your company employees retain the ultimate decision-making authority on any major issues. Your contractors should not use your company identification for access to company resources. An experienced HR expert or attorney can assist you in making sure you are properly maintaining the distinction between your employees and your contractors.
In a decision that illustrates the importance of this distinction, the NLRB held two or more entities will be deemed joint employers under the National Labor Relations Act (NLRA) if there is proof that one entity has exercised control over essential employment terms of another entity’s employees (rather than merely having reserved the right to exercise control) and has done so directly and immediately (rather than indirectly) in a manner that is not limited and routine.
Accordingly, proof of indirect control, contractually-reserved control that has never been exercised, or control that is limited and routine will not be sufficient to establish a joint-employer relationship.
7. Workplace Posters. Certain laws require the employer to post workplace posters in the place of business. You can download many of them from the Department of Labor website. While this may not be the most intimidating of the employment compliance challenges, do not overlook the importance of complying with these poster obligations.
These employment compliance challenges are faced nearly every day by small business owners. Because of this, DIY employment compliance is fast becoming a thing of the past. You should consider seeking the help of an expert to make sure you are on top of your employment compliance obligations and get back to growing your business.
