Social and political changes can force regulations to evolve. Unfortunately, these changes often happen too quickly for many businesses to keep up. It is for this reason that organizations can fall behind on their compliance. It does not take long for these unintentional lags to transform into hefty fines and even lawsuits. In order to assist businesses with their compliance responsibilities, here are a few tricky compliance issues companies may be facing.
- Environmental Regulations
At first glance it may seem that environmental regulations only apply to those in manufacturing or agriculture. This causes many businesses to overlook environmental compliance issues that do in fact apply to their operations. Some of the broader regulations include the Clean Air Act, Clean Water Act, and Resource Conservation and Recovery Act. To help smaller businesses stay in compliance with these and other environmental regulations, the EPA offers a streamlined process and guidance materials that can be found at https://www.epa.gov/compliance/resources-and-guidance-documents-compliance-assistance.
- Unintentional Hiring and Promotion Discrimination
Recruitment, hiring, and promotions tend to follow a traditional path. Early on in the lifecycle of a business, positions are often filled by family members, friends, and friends of friends. As your business grows, continuing to rely on your personal network for employment referrals can unintentionally create a workforce that is far from diverse, whether in terms of age, gender, race, religion, or any other number of demographics. Under certain circumstances this can leave a business in violation of equal opportunity requirements at the local, state and federal level. When companies have 15 or more employees, they fall under most federal discrimination laws enforced by the Equal Employment Opportunity Commission (“EEOC”)—for age discrimination, it is 20 or more employees. Also keep in mind that states and municipalities have thresholds that may be even lower than the federal laws. To ensure total compliance with these regulations, the EEOC offers guidelines which can be found at https://www.eeoc.gov/employers/smallbusiness/index.cfm.
- Workplace Safety
It is not just construction sites and manufacturing plants that need to worry about workplace safety. The Occupational Safety and Health Administration is responsible for overseeing the regulations in this category. They include ensuring that the workplace is free of any potential hazards, that employees use a proper dress code to ensure safety, and that proper records are kept for testing, calibration, and quality control of certain workplace aspects (i.e. safe air quality). Oftentimes, it is the failure to keep accurate and up-to-date records that causes many companies to incur fines and penalties for non-compliance.
Over the past few years, falling out of compliance with overtime regulations has become more and more rampant. The main reason for this is that overtime regulations are rapidly shifting, both federally and within each state. Companies need to be aware that overtime qualification can differ based on salary level and job duties. Additionally, whether overtime is paid based on a daily rate or weekly rate can also vary. The Department of Labor has provided more straightforward guidance on the topic which can be found at https://www.dol.gov/WHD/foremployers.htm#ca.
- Data Security
There have always been strict data laws and regulations within the financial, legal, and medical sectors. These rigorous regulations, though, have expanded to any business in any industry due to the European Union’s GDPR. It is important for businesses to note that these regulations do not solely apply to companies within the European Union, but to any business that deals with the data of individuals who are residents of or who live within the EU. If a business breaches these regulations, they can face a fine of up to 20 million Euro or 4% of their global annual revenue—whichever is greater. These regulations will be strictly enforced, as can be seen through recent data privacy allegations. Within a month of the introduction of the new regulations, WhatsApp, Instagram, Facebook, and Google have already been threatened with fines totaling to over $9 billion. Additionally, while the EU’s security measures have gotten the most media attention, businesses must remember that at least 31 states have established laws regulating how you destroy or dispose of personal information collected from individuals, and another 12 states, including California, Florida, Texas, Massachusetts and others, have implemented broader data security obligations.
- Financial Regulations
The vast majority of financial regulations fall on the financial industry. However, there are a handful of regulations that listed companies and market participants must stay compliant with as well. Market participants must publish major shareholder notifications and listed companies must publish directors’ dealings, ad hoc notifications, and regular financial reports.
- Sexual Harassment
Sexual harassment is technically covered by the Equal Employment Opportunity Commission, which was discussed above. However, due to the rise in sexual harassment allegations, it is important to highlight the issue on its own.
Sexual harassment in the workplace violates Title VII of the Civil Rights Act of 1964 and is considered a form of sex discrimination. This section of Title VII applies to any employer with at least 15 employees. It is the EEOC or the related state agency that investigates sexual harassment allegations. The investigation can result in litigation and hefty attorneys’ fees and damages.
It is a company’s responsibility to ensure that the workplace is free from sexual harassment. In order to prove that they are making an effort to maintain a safe, harassment-free work environment, it is advisable for businesses to clearly communicate that they will not tolerate any form of sexual harassment. This might include posters around the workplace, providing training on the subject (some states make sexual harassment training mandatory), or taking immediate action when complaints are filed.
- Family and Medical Leave
The Family and Medical Leave Act allows employees, as long as they meet specific criteria, to take up to 12 weeks of leave off from work for family or medical reasons. The idea behind the act is to protect employees who need to take time off for the birth of a child, their own serious health condition, or the serious health condition of a loved one.. This leave does not necessarily mean they will be paid, but rather that their job will still be there when they return.
While many companies technically comply with this regulation, there are some that do so with great reservation. Employees may be fearful that using these 12 weeks could cost them a promotion or give the company ammunition to look for reasons to fire the employee. Although an employee taking leave can create complications for an employer, this type of behavior is a direct violation of the FMLA and a business can get into significant legal trouble for it.
The number of regulations governing businesses is continually growing, especially at the state and local level. This makes it essential for leadership in the company to stay abreast of the latest regulatory changes and to have a plan in place for ensuring compliance. One way to help maintain compliance is by outsourcing some HR responsibilities to a Professional Employer Organization (“PEO”). PEOs can offer your company the information you need to attract a diverse workforce, institute workplace safety measures, process payroll in a way that complies with labor laws, train your employees on sexual harassment reporting and eradication, investigate harassment and other discrimination claims, and administer your leave programs. Instead of relying on a single, internal HR professional to both run HR daily tasks in the office and ensure the company is staying on top of evolving regulations, many of these responsibilities can be handed off to a PEO and their team of professionals who specialize in compliance.