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5 labor law compliance challenges in changing times


Labor law compliance is a big deal for businesses of all sizes.

When it comes to labor and employment laws, change is the only constant business leaders can expect. These ever-changing laws and regulations have always represented a potential quagmire for companies, and now is no different.

From paid family leave and hiring to safety and sick leave – and all the many points in between – federal, state and local governments are forever changing what constitutes a company’s responsibility to its workers.

Furthermore, failure to keep up with these evolving rules can carry significant penalties and negative publicity, especially if an employee files a complaint claiming his or her rights have been violated.

That’s why it’s in your company’s best interest to stay up to date and respond as quickly as possible when labor laws change. Here are some current trends in employment law you should know about.

1. Job application no-nos

California was the first state to protect those previously convicted or arrested for a crime by limiting companies’ ability to ask about prior convictions and arrests on employment applications. The goal is to make it easier for this category of workers to find employment, which may help reduce the rate of recidivism.

Now, other states are following California’s lead, with Connecticut, Hawaii, Illinois, Maryland and Minnesota adding such laws to their books. The District of Columbia, as well as many cities and counties, have also joined this trend.

Known as “ban the box” laws, these laws generally forbid private companies from asking about an applicant’s criminal history in the hiring process.

This usually means that your employment application cannot include a checkbox that asks about criminal convictions or arrests, and you’re not allowed to inquire about criminal history until after you’ve decided an applicant is qualified for the job.

In some states, this applies to companies with three or more employees; in other states, it’s 10 or more workers. Some ban-the-box laws and regulations also limit how and when companies can conduct background checks and limit the use of information found during these checks.

Many states are also applying similar logic to questions about a candidate’s previous compensation, instituting a salary history ban on job applications.

So, if your business doesn’t operate in any of the current ban-the-box or salary-history-ban states, should you even be concerned with this legislation? Definitely – because, chances are, more states will follow this trend over time.

2. Mental health and medical claims

Most business owners are familiar with the Americans with Disabilities Act (ADA) and its requirement that workers who are differently abled be offered reasonable accommodations.

What’s new is a growing trend for cases where an employee claims an emotional or mental health issue for which their employer failed to offer a reasonable accommodation. As more and more health care professionals advocate to reduce the stigma often associated with mental illness, this trend will likely grow.

Medical marijuana is another employer quagmire that may touch on ADA regulations, as well as safety regulations. Most businesses still have employee handbooks that prohibit drug use.

But it’s not always so black and white.

For example, what about an employee who fails a drug test but also holds a valid prescription to use medical marijuana?

The current patchwork of states across the country with legalized marijuana (medical and recreational) is sure to cause headaches for employers. Many states already lay out these obligations.

3. Employment at will

The most common misconception among small business owners relates to “employment at will” regulations. Many company leaders assume such laws mean they can fire anyone at any time with no reason given.

However, in reality, any business can be sued for wrongful termination if the employee claims they are part of a protected class, such as national origin, gender or religion. In addition, more states and municipalities are adding LGBTQ persons to the list of protected classes of employees.

As a result, even the smallest business should protect the company by keeping proper records about performance issues and documenting progressive training and counseling.

4. Employee classification

Wage and hour regulations are another area of frequent confusion among small business owners. Many small companies run afoul of the law when it comes to paying overtime properly and classifying employees as exempt or non-exempt.

That’s why it’s vital to keep time and attendance records accurate and current, per Fair Labor Standards Act (FLSA) rules and any similar state law, and properly document safety trainings and compliance per applicable federal and state Occupational Safety and Health Administration (OSHA) regulations.

5. Lawsuits for labor code violations

For California business owners in particular, the Private Attorneys General Act (PAGA) further complicated their navigation of complex employer legislation when it passed a few years ago. And recent legislation has further expanded its potential scope and impact.

PAGA essentially allows aggrieved employees to file lawsuits to recover civil penalties on behalf of themselves, other employees, and the State of California, for labor code violations.

For a nominal filing fee, PAGA lets employees act as “private attorneys general.” They’re empowered to file claims against their employer not just on their own behalf, but also on behalf of other employees who have violations made against them, even if it’s a completely unrelated type of violation.

This legislation means that California business owners especially need to stay current and on the up-and-up when it comes to properly documenting their company’s adherence to local, state and federal labor and employment laws.

PAGA is just one example of how evolving employment laws can make compliance a challenge for business leaders in any state.

Failure to comply can be costly

Many small business owners don’t know they’re making compliance mistakes because they assume labor and employment laws apply only to larger organizations. In some cases, such as paid family leave, that assumption may be correct, depending on the state or states in which you operate.

However, small businesses are usually not exempt from regulations related to time and attendance, safety or discrimination.

In addition to the prospect of significant fines and legal fees, failure to comply with employer liability laws can cost your business significant time and headspace to fight a case.

Even more problematic long-term, wronged employees tend to spread the word among their community both offline and online through sites such as Glassdoor and Facebook. A reputation as a careless or uncaring employer, whether deserved or not, can make it harder for your company to recruit top talent.

Employment laws are always changing and will continue to evolve. When the playing field is constantly moving and changing, you have to stay agile and adapt – or risk compliance issues.

Your best defense is to be prepared and address any issues proactively to prevent potentially devastating consequences. A reputable professional employer organization (PEO) can provide you with the guidance and insight to help your business overcome even the most challenging obstacles.

Learn more about protecting your business from HR-related compliance issues when you download our free e-book: Employment law: Are you putting your business at risk?