Quick look: If it feels like HR laws and regulations are constantly changing, it’s because they are. Here, we dive into the top 10 HR compliance issues facing today’s SMB employers, from recent pay transparency legislation to the rules limiting non-compete agreements and how a PEO can help business leaders navigate it all.
Employers consistently face challenges that can have significant impacts on their organizations. Often, human resources (HR) compliance issues can cause the most stress and demand the most resources, especially for small- and medium-sized businesses (SMBs).
In today’s ever-changing landscape of employment laws and regulations, a critical area of HR that employers of all sizes must prepare for is compliance. This must be executed with little room for error to avoid potential fines and penalties. Here, explore some top HR compliance issues facing employers today and how a professional employer organization (PEO) can help SMBs proactively remain compliant.
1. Pay transparency
Pay transparency is making headlines as more states and cities enact laws requiring employers to proactively share their positions’ salary ranges.
New York City was one of the first to mandate employers to publish salary ranges for internal and external job advertisements. Similar legislation is taking flight in California, Washington, and Rhode Island.
As businesses navigate these rules, they must pay attention to if the laws also apply to their remote staff. For instance, New York City’s laws apply not only to employers based there but any position in which a city resident can be hired. And other states, including California and Washington, have similar guidelines.
2. Pay equity
The Act “requires that men and women in the same workplace be given equal pay for equal work. The jobs need not be identical, but they must be substantially equal. Job content (not job titles) determines whether jobs are substantially equal.”
The law specifies that all types of pay are covered, including salary, overtime pay, bonuses, stock options, profit sharing and bonuses, life insurance, vacation and holiday pay, cleaning or gasoline allowances, hotel accommodations, travel reimbursement, and benefits. Further, if unequal pay is discovered, organizations may not equalize it by reducing either sex’s wages.
Business leaders should confirm they have pay equity across all positions and for various demographics. A tool like ExtensisHR’s DEI Dashboard can help them conduct internal pay audits against race and gender demographics. It should be noted that if a need arises for pay corrections, organizations should partner with legal counsel to rectify the inconsistencies.
3. Minimum wage changes
State minimum wage laws change frequently, but often the focus is on hourly pay legislation, and businesses should review current regulations for exempt, salaried employees.
The federal Fair Labor Standards Act (FLSA) wage for exempt workers is $684 per week. However, some states have a higher minimum threshold, including Alaska, Arkansas, California, Colorado, Maine, New York, and Washington. Employers should note that the national threshold is expected to rise to $900-$1,000 per week (or between $46,800 to $52,000 per year).
Business leaders should also ensure their employees are correctly classified and meet all hourly or salary minimum wage requirements. And companies in states like New York should be aware of their state’s tiered salary thresholds. For example, employers in Upstate New York (outside of New York City and Nassau, Suffolk, and Westchester counties) have a minimum of $1,064.35 per week ($55,341 annually), and the rest of the state has a minimum of $1,125 per week ($58,500 annually).
4. State and local laws
In addition to federal law changes, employers must stay compliant with all state and local updates that occur. Some new or updated laws and regulations that employers must follow include:
- Salary history bans
- Equal Employment Opportunity (EEO) laws
- Paid sick leave and paid parental/family leave
- Reasonable accommodation laws
Like federal law, employers should follow the latest news and updates surrounding their state and local laws. Alternatively, they may partner with a PEO’s HR compliance experts to set themselves up for ongoing compliance.
5. Recruiting technology legislation
Recruiting technology applications, like applicant tracking systems, have risen in popularity—but they’ve also sparked some HR compliance issues.
Many businesses use decision-making technologies to determine whether a job candidate is qualified or if a current worker is eligible for promotion. However, some of these systems use artificial intelligence (AI) that may inadvertently hold bias toward or against certain groups.
To address this, some states and cities are introducing laws. For example, in April 2023, New York City began to require a bias audit of these tools to be conducted before their use. Additionally, candidates and employees residing in the city must be made aware of the use of these technologies and the qualifications and characteristics they will use. And on a federal level, the U.S. Equal Employment Opportunity Commission (EEOC) recently launched an initiative to ensure that these tools adhere to federal civil rights laws.
6. Remote workforce considerations
The first is taxes, which vary depending on three main factors: employee status, where the employee is working, and the length of time they are working there. Suppose some staff works in a different state than where the company is located. In that case, employers may be responsible for paying additional taxes, including but not limited to state unemployment tax, city taxes, school district taxes, and workers’ compensation taxes.
Other state-specific requirements business leaders should keep in mind are:
- Family and Medical Leave Act (FMLA)
- Anti-discrimination laws
- Daily overtime limitations
- Non-compete agreement enforceability
- Paid time off (PTO) requirements
- Sick pay
- Post-separation payments
- 1099 misclassification
- Unemployment compensation
- Workers’ compensation
- Fair Labor Standards Act (FLSA)
7. Cybersecurity concerns
Almost half of American adults have had their personal information exposed by cyber criminals, and Gartner predicts that by 2025, 45% of global organizations will be impacted to some degree by a supply chain attack.
HR leaders can contribute to the company’s cybersecurity by training employees on phishing, safeguarding corporate and personal data, and more. They can also consider offering a voluntary identity protection benefit that enables workers to monitor their credit cards, bank accounts, loans, public records, and more for potential fraud. These tools can even track social media for any potentially reputation-damaging information that may be posted.
8. Employee leave policies
Leave policies continue to be established or expanded across the country.
For instance, in 2023, Oregon’s new Paid Family and Medical Leave Insurance (PFMLI) program will apply to any employer with one or more employees (however, only employers with 15 or more employees will be required to pay into the program). PFMLI will allow workers 12 weeks of paid family, medical, or safe leave (which may be needed because of domestic violence, stalking, or sexual harassment). Staff with limitations regarding pregnancy, childbirth, or lactation are eligible for an additional two weeks of leave.
Similarly, Colorado’s new Family and Medical Leave Insurance (FAMLI) program provides entitled workers with up to 12 weeks of paid leave for qualifying reasons and an additional four weeks for pregnancy or childbirth-related reasons during a 12-month period rolling backward and beginning on the first day the employee starts taking the benefits.
Many states with existing family leave laws are increasing time and/or compensation allowances and the definition of a qualified family member. Consider California, which now defines a “designated person” as “any individual related by blood or whose association with the employee is the equivalent of a family relationship.”
To avoid noncompliance, business leaders must remember to update leave policies in their employee handbooks and train staff on how to handle leave requests.
9. Non-compete agreements
Non-compete agreements used to be the norm, but now the tables are turning. Numerous states now block or limit these agreements, including California, Colorado, Illinois, Maine, Maryland, New Hampshire, North Dakota, Oklahoma, Oregon, Rhode Island, Virginia, Washington, and Washington, D.C.
Non-compete agreements are also gaining federal interest. In January 2023, the Federal Trade Commission (FTC) proposed a new rule to ban employers from issuing agreements to their staff, stating that they can suppress wages, deter innovation, and prevent the creation of new businesses.
10. Marijuana legislation
Another HR compliance issue that’s constantly changing is the laws surrounding marijuana usage.
While still illegal on a federal basis, as of February 2023, medical use was legal in 37 states, and recreational use was legal in 21.
Employers must pay attention and stay on the pulse of their states’ policies. For instance, New Jersey’s recent Cannabis Regulatory, Enforcement Assistance, and Marketplace Modernization Act (CREAMMA) provides protections for recreational and medical use. It states that organizations are prohibited from refusing to hire or taking adverse action against an individual solely because they engage in the recreational use of marijuana. The Act goes on to state that before conducting a marijuana drug test, employers must complete a physical evaluation of the employee in question and to use a Workplace Impairment Recognition Expert (WIRE) to “detect and identify an employee’s usage of, or impairment from, a cannabis item or other intoxicating substance.”
How a PEO can help SMBs navigate HR compliance issues
Keeping up to date on HR laws is a full-time job and often requires time that SMB leaders simply don’t have. That’s where a PEO can make a big difference.
PEOs, like ExtensisHR, offer a variety of services designed to keep growing businesses compliant and successful:
- Payroll management and tax administration
- Risk and compliance expertise
- An easy-to-use DEI Dashboard
- A variety of modern, personalized benefits plans, including voluntary identity protection coverage
- Access to a learning and development portal featuring training on cybersecurity, a range of HR laws and regulations, and more
Staying compliant doesn’t have to be cumbersome. Contact the professionals at ExtensisHR today to discover how we can help.