December is the month for predictions. We like to spend time focused on the trends that emerged and what might possibly take off in the New Year. So it wasn’t really a surprise when I received a very straight-forward question about compliance trends:
What are the most common ways small businesses are out of compliance?
To offer some insight, I reached out to my labor law friends. Also, I didn’t restrict it to only small business – I wanted to find out the compliance issues that challenge any organization. So I asked for the compliance trends that HR and business need to focus on for 2014. And here’s what they told me.
“The top compliance issue for HR professionals heading into 2014 is the Affordable Care Act (ACA). Put 100 employment lawyers and HR professionals in a room and quiz them about compliance with ACA, and I bet you’ll find that fewer than 10% — if that – would pass. To the extent that folks have been putting this on the backburner, it’s time to get proactive and become educated. Because ACA impacts business, large and small, throughout the United States.”
Heather Bussing, an employment attorney specializing in training and preventative advice for businesses and contributor to HR Examiner, also mentioned the Affordable Care Act. But she added another topic to the trends list:
“The biggest issue lately has been Obamacare (aka the Affordable Care Act or ACA), which has triggered looking at benefits in general, especially regarding same-sex couples. But the first of the year always brings new wage/hour and hiring laws, so know what changes are going into effect in your state on January 1.”
“This depends somewhat on the region of the country but generally, and especially in Florida and in California (because of their state law), hands down THE number one compliance issue is FLSA. The federal courts in the certain areas of Florida rank number one and two respectively in the most FLSA lawsuits filed in the entire country. Why is this? Because employers just can’t seem to get it right and plaintiffs’ lawyers know that by law, if they find even one hour of pay owed, they are entitled to recover their attorney’s fees in addition to the money owed to the Plaintiff.
The FLSA is complex, arcane, terribly out of date and counter-intuitive, but it is the law. Every day I see employers getting it wrong; not tracking hours worked, making employees work off the clock, thinking that just by paying someone on a salaried rather than hourly basis the employee is exempt from overtime; and the granddaddy of them all…we’ll just make them independent contractors so we can avoid paying for benefits, overtime and withholding taxes. It’s frustrating to me as a lawyer that more businesses don’t invest a little time and effort to learning the nuisances of the law and developing a compliance plan. This is one area of the law where preventive medicine actually works.”
“Wage and hour remains the top compliance issue. The litigation predation continues and shows no sign of abating. What makes the FLSA so problematic is that it is not only highly technical but also largely outdated. There are fewer FLSA claims than EEO claims but when an employer gets hit with a wage and hour claim, it is often a collective (federal) or class (state) action. The cost of defense can be very high, let alone the potential liability. That’s the bad news. The good news is that, with thoughtful planning, the risks can be substantially mitigated.”
I’m sure no one is surprised by the ACA being on the list. But I must admit, I’m a bit surprised that wage and hour was mentioned this much. Nothing angers employees more than not getting paid correctly.
A big thanks to Jonathan, Mark, Heather, and Eric for sharing their expertise. We often spend so much time talking HR strategy that we can forget there are incredibly complex labor laws that need attention. Not handling them appropriately can cost our organizations both time and money.
Image courtesy of HR Bartender