What happens when managers discourage employees from taking legally protected leave? Microsoft found out the hard way when its workplace culture led to a staggering $14.4 million settlement over alleged parental and disability leave discrimination. California's Civil Rights Department reached this massive settlement with Microsoft, revealing how careless HR compliance mistakes in managing employee rights can turn into a threatening legacy crisis.
Human resources is no longer about an administrative department. They are now a strategic partner in ensuring the compliance and success of an organization. So, keep on scrolling to learn HR compliance, common mistakes, and ways to avoid them.
Read More: HR Compliance 101: A Guide for Small Businesses
What is HR Compliance, and What Laws Do HRs Need to Know?
HR compliance means ensuring that your company policies and actions adhere to the labor laws in your country, state, or municipality. It involves creating and maintaining a process to confirm that your organization legally operates while promoting a safe, fair, and ethical workplace for the employees.
The more geographic regions your business operates in, the more laws you must comply with. So, here are the major employment laws you should be aware of as an HR include:
Type of Law | Names of Laws |
Anti-discrimination Laws | Americans with Disabilities Act of 1990 (ADA) Title VII of the Civil Rights Act Age Discrimination in Employment Act (ADEA)
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Wage and Hour Laws | |
Workplace Safety and Health Laws | Occupational Safety and Health Administration (OSHA) standards |
Family and Medical Leave Laws | Family and Medical Leave Act (FMLA) |
Employment and Labor Relations Laws | National Labor Relations Act (NLRA) Worker Adjustment and Retraining Notification (WARN) Act Pregnant Workers Fairness Act (PWFA) Providing Urgent Maternal Protections (PUMP) for Nursing Mothers Act
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Common HR Compliance Mistakes New Managers Make
For HR compliance mistakes, companies now face fines up to $2,451 per willful violation in 2024. Maybe you are hiring talent from a different state or want to scale your organization to a new geographical area - whatever you are upto, here are some common HR compliance mistakes you need to avoid.
Failing to Document Properly
In the chaos of your day-to-day HR responsibilities, you may overlook the documentation of. Employee details, including their joining date, performance, and more. Unfortunately, this is one of the common HR compliance mistakes that can even escalate into a legal matter. Proper documentation is your primary defense in disputes.
How to Avoid:
Have a solid documentation policy
Consistently document disciplinary actions, performance reviews, complaints, and investigations.
Use clear, objective language and focus on facts
Inadequate Training to Prevent Harassment
HR professionals typically rely on the belief that employees are aware of the state laws regarding discrimination or sexual harassment, yet they fail to give proper training. Such errors will result in baised decision-making, which will unintentionally permit an environment of hostility at work.
How to Prevent:
Conduct regular harassment prevention training.
Make awareness of inclusionary biases, protected classes, and workplace situations a part of it.
Revise the training annually or whenever there are significant changes to the law.
Misclassifying Employees and Independent Contractors
Misclassifying employees as independent contractors or removing employees as non-exempt is another frequent HR error. This kind of mistake can cause violations of the Fair Labor Standards Act, which could get you in trouble with fines and serious lawsuits.
How to Avoid:
Learn the legal definitions to properly determine if the person is an employee or an independent contractor.
Periodically audit your company's employee classification.
Consult your legal counsel to ensure that your classification is justifiable.
Improper Handling of Employee Termination
Terminating an employee due to a lack of documentation or failure to follow consistent procedures could lead to wrongful termination claims. Hastily handling the terminations, especially without plausible causes, could end up in potential lawsuits.
How to Avoid:
Standardize your termination process
Add valid documentation and a fair explanation for the decision
Maintain open communications, with severance packages and outplacement services to ease the transition.
Ignoring the Leave of Absence Policies
Employee leave is difficult because you have to balance conforming to federal, state, and local leave laws with staying in production. But not granting approved leave will be non-compliant, which can negatively affect your overall HR practices.
How to Avoid:
Create a standard process for leave requests
Ensure that the employee is clear on why they are eligible for the leave policy
Keep very detailed records of each request and company response
Here's a quick checklist to remind you of how to avoid HR compliance mistakes:
Compliance Area | Required Actions |
Recruiting and Interviewing Practices | |
Onboarding Procedures and Company Policies | |
Employee Handbook | |
I-9 Forms | |
Unemployment Benefits | |
Employee Benefits and Leave | Provide adequate healthcare coverage for companies with 50 or more employees. Distribute Forms 1094-C and 1095-C by the required deadlines Comply with FMLA paid and unpaid leave requirements
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HIPAA and OSHA Regulations | |
Employee Contracts | Work with legal counsel to draft thorough employee contracts. Include work hours, PTO (Paid Time Off), location, compensation, benefits, dates, and classification.
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Why You Should Be Aware of HR Compliance Mistakes
Non-compliance with the HR laws and regulations can lead to severe consequences for your organization, such as:
Financial and Legal Issues: Breaches of labour laws can result in legal repercussions; you may end up paying fines as well as facing lawsuits.
Impact on Employee Morale: HR compliance mistakes like delays in pay rise or unfair appraisal can create trust issues in your employees. It can adversely impact their productivity and engagement.
Reputational Damage: Non-compliance will cost the reputation of your company, making it harder to recruit and retain the best talent
Read More: Elevating HR in Healthcare: Key Compliance Trends for 2025
How Can HR Teams Contribute to Compliance?
Human resource teams are the backbone of any business's compliance. They help manage various regulatory aspects, from recruiting to workplace safety. If you are a healthcare professional, you can ensure your business compliance with the following strategies:
Instill a culture of integrity by communicating core values and training employees.
Create, document, and fairly enforce company policies through consistent and transparent communication and with a current employee handbook.
Stay up to date with regulations by adjusting your existing operations and policies as required.
Provide space for employees to report their concerns on any unethical activities, like anonymous tip boxes, open-door policy, or compliance officers.
Read More: Women Breaking Barriers: How Female Leaders Are Shaping HR & Workplace Policies
How to Manage HR Compliance? Best Practices
HR compliance is a complex, where you need to stay up to date on every applicable employment and regulation to ensure your organization adheres to them. While you are planning how to keep up with the complaint, consider the following best practices:
Subscribe to Official Updates: Subscribe and receive timely news from the Department of Labour, the Equal Employment Opportunity Commission, and other government agencies to stay informed about emerging legislation.
Stay a Step Ahead: Anticipate any future changes in the employment laws by monitoring industry publications like the Society of Human Resource Management (SHRM), and more.
Consult a Legal Professional: Refer to an employment attorney on issues that might impact your organization, industry, and location of your business.
Network with HR leaders: Collaborate with the peers of your profession to discover what HR compliance tactics they are using to lead a successful organization.
Recent Workplace Discrimination Cases: Jani-King: $3.7 million settlement for misclassifying 300 workers as independent contractors Walmart - $175,000 settlement for three EEOC disability discrimination suits Workday Inc. - AI-powered hiring algorithms for discriminating against applicants
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Read More: Why is Compliance and Safety Critical in Healthcare?
Master Compliance to Protect Your Career and Company
Compliance may not be the flashiest part of the HR routine. But it's definitely one of the most important and powerful components. Handle it well, and it will give a strong foundation for your success. Handle it poorly, and it will be a threat to your business. HR compliance mistakes can lead to delayed growth plans, reputation damage, drained resources, lawsuits, and even criminal charges for your business.
Ready to build a fair, compliant, and thriving workplace? Without further ado, enroll in the online HR, ethics, and compliance courses to balance the needs of your organization, the rights of your employees, and ensure compliance!
FAQs
What HR compliance mistakes do new managers often make?
New managers often misclassify employees, forget overtime rules, mishandle leave requests, skip proper documentation, or overlook training requirements. These mistakes can lead to legal issues, fines, and loss of employee trust.
Why is proper documentation so important for compliance?
Accurate records prove you’re following the law and protect the company if disputes arise. Poor documentation can lead to audit failures, legal trouble, and costly penalties for non-compliance.
What are the risks of ignoring leave and accommodation laws?
Skipping FMLA or ADA requirements can bring lawsuits, fines, and reputational damage. Managers must understand eligibility rules and provide reasonable accommodations to support employees and stay compliant.
How can new managers avoid HR compliance mistakes?
Invest in regular compliance training, keep policies updated, document everything clearly, and seek help from HR experts. Staying informed helps prevent errors and builds a safer, more trustworthy workplace.
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