Author: Kara Hertzog is President of Innovative Employee Solutions
Key Takeaways
- Workforce compliance is increasingly complex due to frequent changes in federal employment laws driven by different presidential administrations, such as the Biden administration’s reintroduction of a six-factor test for determining worker classification.
- Employers must regularly update policies, foster a culture of compliance, leverage technology, conduct audits, and engage legal experts to navigate compliance challenges effectively.
- Several HR compliance trends, such as remote work, data privacy regulations, diversity, equity, inclusion initiatives, and continuous learning, are shaping future workforce management and compliance strategies.
- The use of automation, data analytics, cloud-based solutions, blockchain technology, and AI is transforming compliance in business, making processes more efficient and reliable.
The Shifting Legal Landscape in Employment
Navigating workforce compliance is more complex than ever due to frequent changes in the legal and regulatory framework. Over the past few years, we’ve seen significant shifts in federal employment law, driven largely by changing presidential administrations. Each new administration brings its own policies, often reversing the decisions of its predecessors, which creates a challenging environment for employers trying to stay compliant.
One of the most notable changes this year is the Biden administration’s revised guidelines for worker classification. Determining whether a worker is an independent contractor or an employee has been a point of contention. The federal rule has shifted from the five-factor test introduced by the Trump administration back to a six-factor test that examines the totality of the circumstances rather than focusing on only a few factors. This test includes considerations such as the opportunity for profit or loss, the worker’s investment in equipment or materials, the permanence of the relationship, the employer’s control over the worker, the worker’s skill and initiative, and the degree to which the work is integral to the employer’s business.
In addition to worker classification, employers must be aware of pending changes in co-employment definitions and the use of noncompete agreements. California has led the way by further restricting noncompete clauses, and federal regulations are pending. The Federal Trade Commission’s Final Rule on noncompete clauses, set to take effect on September 4, 2024, broadly prohibits employers from entering into, attempting to enforce, or representing that workers are subject to noncompete clauses. The rule applies to a wide range of workers, including employees, independent contractors, interns, and volunteers.
Of course, the upcoming 2024 presidential election could shift the focus of federal regulations once again. This constant fluctuation underscores the importance of staying informed about legislative changes. Employers must adapt quickly to remain compliant. By keeping abreast of these changes, companies can avoid costly penalties, ensure smooth operations, and foster a compliant, well-informed workforce.
5 Ways to Ensure Compliance in the Workplace
Staying compliant amid these changes in the legal and regulatory framework requires a proactive and strategic approach. Here are some key strategies for ensuring compliance in business as it relates to employment laws:
1. Make regular updates to policies and training.
Keeping policies and procedures current is essential. Frequent training sessions for employees at all levels can help ensure that everyone understands and adheres to the latest compliance requirements, leading to better decision-making. For example, you could schedule quarterly training sessions and provide updates through company-wide emails or an internal newsletter. E-learning platforms can also offer interactive compliance courses that employees complete at their own pace. Subscribing to legal updates and participating in industry forums can provide valuable insights into emerging compliance trends.
2. Foster a culture of compliance.
Leadership plays a crucial role in creating a culture that prioritizes compliance. Start by modeling compliant behavior and encouraging open communication about compliance concerns without fear of retaliation. Recognize and reward employees who demonstrate a commitment to compliance, such as through a “Compliance Champion” program. You could also integrate compliance goals into performance reviews.
3. Leverage the right technology.
Invest in compliance management software that offers real-time updates on regulatory changes and provides automated reminders for important compliance deadlines. Use document management systems to centralize compliance documentation, making it easier to track, update, and audit. Consider platforms that offer analytics and reporting features to identify potential compliance gaps.
4. Conduct regular audits.
Schedule biannual internal audits to review compliance with key regulations, which can help identify and address potential issues before they escalate. Use checklists tailored to specific regulatory requirements and document findings in a report. You could even engage third-party experts for annual audits to gain a more objective assessment of your compliance status. This proactive approach helps mitigate fines and penalties from government agencies.
5. Engage legal experts.
Having access to legal expertise is invaluable for navigating workforce compliance issues. Establish a relationship with a legal firm specializing in employment law and arrange for regular consultations to review changes in regulations and their impact on your business. Legal experts can also provide training sessions for HR and management teams on emerging compliance issues. This drives risk mitigation, as noncompliance can cost businesses hard-earned revenue via fees, fines, lost business, etc.
HR Compliance Trends to Watch
Today, several HR compliance trends are shaping workforce management — and will continue to do so into the future. Here are some insights and predictions to keep in mind as you create your workforce and compliance strategies:
Remote Work and Global Compliance
The rise of remote work has introduced new compliance challenges. Employers must navigate different rules and regulations for employees in various jurisdictions. This trend is likely to continue long into the future, making it crucial for companies to stay updated on international labor standards.
Data Privacy Regulations
With varying data privacy laws like GDPR in the EU and CCPA in California, companies must adopt stringent data protection measures if they’re operating in multiple locations. Ensuring compliance with these regulations is critical for avoiding hefty fines and maintaining trust with clients and employees.
Diversity, Equity, and Inclusion (DEI)
Despite legal challenges, DEI remains a priority for both employers and employees. Crafting effective DEI strategies can be difficult, especially with potential political changes on the horizon. Employers must balance compliance with affirmative action plans and other DEI requirements while fostering an inclusive workplace.
Continuous Learning and Skill Development
As the pace of technological change accelerates, continuous learning and skill development are becoming critical. Employers must ensure their workforce remains competitive by investing in training and development programs. Compliance with evolving educational and professional standards is essential. Initiatives like the EU’s Skills Agendaemphasize lifelong learning and skills development, setting a precedent for global trends.
How Technology Shapes the Future of Workforce Compliance
Technology plays a pivotal role in modernizing compliance processes and making them more efficient. Here’s how:
- Automation: Automation tools can streamline repetitive compliance tasks, such as monitoring regulatory updates, filing reports, and tracking employee certifications. This limits the risk of human error and ensures timely compliance.
- Data Analytics: Advanced analytics can identify compliance trends and potential risks by analyzing large datasets. Predictive analytics can forecast future compliance challenges, allowing companies to proactively address them.
- Cloud-Based Solutions: Cloud-based HR management systems provide real-time access to compliance data from anywhere, making it easier for companies to manage a distributed workforce. These systems can automatically update with the latest legal requirements, ensuring continuous compliance.
- Blockchain Technology: Blockchain enhances transparency and security in compliance processes. It can be used to create fixed records of compliance activities, making audits more straightforward and reliable.
- Artificial Intelligence: AI can assist in compliance by analyzing complex regulations and providing actionable insights. AI-driven chatbots can offer instant compliance guidance to employees, helping them make informed decisions in real time.
The Path Forward: Proactive Strategies for Compliance Success
In today’s dynamic environment, adopting proactive compliance strategies is not just important — it’s essential. As we move into the latter half of 2024 and beyond, the landscape of workforce compliance will continue to evolve. Businesses must remain attuned to regulatory changes both domestically and globally. Staying informed, proactive, and engaged with legal experts will be key to navigating these changes successfully.
By partnering with a workforce management expert like IES, companies can ensure their workforce, including independent contractors, remains compliant and audit-ready across the globe.
Engage workers compliantly, every time. Let IES handle the legal requirements for hiring employees so that you don’t have to worry about the damaging consequences of noncompliance. Learn more about staying compliant.
Kara Hertzog is president of Innovative Employee Solutions (IES), a leading provider of remote and contingent workforce solutions, specializing in Global Employer of Record, Agent of Record, and Independent Contractor compliance services in the U.S. and 150+ countries. Founded in 1974, IES is a woman-owned business, certified by the WBENC and partners with companies to provide compliant employment solutions that empowers peoples’ lives.
