If you ever watch NBC’s The Office, you can’t help but laugh at the managerial missteps of Dunder-Mifflin’s top branch manager, Michael Scott, played by Steve Carell. And even the most dedicated human resource professionals have to giggle at Toby, the downtrodden HR guy, who tries valiantly, but entirely ineffectively, to counsel Michael. On television, HR mishaps and insensitive gaffes make for great comedy, but in reality, a boss’ disregard for employees and their rights can be tragic when you consider the potential consequences.
There are dozens of state and federal regulations that dictate how companies – large, small, and all sizes in between – treat their employees and even potential employees. A systemic disregard for these regulations, or “noncompliance” in HR-speak, can ultimately result in governmental reviews, costly claims, and even lawsuits. Employment law, however, can be complicated and arcane, so non-compliance is not always about a business owner being neglectful or dim-witted. (In other words, Michael Scott is not the only boss breaking the rules.) In fact, more often noncompliance is a factor of a business owner not understanding or being aware of a particular regulation or the consequences that could result. Below is a sampling of some common violations along with their potential consequences.
Wage Payment – A small business owner works her hourly, non-exempt employees nearly 50 hours each week, but only pays them for 40 hours. A competing business owner also works his employees 50 hours each week, and although he pays them for 50 hours, he only pays the regular straight time rate rather than incorporating any overtime pay.
Consequences: Several employees file “Wage & Hour” charges, which in turn lead to audits of ALL payroll records. Both employers are found to be non-compliant, one is required to repay two years of back pay, while the other is required to repay three years of back pay because it was determined that the violations were knowingly and willfully committed. (FLSA violation)
Unemployment Compensation – A small company terminates an employee for work-related misconduct. However, the company never provided the employee with an employee handbook, so he never signed a policy and procedure acknowledgment. In addition, the company neglected to maintain a written file of the employee’s misconduct.
Consequence: Because the company cannot present documented evidence of the employee’s misconduct nor can it demonstrate that the employee should have known of the company policy, the company is charged with a costly unemployment claim that it cannot dispute.
Hiring – During a job interview, an owner of a small business casually asks the applicant if he has children. The applicant is not hired, and he assumes it is because he responded that he has three small children.
Consequence: The applicant files an EEO charge and ultimately a suit against the business. The business owner is forced to pay extensive legal fees to defend against the suit.
Harassment – A supervisor at a mid-sized manufacturing company continually makes sexist comments and tells his subordinates off-color jokes that offend a number of employees. One employee complains, but the company does nothing about it and the negative behavior continues.
Consequence: The employee files an EEO charge, and later, a harassment suit. After incurring sizable legal fees, the company ultimately agrees to a significant settlement.
Retirement & Pensions – A small business owner prohibits a group of non-exempt employees from participating in the company’s pension plan.
Consequences – If an employer maintains a pension plan, employees must be allowed to participate. In this case, the owner’s failure to comply results in a governmental review and a subsequent lawsuit.
Safety – A plant manager’s flippant attitude toward safety encourages roughhousing in the shop and much-needed repairs are neglected. As a result, workers are exposed to unsafe working conditions.
Consequence: During an OSHA inspection, the plant is cited for violating safety codes and given three months to correct the condition, but after three months, the plant manager still has not “gotten around” to correcting the problems, so OSHA fines the company $10,000.
Even the most astute, well-informed business owners have difficulty keeping up with, and thus adhering to, the vast number of ever-changing regulations. Add to that the difficulty of monitoring the practices of top level managers and supervisors, and it is easy to see how business owners can find themselves in hot water.
The most effective way to ensure your business is complying with today’s complex employment laws is to retain knowledgeable human resource professionals. Whether you hire in-house or outsource human resources, having access to experts whose job it is to stay current on HR issues and help train and monitor your managers can help you steer clear of costly pitfalls and prevent poor practices that could damage your company’s reputation. And if you think you can’t afford a professional HR advisor, ask yourself whether you can afford not to have one, because the cost of noncompliance is no laughing matter.