Recruiting Compliance: How to Avoid the Staffing Scaries
This article explores some of the challenges staffing professionals face when it comes to complex compliance issues and offers some simple strategies they can use to protect their firms. For specific advice, readers should consult their firm’s legal counsel.
Picture it. Friday, March 29, 2019. It’s 4:30 p.m. and you’ve just finalized your quote for a press release that’s set to go out on Monday morning announcing your staffing firm’s expansion into Los Angeles. Once the news breaks, your team will be extremely busy with customers, so you’re about to take them out for drinks to thank them for all their hard work and to celebrate this important milestone.
This announcement is a big one for your business. It comes hot on the heels of your recent expansions into New York, Atlanta, and Denver—all of which went well for your Boston-based business—and it marks the fifth office you’ve opened since you started your own firm four years ago.
To be honest, though, these last six months have been a whirlwind. Your team’s been working around the clock, and you have a nagging feeling that maybe everything’s been moving a bit too fast.
“Have we dotted all our Is, crossed all our Ts?” you briefly wonder. “We’re good,” you reassure yourself. “Everything’s fine. Once the dust settles in L.A., maybe I’ll finally take the family down to the Bahamas for a few days.”
You’re feeling a bit burned out, but business is booming. You know you have to strike while the iron’s hot and take advantage of the opportunities in these new markets while you can.
Suddenly, your assistant, Carla, bursts into your office with a certified letter and a terrified look on her face. It’s from ICE (U.S. Immigration and Customs Enforcement). You’re facing a $1.4 million fine for failing to comply with I-9 verification laws in New York, where you started doing business in late 2016.
“Whoa, whoa, whoa!” you say frantically. “Legal checked everything, and I mean everything, before we went into New York. We were all set! This fine will crush us! What the hell are we going to do?! We’ve got to hold off on the announcement on Monday. Carla, cancel drinks and get the management team into the conference room for an emergency meeting in 15 minutes.”
As Carla rushes out, you start speed-dialing your lawyer’s mobile phone, hoping there’s a way she can get your business out of this mess.
Tough situation, right?
By now, maybe you’ve figured out that the story’s fictitious. But it’s the stuff of nightmares that could very well happen to any staffing firm that’s not careful.
The threat of non-compliance in staffing can pack a brutal punch that many businesses may not be able to rebound from. And the threat’s not isolated to small businesses. Midsize and enterprise firms can feel the pain, too. From a financial hit your firm can’t afford to face to a total knockout that could completely put your firm out of business, smart staffing leaders know they need to treat the issue of compliance extremely seriously if they want to protect their businesses.
“To comply, or not to comply?” That is not the question staffing leaders must ask themselves.
Rather, the question they must ask is, “Have we properly protected our business with the right resources and processes to ensure we’re able to comply with ever-changing regulations?”
But even simply ensuring your firm is able to comply with necessary regulations can be daunting.
Keeping compliant isn’t a one-time exercise. It requires constant vigilance considering how rapidly regulations seem to change. And beyond how frequently changes occur, firms face the added complexity of having to be aware of regulations at the local municipal, state, and federal levels.
Figuring out what to specifically monitor can also be problematic. All of the following are important considerations:
- The number of breaks workers must have
- Rules about how much time a worker is legally allowed to be on some jobs
- Laws about wages and what’s considered overtime
- How taxation regulations factor in
- Rules about uniform and travel provisions
- Rules about who’s eligible for Affordable Care Act (ACA) healthcare insurance
- And so much more
There’s no shortage of compliance issues staffing firms have to properly handle and they often require skills beyond what most firm owners and recruiters possess.
Say your firm places 100 temporary hourly warehouse workers on assignment to help a client meet their additional staffing needs during the peak holiday season. Depending on where the need is most acute each day, your client has them working between three of their different warehouse facilities within a 50-mile radius which spans three states (Massachusetts, Rhode Island, and Connecticut). They usually clock-in on different time clocks—each one older than the other. And they work without a set hourly schedule so they’re often working day, night, and overnight shifts—some of which may require different pay rates in different states. Their daily work schedule is also variable, and sometimes they work on Sundays when time-and-a-half wage laws come into effect in states like Massachusetts. What’s more, you and your client have to ensure you’re handling issues with timekeeping and attendance properly, and without the right technology, that’s where human error often comes into play.
It’s easy to see how staying on top of complex rules can easily become an unruly task for busy staffing professionals.
The Sunday Scaries are real in the staffing industry—and they don’t just happen on Sundays.
Have you heard of the Sunday Scaries? Basically, they’re what’s known as the anxiety that sets in on Sunday nights after the weekend winds down and it’s time to get back into a normal routine for the week—work, school, etc.
Compliance issues can be a major part of what keeps staffing leaders up at night—on Sundays, Mondays, Tuesdays… you get the idea. Sunday Scaries can turn into Staffing Scaries pretty quickly and appear beyond Sunday nights.
According to Staffing Industry Analysts’ Global Staffing Company Survey 2018, staffing leaders are worried about many current and forthcoming legislation changes. Issues like the ACA, immigration issues (H1-B visas), mandatory paid sick leave/PTO/family paid leave, local regulations, tax issues, independent contractor classification/1099 issues, changes in overtime rules, and more are all top of mind.
Staffing leaders are justifiably right to be worried about what might happen if their firm can’t comply as it should. The costs can be astronomical and catastrophic.
Remember the $1.4 million penalty in the story at the beginning of this article? The business owner had failed to comply with I-9 verification laws and ICE was cracking down on his business. While that particular story was fictitious, it was inspired by a firm that actually faced a similar penalty for the same reason, according to LawLogix by Highland.
Imagine building your staffing business, growing it, and expanding into multiple states. If you’ve failed to comply with even one regulation, the penalties can rack up over the years and you could face even more major penalties once the issue becomes more visible and audits ensue.
What’s even more challenging is that it’s nearly impossible to estimate the potential penalties your firm may face in any given instance because of the complexity of the rules and how frequently they change. All you can be certain of is the fact that the financial and legal risks can be immense.
Beyond the financial and legal risks, though, failing to comply with regulations can also put your business’ reputation at risk.
Employers won’t want to do business with a firm that’s known for not having a handle on complex employment regulations, and candidates won’t want to work with a firm if they’re known for having a history of skirting the rules around wages, breaks, and other things that matter most to them.
How can staffing leaders stay compliant and protect their firms for the future?
Many firms have found they need to add additional overhead to handle compliance issues.
Small, fledgling firms often choose to outsource their compliance work to outside legal counsel or subscribe to employment and legal monitoring services like Thomson Reuters, XpertHR, and Lexology, which can provide updates on what to be aware of before regulations change.
Other firms have found that issues having to do with compliance are something they want an in-house specialist to handle, so they hire them and often equip them with similar monitoring services, as well.
Beyond such services, there are many resources that will help your firm stay on top of compliance-related matters.
Industry organizations like the American Staffing Association, which has dedicated resources for industry-related law and advocacy, and Staffing Industry Analysts, which serves as a global advisor to the staffing industry, have newsletters and often host webinars or live events on specific legal topics that may be relevant to your business (one to note: ASA’s Staffing Law Conference will be held in Washington, DC on April 4-5, 2019).
Government organizations like the U.S. Equal Opportunity and Employment Commission (EEOC), which advises on unlawful workplace discrimination, and the U.S. Department of Labor (DOL), which advises on wages, workers compensation, occupational safety and health, and much more, are also useful sources of information.
While costs to keep your business compliant can add up and may even seem to be too much of an expenditure if your firm’s just starting out, consider the alternative. Hefty fines and the threat of going out of business.
It’s easy to see why making sure your firm can comply with all relevant local municipal, state, and federal regulations is a business imperative. Protecting your business this way can help you to mitigate unforeseen risks, keep your firm in business, and enable you to grow it according to your vision. Beyond in-house compliance specialists, outsourced counsel, and employment and legal monitoring services, here are some additional ways to help protect your firm from the unknown.
1) Make sure you and your clients have the right technology in place.
Take the warehouse workers example from earlier. Having workers clock-in on outdated technology is a surefire way to encounter unnecessary errors. Don’t simply check the box when it comes to time cards and leave it to your auditors to catch mistakes. This is a risky bet, especially for firms that don’t have the services of an auditor. Technology helps to protect against human error, so tools like web-based time clocks and software that enables employees to easily enter their time and expenses, wherever they may be, can integrate with other technology like your applicant tracking system (ATS) and help you to ensure you’ve put guardrails in place against non-compliant activities.
2) Instill a mindset of compliance into your company’s culture and develop your business processes to support it.
Explain to your staff why compliance issues matter so much, why it’s imperative they follow the processes you establish and the guidance your compliance experts set forth, and how doing so can help to protect themselves and your business. By making compliance a component of your culture, you create accountability across your business and ensure such issues don’t become something that just sits on one person’s plate—your compliance specialist.
3) Counsel your clients on compliance issues.
Because you understand the value of investing in this type of expertise for your own business, maximize that investment by building compliance conversations into your client relationship management process. By discussing relevant regulation changes as they occur with your clients, you can position your firm as a true partner and work together to create preventative plans that will protect both of your businesses. For example, perhaps you can help keep your clients on track with a list of technology to implement (like web-based time clocks) or provide them with a simple checklist of activities to perform on a regular basis (i.e., make employee handbook updates, ensure you have the latest legal notices posted in your breakrooms, monitor these resources for updates, etc.).
By taking action and putting preventative measures in place, you can demonstrate you were acting in good faith should a compliance issue arise. It may or may not help you handle such an issue, but it’s better to protect your business as best you can rather than leave it open to risk.
Staying Compliant in 2019: 5 Regulations and Resources You Need to Know About
1) Changes to the ACA individual mandate have taken effect.
In case you missed it, the ACA’s individual mandate was repealed as part of the 2017 tax reconciliation act and the change has gone into effect as of January 1, 2019. “As has been widely reported, both houses of Congress have now voted to repeal the Affordable Care Act’s (ACA) individual shared responsibility penalty, effective for 2019, as part of the 2017 tax reconciliation act,” according to Health Affairs.
2) The DOL released a new compliance-related resource.
Early in February 2019, the U.S. Department of Labor (DOL) released a new resource to assist with compliance. “This new online version of one of the Wage and Hour Division’s (WHD) most popular publications will assist American employers and workers with a simple, easy-to-follow resource that provides basic WHD information, as well as links to other resources,” according to the DOL.
3) EEO-1 reports are due on May 31, 2019.
While historically due in September, the due date for EEO-1 reports has changed to March 31, 2019. Yet due to the recent government shutdown, this deadline has been extended. “On Feb. 1, 2019, the U.S. Equal Employment Opportunity Commission (EEOC) announced an extension of the filing deadline for the 2018 EEO-1 Report from March 31, 2019 to May 31, 2019. The extension is the result of the partial federal government shutdown, which delayed mailing of login information for the EEO-1 web portal. The EEOC indicated that the filing portal will now be open in early March. In addition, the EEOC will soon release more information about EEO-1 filing and suggests employers monitor the EEO-1 website.” For more information, visit the EEOC website.
4) The DOL proposed a new rule that would enable millions of workers to earn overtime pay.
On March 7, 2019, the Department of Labor (DOL) proposed a new rule that would allow more than a million workers to qualify for overtime. According to the DOL, “under currently enforced law, employees with a salary below $455 per week ($23,660 annually) must be paid overtime if they work more than 40 hours per week. Workers making at least this salary level may be eligible for overtime based on their job duties. This salary level was set in 2004. This new proposal would update the salary threshold using current wage data, projected to January 1, 2020. The result would boost the standard salary level from $455 to $679 per week (equivalent to $35,308 per year).” For more information on the proposed rule, visit the DOL website.
5) The Consumer Financial Protection Bureau issued new rules on prepaid accounts.
As of April 1, 2019, new rules for prepaid accounts will be in effect based on changes from the Consumer Financial Protection Bureau (CFPB), which are important to note if you use a paycard system to pay workers. “The CFPB’s new rule on prepaid accounts creates comprehensive consumer protections for prepaid accounts. With our new rule you will get clear, upfront information about prepaid account fees so you can know before you owe and shop for the best deal. The rule also creates a number of new legal rights for prepaid account users, including protections in case of errors, loss, or theft. The new consumer protections and disclosures described in the above video will take effect on April 1, 2019,” according to the CFPB.
For specific information on which local, state, and federal regulations your firm needs to be aware of, comply with, and how to do so, consult your firm’s legal counsel.
Compliance issues in the staffing industry are complex, ever-changing, and complicated for even the savviest of firms. They’re the stuff of nightmares and smart staffing leaders know they can’t afford to put their business at risk by ignoring them. Leaders know they must actively take steps to protect their firm, whether they’re just starting out or they’re an established global enterprise. Human error can play a major part in a firm’s failure to comply with regulations, so staffing leaders must work to safeguard their own firms by implementing the right technology, developing the right processes, building the right culture, and having the right conversations with clients that will help to prevent compliance issues from occurring now and in the future.
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