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Compliance with both federal and state labor law and local and state labor regulations is necessary for a business to be viable in the long term. Business owners or employers who don’t comply with labor laws risk financial consequences that could damage their bottom line net income.
Federal labor laws apply to all US states, and most of the regulations are included in the Fair Labor Standards Act (FLSA). Additionally, individual states also enact their own worker protection regulations under their local state laws.
Which Labor Laws Affect Businesses?
For employers to be in compliance with labor laws, they need to know which federal and state laws apply to their business. This is easier said than done as there are numerous applicability variants of how state laws can impact a business aside from the general federal laws.
For example, the Age Discrimination in Employment Act (ADEA), which forbids discrimination against people over 40, only applies to companies with more than 20 employees.
Company owners who aren’t sure whether they are in full compliance with both federal and local state labor laws should visit their local state agency officials to familiarize themselves with them. The office in question typically bears the name Department of Labor or something similar, depending on the state (e.g., New York State Department of Labor in the state of New York).
How Do Companies Ensure Labor Law Compliance?
Labor laws are constantly updated as they are an important factor that helps maintain the stability and development of any type of business. While labor law compliance may sound simple, many employers often have difficulty keeping up to date.
When a company fails to comply with the latest additions to federal and state labor laws, it can result in financial penalties and negative publicity for the company.
Companies that want to be compliant with current labor laws can do the following things to help their employees get familiar with their rights and adopt practices that help them stay compliant.
Compliance Checklist
Once the employer learns the federal and state labor laws, they create a labor law compliance checklist they need to adhere to. The compliance checklist is used by both external and internal auditors to assess a company’s compliance with labor laws.
Moreover, employees also have access to this checklist, so they are familiar with their worker rights.
Employee Handbook
Employers create an employee handbook to inform and update employees on their rights and responsibilities in the workplace. The employee handbook reduces any misinformation or misunderstandings between employers and employees and is an accurate representation of how the company handles worker policies. It also helps eliminate any cause for lawsuits regarding non-compliance with labor laws by potentially disgruntled employees.
Each employee receives a copy of the employee handbook that they have to sign at the bottom, thus acknowledging they have received, understood, and accepted the terms in the handbook. This also goes for any handbook updates made based on labor law changes.
Audits for Job Discrimination
Employers are aware that any discriminatory policies or practices can result in employee grievances that can be quite costly, especially those concerning racial or disability discrimination.
So employers have different HR or employment practices in place and use self-auditing to ensure that they don’t breach discrimination laws and regulations.
When self-auditing, employers start by identifying the anti-discriminatory federal labor laws that apply to their business and then checking their practices and policies to see if they are compliant. Aside from the federal laws, some states have unique discrimination laws, such as gender identity rights, that companies should be aware of.
Employee Contracts
Employers create employee contract agreements when they hire full-time workers or hourly employees. This helps solidify the employment relationship and protect both the rights of the employees and the company. The contract outlines the rights and responsibilities of the worker, thus eliminating potential misunderstandings in the employment relationship.
The employment contract is written in such a manner that it complies with federal and state labor laws. The contract can be amended in the future in the presence of a company attorney or based on custom company agreements drawn up by the HR department.
Companies need these employee contracts as proof of labor law compliance for external auditors or state inspectors.
