The Hidden Danger
In the fast-paced world of running a business, many owners focus on growth, profits, and innovation. However, there’s an often-overlooked danger lurking in the background that can cripple your business overnight—ignorance of HR laws. Failing to comply with employment laws can be very costly. If you have employees in many states, the complexity is even higher. Every state has different employment laws.
The Compliance Chronicles: Tales of Tribulation
It is always enlightening to review recent lawsuits. Here are a few examples:
Unexpected $600K Expense
Last year, a Red Robin restaurant agreed to pay $600,000 to four former employees. Four women complained to a manager about a line cook who made offensive sexual comments, requested sex, and made unwanted remarks about their bodies. The manager did not do enough to stop the conduct. This is a reminder that all complaints should be taken seriously and addressed by an HR professional who has experience in this area.
Unexpected $2 million expense
Pearl B-Star Inc. reached a $2 million settlement with the company for underpaying 32 workers. Pearl violated state labor laws governing recordkeeping and payroll timekeeping. Are you aware of your state’s payroll recordkeeping laws?
Unexpected $3 million Expense
Jani-King, a commercial cleaning company, settled a lawsuit for $3 million. The lawsuit accused Jani-King of misclassifying its employees as 1099-independent contractors, a serious violation of HR laws. Many small businesses classify employees as 1099/independent contractors incorrectly. That can be a costly mistake.
Unexpected $41 million Expense
Last year a nurse won a $41 million jury verdict in her discrimination and wrongful termination lawsuit against Kaiser Permanente. The nurse was fired for poor performance. The nurse alleged discrimination and won.
These examples are just the tip of the iceberg. The legal landscape for employment is complex and constantly changing. Small businesses are particularly vulnerable because they often lack dedicated HR departments or legal counsel. Many owners don’t realize that ignorance of the law is not a defense in court. Even a seemingly minor infraction can lead to lawsuits, hefty fines, and even the closure of your business. You need an expert to help you make decisions about your employees.
Here are some of the key areas where small businesses often make costly mistakes:
- Employee Classification: Misclassifying employees as independent contractors or exempt when they are not can lead to back pay, penalties, and lawsuits.
- Wage and Hour Laws: Failing to pay minimum wage, overtime, or to provide mandatory breaks can result in significant financial penalties.
- Discrimination: Any form of discrimination in hiring, promotions, or layoffs can lead to lawsuits that not only damage your finances but also your reputation.
- Harassment and Retaliation: Failing to address workplace harassment or retaliating against employees who report issues can result in massive legal fees and settlements.
- Following other Federal & State Employment Laws: Paid family leave, sick leave, ADA, FMLA, Pay Equity Laws, OSHA, payroll taxes, city minimum wage laws, EEO-1 reporting, benefit laws, ACA, Interviewing and employee selection laws, etc.
Preferred CFO has an HR team that has fired hundreds of employees. We have only lost one lawsuit and that happened because management went against the advice of the HR team. We have never lost a lawsuit where our advice was followed.
The Path Forward: Protecting Your Business
The best way to protect your business is to be proactive. Here’s what you can do:
- Educate Yourself: Take the time to learn about the employment laws that apply to your business. These laws can vary significantly depending on your location and industry.
- Hire Experts: If you don’t have an HR department, consider hiring the HR team at PCFO. We can be your HR team for a fraction of what it will cost for you to hire an in-house HR team.
- Implement Clear Policies: Develop and enforce clear HR policies that comply with the law. Make sure these policies are communicated to all employees and that they understand their rights and responsibilities.
- Regular Audits: Conduct regular audits of your HR practices to ensure compliance. This includes reviewing employee classifications, wage practices, and workplace policies.
- Stay Informed: Employment laws are constantly changing. Make it a priority to stay updated on the latest regulations and adjust your practices accordingly.
In Conclusion
The stakes are high for business owners who neglect HR laws. The financial and reputational damage from a lawsuit can be irreparable. Don’t let ignorance of the law destroy what you’ve worked so hard to build. Take action today to protect your business from the hidden dangers of HR law violations. Your business’s future may depend on it.
Give Preferred CFO a call at (314)-409-9979, we would be happy to discuss how we can help you stay compliant with HR laws and avoid lawsuits and fines.