7 Common HR Issues That Often Go Undiagnosed

On the surface, your organization’s human resources function may appear well managed and compliant. Policies are in place, procedures are followed and everything seems to be running smoothly. Beneath this facade, however, unseen HR risks could be quietly brewing. And that poses severe threats to your company’s financial stability, legal standing and public image.

These undiagnosed HR issues often go unnoticed until it’s too late and can easily turn into costly legal battles, fines and reputational damage. Even the most well-intentioned organizations can leave themselves vulnerable to potentially devastating consequences.

With regulations constantly shifting and workforces becoming more diverse and distributed, the stakes for addressing HR risks have never been higher. Failing to identify and mitigate these unseen issues can undermine your hard-earned success and jeopardize your future growth potential.

Issue 1: Misclassification of Independent Contractors

When companies need to save money, many turn to independent contractors. They often believe the reduced payroll costs, overhead and flexibility will result in cost savings, even if the contractor is doing the same amount of work.

In practice, it’s a little more complicated. There are important distinctions between employees and contractors. If you’re unaware of them, the line between employee and contractor can be blurred. With increased scrutiny from federal agencies, misclassifying workers as independent contractors when they should actually be considered employees can result in severe consequences, including owing back pay, benefits and substantial fines.

For example, consider a software development company that hires a team of coders as independent contractors to work on a long-term project. However, upon closer inspection, these coders work exclusively for the company, follow strict guidelines, and have little control over their work. In this case, it’s likely they should be classified as employees. The company could face significant penalties for misclassification if they don’t promptly correct the problem.

Solution: Conduct a thorough review of your workforce to ensure proper classification. Consult with HR experts or legal counsel to understand the latest regulations and classification criteria. Then implement processes to regularly evaluate and monitor worker classifications.

Issue 2: Compliance with New Regulations

The HR landscape is constantly evolving, with new regulations emerging regularly to address critical worker needs. If you’re not aware of the specifics around such regulations, staying compliant can be a challenge. Failure to do so can lead to lawsuits, fines, and reputational damage.

Consider, for example, the PUMP Act, which expands break allowances for breastfeeding employees, or the Pregnant Workers Fairness Act, which requires accommodations for pregnant workers. Let’s say a company fails to provide adequate break time and private spaces for its breastfeeding employees (as required by the PUMP Act). If an employee files a complaint, the company could face fines and legal action. What’s more, future candidates may hesitate to accept positions there if they fear discrimination, making it difficult to recruit a talented and diverse workforce.

Solution: Stay informed about new and upcoming regulations that impact your workforce. Consult with HR experts or legal counsel to understand the requirements and ensure compliance. Update policies and procedures accordingly, and provide training to managers and employees.

Issue 3: Managing Out-of-State Employees

The rise of remote work has introduced a new set of challenges for employers. Companies must comply with employment laws and regulations based on the state where the employee is physically working, not just the company’s location. Noncompliance can result in lawsuits, fines and other potential penalties for failing to provide the correct benefits, minimum wage, paid leave or breaks.

Let’s say a marketing firm based in Florida hires a remote employee living in California. They would need to provide that employee with the appropriate benefits and paid leave as required by California law, even if the rest of their employees are based in Florida. Extrapolate that to having employees in multiple states — each with their own regulations — and it’s easy to see how complex these issues could become.

Solution: Implement processes to track and manage the locations of remote employees. Consult with HR experts to understand the specific requirements for each state where your employees reside, and work with them to build a pay, benefits, and work hours policies that cover everyone’s needs fairly.

Issue 4: Fair Labor Standards Act (FLSA) Compliance

Accurately tracking overtime, counting all work time and correctly classifying employees as exempt or non-exempt can be a daunting task. But with increased scrutiny and the first of upcoming changes going into effect July 1, which raise the overtime threshold and set a three-year cadence for future updates, the risks and potential liabilities are significant.

For example, a construction company may classify all project managers as exempt from overtime pay, regardless of their actual job duties. But if these managers are not paid the minimum salary threshold (remember, certain states may have higher thresholds) or perform non-exempt work (such as manual labor or mostly routine tasks), the company could face legal action for failing to pay overtime wages as required by the FLSA.

Solution: Conduct a comprehensive review of your time-tracking practices, job classifications and overtime policies to ensure they’re in alignment with legal requirements. Then provide training to managers and employees on proper time tracking and classification. If you’re not fluent with FLSA and other labor regulations, an expert HR consultant from James Moore can act as a key resource in evaluating and updating your HR policies.

Issue 5: I-9 and E-Verify Compliance

Proper handling of I-9 forms and E-Verify processes is crucial for maintaining compliance with immigration laws. However, many companies fail to complete these processes in a timely manner or may not take them seriously. Noncompliance can result not only in significant fines and penalties from the Department of Homeland Security but also potential legal issues related to immigration laws.

Consider a manufacturing company that hires a new employee but fails to have them complete the required I-9 form. When the company is audited by the Department of Homeland Security, its failure to have this documentation results in the company facing substantial fines and penalties.

Solution: Implement proactive processes to ensure timely completion and proper handling of I-9 forms and E-Verification, where required. Provide training to managers and employees on the importance of compliance and the potential consequences of noncompliance.

Issue 6: Inconsistent Policy Enforcement

Well-defined HR policies are essential, but you need to apply them consistently. If managers fail to enforce policies consistently across the organization, the company could face lawsuits such as wrongful termination or discrimination claims. Even if the company ultimately prevails in court, the legal fees and reputational damage can be significant.

Imagine a company has a clear, well-documented policy regarding personal internet usage during work hours. However, one manager strictly enforces the policy while another turns a blind eye. An employee who was terminated for violating the policy by the strict manager could claim discrimination or unfair treatment, leading to a costly legal battle for the company.

Solution: Regularly review and update company policies to ensure they are current and compliant. (These policies should be detailed in your employee handbook, which should also be updated regularly.)  Provide comprehensive training to managers and leaders on policy enforcement and the importance of consistent application. Implement processes to monitor and ensure consistent policy enforcement across the organization.

Issue 7: ADA and FMLA Compliance

The Americans with Disabilities Act (ADA) and the Family and Medical Leave Act (FMLA) are complex and technical. Complying with them is a challenge for many organizations. Among other consequences, noncompliance can result in lengthy and financially devastating lawsuits.

Consider a situation in which an employee with a disability requests reasonable accommodation like a modified workstation or flexible schedule. If the company fails to engage in the interactive process or denies the request without proper justification, the employee could file a complaint under the ADA.

Solution: Provide comprehensive training to managers and leaders on ADA and FMLA requirements, including recognizing and responding to accommodation and leave requests. Consult with HR experts or legal counsel to ensure compliance and proper handling of all ADA and FMLA cases.

James Moore HR Solutions: Your Partner in Proactive Compliance

Diagnosing and proactively addressing potential HR issues can save your business from significant legal and financial consequences. By conducting regular assessments, staying informed about changing regulations, and implementing robust policies and procedures, you can mitigate risks and create a more positive and legally compliant work environment.

As you navigate these complex challenges, partnering with an HR consultant from James Moore can be a game-changer. Your external HR partner can provide strategic guidance, conduct comprehensive assessments, and ensure your organization remains compliant with ever-evolving regulations—all while you focus on driving your business forward. Want to learn more about how we can help? Check out our Comprehensive Guide to HR Outsourcing.

Don’t wait until it’s too late. Contact James Moore HR Solutions to schedule an initial consultation. Together, we’ll help you build an understanding of your HR issues and execute a plan to remedy them.

All content provided in this article is for informational purposes only. Matters discussed in this article are subject to change. For up-to-date information on this subject please contact a James Moore professional. James Moore will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through this site.