The hiring process can be complex and time-consuming for even the smallest businesses. As they grow, of course, the landscape becomes even more complex, full of potential legal landmines that can be costly in terms of both out-of-pocket costs and business reputations.
It takes a great deal of time, money and effort to post job openings, review hundreds or even thousands of applications, schedule and conduct interviews, negotiate pay and benefits and then conduct onboarding.
With so many moving parts, it’s understandable that companies may miss important details or specific requirements they must comply with. And, of course, each year many do run afoul of various compliance requirements when conducting interviews, extending offers, reviewing candidates, making offers, and bringing employees on board.
A Complex Web of Requirements
The hiring process is governed by a complex web of federal and state laws designed to promote fairness, equity, and compliance in employment practices. Failure to comply can lead to significant consequences, including lawsuits, penalties, and reputational damage.
Here we look at some of the most important laws affecting hiring, highlight common compliance challenges, and discuss what leading companies do to maintain compliant and effective hiring practices.
Key Laws Governing Hiring Compliance
The United States operates under a federal system, meaning legal authority is divided between federal, state, and local governments, all of which may have a stake in regulating hiring practices.
On the federal level, some of the key employment laws that impact companies include Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act (ADA), the Age Discrimination in Employee Act (ADEA), and the Fair Credit Reporting Act (FCRA).
Title VII of the Civil Rights Act of 1964 applies to companies with more than 15 employees and prohibits employment discrimination based on race, color, religion, sex, or national origin. To maintain compliance companies must ensure that their hiring practices, including job postings, interviews, and offers, do not discriminate against these protected classes.
The Americans with Disabilities Act (ADA) also applies to companies with more than 15 employees and prohibits discrimination based on a wide range of disabilities and requires employers to provide reasonable accommodations for qualified individuals with disabilities.
Companies are required to make their hiring processes accessible and to avoid questions that could reveal disability status unless the disability is directly job related.
The Age Discrimination in Employment Act (ADEA) applies to companies with more than 20 employees and protects people 40 and older from age discrimination in both hiring and employment practices. Employers cannot make hiring decisions based on age, and favor candidates under 40.
The Fair Credit Reporting Act (FCRA) affects any company that uses third-party background check services and regulates the use of consumer reports, including background checks, during hiring. Employers are required to obtain written consent from applicants and provide required notices if adverse action is taken based on background reports.
The Immigration Reform and Control Act (IRCA) requires employers, regardless of size, to verify work authorization for all employees. Companies are required to complete Form I-9 for all new hires and to avoid discriminatory practices based on citizenship or national origin.
In addition to these federal laws, at the state level there are additional legal requirements companies must abide by. For instance, California’s “ban-the-box” law restricts inquiries into criminal history until after a conditional job offer. In New York, salary transparency requirements promote pay equity and mandate employers to disclose salary ranges in job postings.
Many cities and local municipalities also have locally applicable laws, including city-specific minimum wage requirements.
Ethical Considerations
Adding to this legal complexity, evolving societal expectations around diversity, equity, and inclusion have introduced new pressures on hiring practices. Employers are increasingly expected to go beyond legal compliance, addressing unconscious bias and ensuring equitable access to opportunities.
Even when not legally required, companies may impose internal requirements on their hiring practices.
Top Compliance Challenges for Employers
Amid this challenging legal and regulatory framework, it’s no surprise companies often run into compliance challenges. Here are some of the top issues companies face in hiring.
Preventing Discrimination
One of the most significant challenges employers face is ensuring their hiring practices are non-discriminatory. Despite federal protections, many companies struggle to root out bias in job descriptions, interview processes, and decision-making criteria.
Biased language in job postings can keep diverse candidates from applying for positions, while subjective interview processes may disadvantage applicants from underrepresented backgrounds.
Background Checks
While background checks can be critical to hiring decisions, employers must navigate stringent federal and state requirements. For instance, failing to obtain proper authorization, improperly using background information, or disregarding ban-the-box laws can lead to legal complications.
Employers must also ensure that background check policies do not disproportionately exclude applicants from protected groups unless exclusions are job-related and necessary.
Worker Classification
Worker classification presents yet another compliance hurdle, especially as gig economy roles become more prevalent. Misclassifying workers as independent contractors rather than employees can lead to violations of wage, tax, and benefit regulations. Employers must carefully evaluate their classifications using federal guidelines, such as those from the IRS, as well as state-specific tests.
Authorization to Work in the U.S.
Immigration compliance is similarly fraught with challenges. While Form I-9 verification is required, employers must tread carefully to avoid asking for specific types of documentation or making assumptions based on a candidate’s citizenship status, which can lead to claims of national origin discrimination.
Pay Equity
Pay equity has become a growing area of concern, with new state laws requiring salary transparency in job postings. However, many employers struggle to analyze and address pay disparities within their organizations, particularly when faced with complex compensation structures. Non-compliance with pay equity laws not only leads to legal exposure but also damages employee trust and morale.
Dynamic Regulatory Environment
Finally, keeping up with rapidly evolving laws is a persistent challenge. States continue to introduce new requirements, such as restrictions on the use of artificial intelligence in hiring decisions. Without regular audits and updates to their practices, employers risk falling out of compliance.
What Great Companies Do to Ensure Hiring Compliance
Great companies take a proactive and strategic approach to hiring compliance. They begin by providing comprehensive training for hiring managers and HR professionals on relevant laws and best practices. This training includes education on unconscious bias, ADA accommodations, and legal interview questions, ensuring that staff understand the nuances of compliant hiring.
Technology also plays a crucial role in effective compliance. Leading organizations use applicant tracking systems (ATS) to manage records, screen for biased language in job postings, and ensure consistent evaluation criteria across candidates. These systems help streamline processes while reducing the risk of human error.
Regular audits are another hallmark of compliance-focused companies. By reviewing hiring records, job postings, and background check policies, these employers identify and address compliance gaps before they become liabilities. Many organizations also engage employment law specialists to review and optimize their hiring practices.
Great companies foster a culture of inclusion that goes beyond legal requirements. They actively seek to diversify their talent pools, provide equitable opportunities for advancement, and create a workplace environment where employees feel valued and respected.
The hiring process is fraught with compliance challenges, ranging from navigating anti-discrimination laws to addressing pay equity and background check regulations. As federal and state laws continue to evolve, businesses must remain vigilant in updating their practices and policies to avoid costly mistakes.
By investing in training, leveraging technology, and seeking expert guidance, companies can not only achieve compliance but also build more inclusive and effective hiring practices.
Lin Grensing-Pophal is a Contributing Editor at HR Daily Advisor.
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