The regulatory environment Employment was largely unregulated until the Great Depression, when the brutality of the economic system came into plain and painful view.
HR regulations emanate from the federal government, state government, and, in some cases, local governments. The regulations cover a wide range of topics and are quite granular in the procedures required.
As we have told seminar participants, current employers are suffering for the sins of predecessor employers. Mistreatment of employees and failure of proper employer practices have caused the dense regulatory environment we face today.
Current politics
We prefer to avoid politics; however, it is worth mentioning that the current administration is more anti-regulatory than previous administrations, and there have been, and will be, changes to employment regulations. (See the comments below “Keeping up.”)
Current attacks on diversity, equity, and inclusion have caused stress and appear to have stood civil rights enforcement on its head. Attention must be paid to current events, and there must be an honest assessment of current policies within the current environment.
A risk management approach
The risks of noncompliance should be identified and categorized so that proper management controls can be created and monitored.
A risk management program for HR could be modeled as:
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Anticipate possible risks
- Categorize risks by (1) probability and (2) potential costs
- Develop or update policies and procedures to promote compliance
- Train managers and supervisors, and then train the workforce
- Track calendar events, filing, and payments
- Monitor compliance, determine corrective actions
- Monitor governmental activities in relevant areas
Strict compliance
Employment regulations tend to be enforced with a strict compliance model; the employer is responsible for supervising the workforce, including ensuring adherence to the details of regulations. If employees violate or ignore policies, the employer is at fault. The employer is responsible for setting policies, training and supervising employees. When employees are out of compliance, the presumption is that the employer is at fault due to failures in policy, training, monitoring, or enforcement. This is an extremely strict standard.
Policies and procedures (P&P)
P&P document the organization’s rules and regulations. Creating and maintaining P&P is time-consuming and resource-hungry, but it provides the management and training backbone of the company.
P&P is both a proactive activity and a self-defense activity, documenting standards of conduct that allow enforcement. Standards for conduct, performance, and compliance are documented and available for training. Areas of strict compliance, such as “swipe-in, swipe-out” timekeeping, should be documented for both training and enforcement purposes. The stakes are high, given the penalties for failure.
Onboarding and off-boarding
Each organization should have a complete set of approved forms to be used in the search and hiring process, and a comprehensive checklist for the hiring process. These forms and policies should be scrubbed for any possible hint of discriminatory intent and/or clumsy procedures.
Onboarding, resignations, and terminations should all be managed with a detailed checklist with detailed assignment of duties. The termination policies should anticipate troublesome terminations and be prepared accordingly.
Resignations, retirements, and terminations of clinicians must be managed carefully, with transition plans developed and monitored by clinical leadership. The patient experience should be as seamless as possible.
Since most, if not all, employees have access to technology, there must be thorough, careful transition procedures for both onboarding and separations. It is critical that separated employees, clinicians, and administrative staff be terminated from technology access and that all files are preserved.
Licensing and certifications
A healthcare organization is dense with licensure and certification activities, with most clinical positions requiring some type of credential.
There are two key issues here: (1) verifying credentials on hiring and (2) monitoring renewals. There should also be policies on monitoring and recording new credentials (e.g., a young physician receives board certification).
There has been a recent scandal involving a Florida organization issuing falsified nursing degrees. This caused quite a mess for innocent employers.1 Employees may have verified the degrees, but the school and the degrees were phony. The State of Kansas is experiencing significant political and operational drama regarding nursing licenses. The Nursing Board is being accused of issuing censures for trivial issues and limiting the supply of desperately needed nurses. Nurses are battling back; employers are worried.2
Employers must be attuned to state licensing boards and licensing issues and should maintain a tickler file of license renewal dates and provide reminders to employees three months before the license is due to be renewed. Tracking continuing education is burdensome, but at the very least, annual reminders should go out to clinicians to ensure they are aware of continuing professional education requirements.
It is critical that separated employees, clinicians, and administrative staff be terminated from technology access and that all files are preserved.
Wage-and-hour
Federal wage-and-hour regulations are dense, complicated, and subject to strict enforcement. Failure to adhere can be expensive — especially in terms of backpay.
First up, who is hourly and who is salaried? There are exacting regulations to define who is hourly and subject to overtime, and who is salaried. Abusing the system by declaring an hourly worker to be salaried is a common cheat. Job design, related documentation, and want ads should all consider these regulations. Timekeeping, “swipe-in, swipe-out,” (or any timekeeping mechanism) must be subject to exacting standards, the employees trained, and the system monitored for exacting compliance.
In one of the nation’s largest wage recovery judgments, a Pennsylvania federal court has awarded $35.8 million in overtime back wages and liquidated damages to 6,000 current and former workers employed by the operators of 15 residential skilled nursing, rehabilitation, and assisted living facilities in western Pennsylvania that willfully denied them overtime pay.
A Missouri nursing home was recently penalized by the U.S. Department of Labor to the tune of $380,000. The facility was automatically docking nurses for a 30-minute lunch, even though management knew the nurses rarely received 30 minutes of uninterrupted mealtime.5 Lunch and break-time procedures require careful development and intense monitoring. Automatic time docking must be carefully designed and constantly monitored.
Systematic underpayment of wages is classified, at least in the media, as “wage theft,” a label providers should work hard to prevent.
Occupational Health and Safety Administration (OSHA)
Occupational health standards, dominated by federal OSHA regulations, exist to protect both patients and employees. The regulations are dense and detailed in a healthcare setting, where employees — based on employment history — are considered at risk for various injuries and exposures.
Supervisory practices must include adherence to OSHA healthcare practice standards, both general standards and other regulatory areas such as imaging and radiation. There are also state occupational regulations, standards, policies, and investigation procedures to be aware of and keep up to date in your organization.
Employee security protection programs
Employees are given a measure of protection via state unemployment and workers’ compensation programs.
Unemployment is a state-operated insurance program, backed by the federally operated reserve program, which assists states during periods of high unemployment.
In most states, workers’ compensation — providing protection for workplace injuries and deaths — are provided by private insurance companies. However, some states have monopolistic programs (North Dakota, Ohio, Washington, and Wyoming), and others have coverage option programs (private or state).
All these programs require reporting on some basis and prompt payment of premiums, whether private or public programs.6 These are strict compliance programs with penalties and/or interest charges levied on compliance failures.
Civil rights statutes
There are several categories of civil rights protection — race, age, gender, disability, national origin, etc. — that put demands on employers for equality and equity in hiring, compensation, job assignments, discipline, and termination.
Hiring, retention, promotion, and termination procedures must be carefully and constantly monitored for compliance with best practices.
Complaints filed must not only be managed and resolved properly, but they should also be reviewed and monitored for trends of noncompliance.
Payroll taxes and deductible items
A large burden on employers is the collection, reporting, and payment of payroll taxes, including federal income taxes, Social Security taxes, Medicare taxes, state income taxes, city income taxes and, in some states, school income taxes. Just to increase the pain for multistate employers, each state has its own system.
The timely reporting and payment of these taxes — withheld or employer share — require strict compliance and prompt reporting and payment. Onerous penalties and interest charges are the punishment for failed compliance. Paperwork duties include quarterly and annual reports, as well as the production and timely delivery of accurate IRS Form W-2s (late delivery of W-2s is also a morale issue).
Many organizations contract payroll services, but this does not shift the responsibility for prompt filings and payments (the agreement with the vendor can be structured to transfer some of the risk). And of course, the timekeeping and management duties stay with the organization. (Financing a business organization by delaying tax transfers and payments is a bad idea and promises an expensive outcome.)
There are also withholdings for diverse benefits and retirement plans, along with the attendant fiduciary duties for payment and reporting. Failures in this area can be extremely costly for the organization.
Notices and correspondence from taxation authorities should be promptly brought to the attention of senior management, and the response should be assigned (either internal staff or external public accountants) for prompt response. Compliance with retirement and benefit rules should be reviewed and monitored at least annually.
Contracting payroll services
Many organizations use an external service to record and pay payroll and payroll taxes. The organization is still responsible for compliance and retains all fiduciary duties, so monitoring this relationship is critical.
Checking accounts should be monitored for transfers — especially payroll tax payments. If the contracting company manages benefits payments, this should be monitored closely as well. The employer is always responsible for prompt and accurate payroll, prompt and accurate report filing, and timely payment!
Control calendar
A calendar of all payroll payments, payroll taxes, and benefit deadlines should be prepared annually and tracked weekly. There is commercially available calendar software, or you can create a calendar in a spreadsheet. The calendar should specify check payment, e-payment, paper filing, or portal filing for each item (as this is written, the IRS is probably going to phase out check payments, but the IRS’s communication stream is murky).
Keeping up
The internet has done wonders for regulatory compliance updates. Government agencies tend to create and revise web pages with regulatory texts and updates. In the case of the federal government, entire documents are available in PDF format for downloading and reading (some are rather thick!). AI may be valuable for updating forms, scrubbing policies and procedures, and monitoring current information in the HR sector.
Professional advisers — especially legal counsel and accounting professionals — should provide advice where needed. Accounting professionals should be especially helpful with taxation and tax reporting issues, including payroll taxes. The government provides resources and updates on their websites (IRS, Equal Employment Opportunity Commission, Department of Labor, Wage and Hour, OSHA, and Federal Unemployment).
Takeaways
- HR is subject to numerous complex employment regulations.
- Regulations are enforced with a “strict compliance” standard; the employer is responsible for employee conduct, employer conduct, and noncompliance.
- Payroll and related taxes and benefits are subject to strict compliance and also severe penalties and interest.
- Regulations are frequently updated and revised, and they change with new circumstances and political winds, so employers must “keep up” with the regulatory environment.
- Licensing and certification require intensive monitoring and surveillance, as failures in onboarding or updates can have major consequences for the organization.