Compliance, A Cautionary Tale: Just Because You Don’t Know Doesn’t Mean You’re Not Liable
Over the past 20 years of working in HR management, I’ve seen firsthand how small to midsize businesses unintentionally fall into compliance pitfalls. With so many responsibilities, many employers assume that ignorance of the law excuses them from the consequences of non-compliance, but that couldn't be further from the truth. Whether it's wage and hour laws, workplace safety regulations, or employee classification rules, ignorance of the employment law is not a defense.
A common compliance issue that many businesses face is the misclassification of employees. Not long ago, I was asked to consult for a client who unknowingly misclassified several employees as independent contractors. When the Department of Labor (DOL) audited the company, the employer faced severe financial repercussions. The DOL determined that the workers should have been classified as employees, resulting in the company being held accountable for back wages, as well as fines and penalties. In fact, the company had to pay back wages that exceeded $50,000, and the penalties for this type of violation often range from $5,000 to $25,000, depending on the circumstances and the number of affected workers. Their lack of awareness didn’t lessen the consequences, only added to their burden.
This highlights a critical lesson for business owners: compliance isn’t just about knowing the laws, it's about proactively putting the right processes in place to ensure your business follows them. Whether you’re dealing with complex regulations related to overtime, minimum wage, or workplace safety, assuming you’re compliant without confirmation can lead to costly mistakes.
Beyond wage and hour issues, there are other serious compliance risks that can hurt businesses. For instance, failing to comply with Occupational Safety and Health Administration (OSHA) standards can result in fines ranging from $15,625 per violation for serious issues to $156,259 for repeated or willful violations. These fines can cripple or ruin a small business. Non-compliance doesn’t only harm your bottom line, but it can also damage your reputation and trust with employees, customers, and stakeholders.
One of the most significant challenges for small and mid-sized business owners is keeping up with constantly evolving employment regulations. Compliance is not a one-time task—it requires ongoing vigilance. Failing to stay current with laws at both the state and federal levels can lead to disastrous outcomes. For example, newer regulations around pay transparency and changes to independent contractor classifications have placed additional compliance pressures on business owners.
That’s where seeking expert advice can make a world of difference. At NorWalk Consultants, we work with businesses to audit their HR processes and ensure that all legal obligations are being met. Working with an HR Consultant allows businesses to make small investments to review their current systems and plan for growth. From employee handbooks to payroll systems, we take a proactive approach to ensure full compliance and prevent costly mistakes. If you’re unsure about your obligations, seeking advice from HR experts can save your company from legal headaches and huge financial fines and losses.
At the end of the day, compliance is about protecting both your employees and your business. Staying informed, seeking guidance, and making the effort to comply with relevant laws isn’t optional—it’s essential for sustainable success. Don’t wait for an audit or a lawsuit to realize what you didn’t know. Take charge of your compliance today, before it becomes a costly lesson tomorrow.
