How to Avoid a Recruiting Non-Compliance Lawsuit: Hiring Compliance 101

The last thing you want to worry about as a small business owner or hiring manager is a potential lawsuit because you asked the wrong question.

Most recruiting-based lawsuits deal with discrimination cases, with the average defense expense through settlement costing $160,000.

The good news is that staying compliant with federal and state laws doesn’t have to be a hassle. You should have few to no issues structuring a fully-compliant and effective hiring process if you:

• Review the laws
• Think through your job description
• Refine the interview process
• Streamline your onboarding procedures

Let’s take a deeper look at what that process would look like for your business.

Recruiting compliance 101: Regulators and laws

While there is no one specific “recruiting” law, businesses are required to stay compliant with federal, state, and sometimes local (city or county) employment laws. These laws can affect the hiring process, and it’s essential that you are aware of them. The problem with compliance issues is that even an unintentional question or half-baked procedure could end up as part of a costly lawsuit.

Your goal is to avoid potential discrimination claims and ensure that the company’s reputation remains in good standing with job applicants. To do this, it helps to use the federal laws as a guide when planning your recruiting process.

Governing agencies

The are two primary government agencies that enforce federal laws dealing with employment practices and recruiting:

• Equal Employment Opportunity Commission (EEOC) – Small businesses that have employed at least 15 employees for 20 calendar weeks during the year are required to comply with EEOC regulations. The EEOC regulates and enforces federal anti-discrimination laws. Companies may not discriminate against job candidates or employees based on any protected class of race, ethnicity, religion, sex, gender identity, national origin, age, disability, or genetics.
• Office of Federal Contract Compliance Programs (OFCCP) – A part of the Department of Labor (DOL), the OFCCP ensures that any federal contractor or subcontractor working for the government does not discriminate against a job candidate or employee based on their race, color, religion, sex, gender identity, national origin, age, disability, or genetics.

The problem with compliance issues is that even an unintentional question or half-baked procedure could end up as part of a costly lawsuit.

More federal laws impacting recruiting and hiring

Additional federal laws that cover recruiting, hiring, and other employment policies include:

• Age Discrimination in Employment Act (ADEA) – This law protects individuals over the age of 40 from age-based discrimination.
• Americans with Disabilities Act (ADA) – Based on the Civil Rights Act of 1964, ADA extends civil rights protections to disabled individuals. As a result, employers must provide reasonable accommodations when hiring and retaining employees to ensure those with disabilities can participate in essential work functions.
• Equal Pay Act (EPA) – Under this law, a man and woman must be paid the same wage for doing the same work.
• Pregnancy Discrimination Act (PDA) – Employers cannot discriminate against pregnant employees or job candidates. Pregnant individuals struggling to complete their work or requiring time off must be treated as temporarily disabled workers.
• Title VII of the Civil Rights Act of 1964 – This law prohibits discrimination against a job candidate or employee based on their race, color, national origin, religion, or sex.

Federal laws are considered the bare minimum threshold, and individual states may have their own specific additional regulations.

Be aware of salary history bans

In addition to these various laws, nearly half of the states have made it illegal to ask for a job seeker’s past salary.

There are currently 21 state and federal district bans and 21 local bans. Areas that have complete salary history bans are:

• Alabama
• California
• Colorado
• Connecticut
• Delaware
• District of Columbia
• Hawaii
• Illinois
• Maine
• Maryland
• Massachusets
• Nevada
• New Jersey
• New York
• North Carolina
• Oregon
• Pennsylvania
• Rhode Island
• Vermont
• Virginia
• Washington

For businesses hiring across state lines or with multiple franchises, you may want to keep things simple and ditch the salary history question altogether.

Refine your job description for the hiring process

Posting a job board seems reasonably straightforward, but it’s possible to accidentally violate compliance laws based on your wording. For example, Koehler Company had to pay nearly $900,000 in a lawsuit regarding gender discrimination in 1999. The organization didn’t hire job applicants who were shorter than 5’4″, thus eliminating a significant number of women from the candidate pool. Likewise, Hooters was sued multiple times for only hiring women servers.

When drafting your job description, focus on the essential tasks and work expectations. Whenever possible, use gender-neutral language.

Reduce risks in your interview and hiring process

Several questions can discourage potential job applicants and land you in hot water with the EEOC. Some questions to avoid include:

• What year were you born?
• Do you have children, and if so, what are your childcare arrangements?
• Do you have a disability?
• Have you ever suffered a workplace injury?
• What gender do you identify as?
• Where do you go to church?
• How tall are you?
• How much do you weigh?

Ideally, unless a question is pertinent to the position, simply don’t ask it. Make sure to have a list of screened questions for your hiring team to draw from.

Safeguard candidate data

When processing a job application, it’s important to note that you must appropriately handle extremely valuable personal information. Make sure you store all candidate data securely, whether you process applications the old-fashioned way or on an applicant tracking system (ATS).

If you want to run a background check on a job candidate, keep in mind that some states have strict data collection and storage requirements. Furthermore, many states are adopting ban-the-box laws or regulations that prevent employers from asking about a job seeker’s criminal history when hiring. States using ban-the-box laws are:

• California
• Colorado
• Connecticut
• Hawaii
• Illinois
• Maine
• Maryland
• Massachusetts
• Minnesota
• New Jersey
• New Mexico
• Oregon
• Rhode Island
• Vermont
• Washington

Staying compliant isn’t a one-off policy implementation; it’s a journey.

Keep compliant during the employee’s lifecycle

Compliance doesn’t end after you hire your employee. From onboarding until termination, EEOC regulations and anti-discrimination laws still apply. However, all employee contracts, compensation, benefits, and work environments should adhere to several employment laws. Key federal regulations to comply with include the following:

• Affordable Care Act (ACA) – Focuses on health insurance compliance.
• Consolidated Omnibus Budget Reconciliation Act (COBRA) – Provides healthcare for terminated employees.
• Fair Labor Standards Act – Regulates minimum wage and compensation. State-specific laws may override or supplement this.
• Health Insurance Portability and Accountability Act (HIPAA) – Protects employee medical information.
• Occupational Safety and Health Administration (OSHA) – This agency enforces workplace health and safety guidelines.

To reduce compliance issues from hiring to onboarding and beyond, it’s critical to have a transparent communication system and regularly evaluate your employee handbook policies and procedures.

Invest in insurance

In 2021, the EEOC resolved 62,187 claims, and employers shelled out $350.7 million in benefits to plaintiffs. Most lawsuits filed due to poor recruitment or employment processes are covered under Employment Practices Liability Insurance (EPLI). While prices vary, the average EPLI cost is $395 a month.

Many small businesses can get EPLI coverage through a general Business Owner’s Policy (BOP) – but you will want to check with your provider when purchasing an insurance bundle.

In a perfect world, you’ll never need insurance. But just in case, it doesn’t hurt to have all your bases covered.

More tips for compliance

Staying compliant isn’t a one-off policy implementation; it’s a journey. On the plus side, there are many free and paid tools to help you streamline your business and stay compliant. From comprehensive cloud-based HR platforms to Excel templates and guidebooks, there is something out there for every business model.

For more on maintaining workplace compliance while reducing your workload, check out these resources:

• Payroll Report Template – Stay on top of your payroll taxes and reporting.
• HR Guide to Addressing Social Issues and Racism – Learn to recognize and weed out negative behaviors in the workplace.
• Ultimate Zip File for People Operations – Onboard faster with this comprehensive file set.
• Sample Employee Termination Scripts – Make a challenging conversation a little less difficult with thorough and compliant termination scripts.