Workforce regulations are ever-changing to align with shifts in employee rights, societal expectations, and labor market trends. Even more important is how these regulations change to incorporate federal (and state) policy shifts every couple of years. Therefore, your organization should strive to achieve legal compliance. Yet, research indicates that a shocking 67 percent of organizations struggle with compliance with federal labor regulations.
Understanding Federal Policy Shifts
Federal policy shifts can happen at any time. They can occur through:
- Legislative Action: This occurs when Congress passes new labor legislation or amends existing statutes. For instance, amendments to the Fair Labor Standards Act (FLSA) often come from Congressional action.
- Executive Orders: Federal employment policy changes can also occur through executive orders issued by the President.
- Agency Regulations: Federal agencies like the Occupational Safety and Health Administration (OSHA), Department of Labor (DOL), and Equal Employment Opportunity Commission (EEOC) frequently introduce new employment regulations or modify existing ones.
Since the start of 2024, we’ve seen several federal labor laws changing, with more set to happen in 2025. For instance, amendments made to FLSA requiring that employees with a weekly salary less than $844 be eligible for overtime pay came into effect on July 1, 2024. This amendment will see the threshold rise again to $1,128 per week come January 1, 2025.
Additionally, the recent election results will see workforce regulations shift further. Historically, Republican administrations have focused on reducing regulatory burdens on businesses. There may be attempts to roll back some labor protections implemented in recent years, such as the already discussed overtime pay requirements set to increase a second time in 2025.
Impact Analysis
Generally, federal policy shifts can have several effects on your organization regardless of the industry it falls in. The most common impact that your organization should prepare to deal with is increased employment costs, especially if the policy changes adjust minimum wages, overtime thresholds, or benefits requirements. An increase in either of these can increase payroll expenses, which can prove expensive to maintain.
Understanding how policy shifts impact the specific industry you’re operating in is also essential for accurate and efficient human resource planning. Certain industries are more vulnerable than others to specific federal policy shifts. For instance, frequent changes to wage laws and overtime thresholds can create operational challenges in retail and hospitality industries as businesses struggle to keep up with the policies.
When the Biden administration issued an AI executive order in 2023, the impact of the policy differed across industries. If we look at the impact that this policy had on the human resource (HR) sector, one of the main things businesses experienced was high operational costs. This is because compliance with the executive order required organizations to invest in consultants well-versed in the policy requirements and audits into existing AI tools to establish fairness in recruitment.
Preparing for Changes
Part of navigating workforce regulations means you’re effectively prepared to handle federal policy shifts when they happen. So, how do you know you’re ready for regulatory changes?
The first step is to conduct internal and external audits to assess if there are any gaps between your existing workforce regulations and the new policy changes. This provides you with insight into areas that fall short and need improvement to achieve workforce compliance.
Once you identify the gaps, you can now develop a compliance strategy to ensure you can easily adapt to changing policies.
For instance, an effective compliance strategy should include regular employee policy reviews that check to establish if your organization’s regulations align with existing and new laws.
Additionally, your compliance strategy can leverage technology to automate compliance management, which includes conducting audits, tracking, and reporting.
If your organization’s HR team seems stretched thin with responsibilities, you can hire the services of consultants. This helps ensure your workforce policies are in compliance with the latest federal policies and that your HR team focuses on other tasks.
Proactive Measures for Mitigation
Failure to comply with federal policy shifts can have severe consequences for your organization, including costly fines, employee lawsuits, business closure, and loss of customer and employee trust.
For instance, as of 2023, non-compliance with the Affordable Care Act (ACA) can attract fines of up to $2,880 or $4,320 for every full-time staff member (minus the first 30 staff). Non-compliance, in this case, refers to an organization not offering affordable healthcare for its employees that meets the minimum affordability requirements, coverage, and value.
Given the example above, you’re better off implementing preventive actions, such as:
- Keeping up with HR policy updates from reputable resources such as the Society for Human Resource Management (SHRM).
- Following labor regulatory agencies like DOL and OSHA to ensure you have the most recent updates on labor policies.
- Conducting regular training programs for HR and leadership teams to ensure they’re up to date with the latest workforce regulations.
Adaptation and Vigilance: The Keys to Navigating Workforce Regulations
Federal labor policy shifts are here to stay. They’ll continue to change as long as government administrations change and labor markets evolve. But that shouldn’t be the reason why your organization isn’t compliant. Therefore, staying vigilant and adaptive is essential to ensure your organization is on the right side of the law and doesn’t incur unnecessary costs related to non-compliance.