Outsourcing Compliance Tasks

Navigate the waves of new compliance regulations.

by William B. Bierce

In January 2005 alone, lawmakers filed dozens of new bills that would impose new mandates on HR administration. HR managers and their providers should be on alert for new compliance tasks. Following the criminal liability framework of incentives for compliance, the draft legislation would impose severe consequences for non-compliance. Interpreting some of the laws requires expert legal advice.


RecruitmentIn employee recruitment and onboarding, various bills would extend existing rules on mandatory verification of employment eligibility. The Illegal Immigration Enforcement and Social Security Protection Act of 2005 would convert Social Security cards to high-tech documents and require the Secretary of Homeland Security to establish and maintain an Employment Eligibility Database accessible to employers. The Secretary could impose a $50,000 penalty to those who fail to follow eligibility rules, with non-compliance carrying a five-year prison term.


Family ProtectionThe Bush Administrations social policy agenda would focus resources on protecting families and children. HR departments would be subject to additional compliance tasks, including garnishment of compensation paid to veterans for service-connected disabilities in order to enforce obligations under the Family and Community Protection Act of 2005, S. 6.


Labor Protection Against Offshoring of Jobs Under the Fair Wage, Competition, and Investment Act of 2005, S. 14, the WARN Act (Worker Adjustment and Retraining Act) would be amended to cover plant closings or mass layoffs of companies with 50 employees and add offshoring of jobs to the list of WARNable events.


Trade Assistance for Service WorkersUnder the Trade Adjustment Assistance Equity for Service Workers Act of 2005, federal trade adjustment payments would be available to displaced workers. While this assistance would not impose any payment obligation on enterprises, it would likely require cooperation in new recordkeeping that could be intrusive and affect customer relationships.


Identity TheftIdentity theft starts with Social Security numbers. The question for employers is not merely what abuses are prohibited, but how to fall within the scope under the proposed Social Security Number Misuse Prevention Act, S. 29. Under this bill, permitted uses of Social Security numbers would have to be set forth in defined policies, with new administrative checks and balances, particularly for visibility purposes under Sarbanes-Oxley. The tests will require new employment manuals, which your employment lawyers, advisors, and friendly HRO providers will be happy to write.


Reporting RequirementsAdditional reporting requirements will become more onerous. Under the proposed Equal Pay Improvement Report Act of 2005, the Department of Labor would report to Congress, making recommendations relating to how the Fair Labor Standards Act of 1938 has been used by employers to foster or exacerbate pay inequities, especially inequities based on an employees gender, race, color, religion, national origin, or such other factors as the Commission finds relevant.


Health BenefitsUnder the Affordable Health Care Act, S. 16, employees would be able to deduct employer-provided healthcare insurance for their dependent children. Small employers would be able to deduct from taxable income an applicable percentage of the amount of qualified employee health insurance expenses for each qualified employee. This will add new policies, accounting, and software to your HR duties.


Civil RightsWhile unlikely to be signed by President Bush, one bill would add affectional or sexual orientation to the list of civil rights protected under the Civil Rights Act of 1964. Under the proposed Civil Rights Amendments Act of 2005, the term means male or female homosexuality, heterosexuality, and bisexuality by orientation or practice, by and between consenting adults. This would create a new protected class under the Equal Employment Opportunity Act.


Small Business ComplianceUnder the National Small Business Regulatory Assistance Act of 2005, the SBA would be required to provide confidential, free-ofcharge, one-on-one, in-depth counseling to the owners and operators of small business concerns regarding compliance with Federal and State regulations. In all likelihood, such advice would supplement (and not likely supplant) any small business reliance on PEOs, payroll processing services, and benefits consultants.


With employers becoming increasingly subject to civil and criminal penalties, HRO providers will need to revise their marketing and contracting language addressing liability for the enterprise clients. Sophisticated customers could then differentiate service providers on the basis of scope and risk shifting. This issue will be accentuated as new legislation emerges.


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