The First Three of Compliance

My small business clients give me skeptical looks.  I imagine that they are thinking “do I really need to worry about that?” or “my people will never sue me, they love me.” I love these looks because they show that my clients are balancing risk. They are weighing whether they need to worry about compliance (i.e. spend money on an attorney) against whether their failure to be 100 percent compliant will ever rear its ugly (and expensive) head.  I knock on wood with them that the ugly head will remain hidden while preparing for the worst.

No one likes to prepare for the worst, but often we have to.  For employers, the worst includes a lawsuit brought by an employee or an investigation by a government agency. Preparing for the worst includes spending just enough to be compliant and protect the business and its number one asset, employees.  So, for even modest resources, employers need to start somewhere to protect themselves.  Here’s what to start with:

  1. An employee handbook. Every employment lawyer will tell you that the employee handbook is one of the most important documents in any employment or labor law dispute. It is always an exhibit to a deposition. Besides its litigation importance, the handbook contains the most important policy that every employer must have – the harassment policy.   The handbook also describes the work culture both good and bad and sets employee expectations. It is an essential document no matter what type of business you’re in.
  1. Manager training. As I’ve said before, managers need to know enough. They need to know what their role is, what their responsibilities are, what’s in the handbook, and when they need help.  For the smallest companies (under 10 employees), this training doesn’t need to take more than two hours, but it should happen.  There are too many new laws (even the “blacklisting” kind) that could stop a small business from doing business if managers don’t know what they are doing.
  1. Performance management. I know, performance management is a huge topic.  At its core, performance management is simply setting expectations and holding employees accountable.  Large organizations spend millions on fancy apps and software, develop multi-step processes to bring automation and consistency to setting expectations.  Small businesses don’t need to do all that.  When you’re small, you can be more informal.  Set expectations, communicate those expectations, and measure employees against them.  Eventually, you may need to terminate someone for poor performance and if you haven’t set and communicated expectations, you expose your business to more scrutiny, including the lawsuit kind.

Of course, employers need to worry about I-9s, personnel files, proper classification of employees, sick leave requirements, and many, many other things.  But if we have to start somewhere, these three can protect an employer from many risks.  As business takes off, we can dig into all of those other areas.

By the way, my response to the looks is to be as straightforward as I can.  “I’ll help you worry a bit less,” and “Of course they love you, but everyone hires someone who could sue them eventually.”  I promise.

Image from Cindy Tang available at

A Shaky Relationship: FCRA & Data Analytics

This past weekend, the New York State Bar Association has asked me to speak about data analytics in human resources at their fall conference.  This is one of my favorite topics, particular since data analytics have a huge impact on HR now and will to continue to in the future. This post and many others in the future will cover data analytics, its impact on HR, and how compliance can get tricky with the technology.

Big data, data analytics, HR analytics, people analytics, talent analytics – no matter what you call it – is changing how HR operates.  Vendors, like Gild, Pocket Recruiter, HireVue, and many, many others, offer algorithm-based technology to make traditional HR pain points as simple as a few clicks.  In the few clicks and the algorithm itself lies the potential for violations of various employment and labor laws.

Let’s start with the Fair Credit Reporting Act.  FCRA governs consumer reporting agencies in how they gather and report on particular individuals, including job applicants, even when these consumer reporting agencies are collecting public information.  In the employment context, these reports include criminal background checks, credit checks, and even social media searches when the reports are compiled by third parties and provided to employers.

In order to gather the information and get authorization from a job candidate, employers must follow strict disclosure requirements, give candidates notice that a report will be generated, and provide avenues for candidates to dispute information they believe is inaccurate.  Simply put, it can be incredibly easy to run afoul of FCRA.

One data analytics vendor, Joberate, has created an algorithm that takes publicly available data, like social media usage, and allows recruiters to determine whether a particular candidate could be interested in a new job.  Joberate generates a J-Score that can tell a recruiter whether an individual is in engaged in job-seeking behavior – the more job-seeking behavior, the more likely the individual would be interested in speaking with the recruiter.  By knowing individual J-Scores, recruiters aren’t wasting their time contacting passive candidates who aren’t really candidates at all.  They can be focused only on individuals who are ready to make a career change.

So what does FCRA have to do with this?  Potentially, a lot.  When a third party does any kind of search that includes information that may “serve as a factor in determining a person’s eligibility for employment” and gives that information to an employer, the Federal Trade Commission takes note.  Whether an individual is truly engaging in job seeking behavior may be considered a factor on whether a recruiter reaches out to that particular candidate and whether the individual is considered a candidate for employment.  So does an employer violate FCRA by using Joberate?