HR's top compliance missteps

Two employment lawyers share the most common employer missteps they're seeing

HR's top compliance missteps

Working in human resources can be a little like life in the fast lane – with a lot of potholes that could potentially derail the journey.

Many of those potholes can come from compliance requirements – workplaces are subject to many legal rules that are frequently changing, which can spell trouble for employers and their HR departments if they don’t keep up.

“Human resources is a fast-moving profession with changes all the time, similar to the practice of law - what may have been appropriate three months ago may not be any more - and it's important to have your checks and balances in place to ensure that your practices are compliant,” says Amy Gibson, a partner at MLT Aikins in Saskatoon.

Joel Smith, a partner at Williams HR Law in the Toronto area, agrees.

“The reality is, we live in a fairly heavily regulated country, so there's a lot to know and things change all the time,” he says. “COVID has been particularly difficult with things changing, but it's been like that for a long time.”

Vacation pay a common error

So what are some of the biggest compliance issues where employers get tripped up? According to Smith, in his practice he sees that many employers haven’t caught up with how to calculate vacation pay and wages. Each province has its own way of doing it, but employers often have trouble determining where to start.

“In Ontario, for example, vacation pay has to be calculated as a function of wages, and wages are defined under the Employment Standards Act (ESA) quite broadly,” he says. “Really, it encompasses any monetary compensation under the ESA or an employment contract, except for discretionary incentive compensation - true discretionary bonuses are not counted as wages and therefore don't need to factor into vacation pay, but non-discretionary bonuses, which the vast majority of bonuses really are, and commission payments need to be to be included in calculating vacation pay.”

The liability for miscalculated vacation pay can be significant, says Smith.

“Obviously, it depends on the employee's commission and incentive compensation that they received, but, for example, a highly paid salesperson might make hundreds of thousands of dollars a year in commissions, and if they're not getting vacation pay on those commissions, that can be massive amounts of vacation pay for which the employer has taken on liability,” he says.

Cross-jurisdictional compliance

For Gibson, the rise of remote work has made the location of employment a significant compliance problem for employers, especially if their employees have moved.

“Typically, the jurisdiction of employment is where an employee is located, not the employer,” says Gibson. “For example, if you’re a Saskatchewan-based business and now suddenly one of your employees is working in BC - not just a work trip or a short project, but permanently working there – then they're governed by BC employment standards.”

In such circumstances, employers need to know where exactly remote employees are and update their employment contracts to comply with the relevant legislation and the employer’s policies, says Gibson.

“There's a lot of liability that can arise, from employment standards complaints to violation of workers’ compensation legislation, health and safety, and tax issues for failing to provide the proper remittances,” she says. “Sometimes [an employee moving out of province] just happens - it's not meant to cause an employer problems, but it's important that you have appropriate remote work policies or a contract that dictates what notice and approvals need to be provided.”

Managing difficult employees

Managing the employment relationship involves many legal rules, so there are many potential pitfalls for HR. Gibson says one of the big issues she’s been dealing with lately is how employers manage difficult employees.

“Employers call me when they've reached the last straw and they need to get an employee out due to poor performance, but they have absolutely no documentation on that employee's performance being subpar or any warnings that have indicated that the employee’s job is on the line,” she says. “When that happens, it’s very difficult to terminate an employee for cause, and if you're looking at terminating without cause the common law and statutory obligations can be quite high and expensive for an employer.”

“I always recommend dealing with performance issues as they arise, even if it's just coaching meetings, documenting discussions, or warning the employee that their job is on the line if they don't improve, so you can demonstrate that you have good and sufficient reason establishing cause down the line,” adds Gibson.

If things get to the point of termination, some employers are getting tripped up by not paying out statutory termination entitlements and issuing records of employment on time, says Smith.

“In Ontario, for example, the statutory termination entitlements are required to be paid the next pay day or within seven days after the dismissal, whichever one is later - that's pretty quick for an employer to get their ducks in a row and make sure that they're paying the full termination entitlements,” he says. “It's certainly manageable for employers if they plan for it, but sometimes a termination comes quickly and HR may not have an opportunity to get ready - then they're scrambling to get it done.”

Accommodation process

Smith and Gibson agree that an area in which HR often has difficulty - leading to slip-ups – is accommodation.

“A common issue that I've seen throughout my career, and continue to see, is employers being overly rigid in determining how and whether they can accommodate an employee's limitations,” says Smith. “Managers and HR people - more commonly managers who may not be as familiar with human rights principles - assessing that they're not able to accommodate somebody who has limitations that an adjudicator would say would have to be accommodated.”

Just because accommodation may be difficult, it doesn’t mean the duty to accommodate has been met, says Smith.

“The law fundamentally expects that, where an employer is able to reasonably accommodate, it will take on some level of hardship - that's implied in the idea that the endpoint is undue hardship,” he says. “If it's not undue hardship, it’s something that the employer may have to take on and really start thinking outside of the box.”

Catching a mistake

HR can play an important role in fixing missteps and co-ordinating positive action by connecting with management or others involved, communicating the liability, and stop what is happening, says Smith.

“It depends what the issue is, but the first step really will be to bring it to the senior levels of the organization and get some legal advice, because remedying broader organizational practices can involve a lot more strategy and be more challenging than one-off situations that you just need to shift on one issue,” he says.

“Number one, talk to legal counsel, but look at what the actual compliance issue is, determine whether it's farther reaching than the individual employee that you've identified, and then look at ways for the most economical and prudent way of fixing it going forward,” says Gibson. “In some circumstances where it’s more far-reaching than an individual employee, it’s an all-hands-on-deck dealing with a potential liability for the organization and the strategy for fixing it - it might be some proactive measures, it might be quietly checking it, it really will depend on what the issue is.”

HR professionals can help their organization deal with missteps - and avoid them in the first place – by continuing to educate and inform themselves, adds Gibson.

“Make sure that you know the legislation that governs your organization and that you're aware of any amendments and developments, whether that be the legislation itself, health and safety rules, or how tribunals and the courts have treated interpretation of those provisions - continuing education is incredibly important,” she says.

Smith notes that it can be challenging for HR professionals to keep abreast of everything, particularly for smaller employers with smaller HR teams, so it’s a good idea to keep legal advice close at hand, whether directly from legal counsel or updates from law firms.

“It's really just not possible to know everything, there's just too much along with the other day-to-day responsibilities of HR,” says Smith. “When they have, what I like to call, their “spidey-sense” tingling, then they should reach out to counsel - often when my clients reach out to me because their “spidey-senses” tingle, there's a reason for that.”

Latest stories