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HR Compliance for Nonprofits

Human resources professionals and experienced nonprofit leaders know the importance of complying with the myriad of laws protecting workers. The legal requirements imposed by these laws touch every aspect of the employer-employee relationship. Failure to keep up with continually changing legal requirements and associated practices can be costly—both financially and reputationally.

In this article, we discuss several top HR compliance areas that may confound nonprofit employers. 

  1. Sorting Through Competing Legal Directives
  2. Other Areas that Warrant Monitoring
  3. Maintaining Compliance—What To Do

Sorting Through Competing Legal Directives

Federal, state, and local governments each have the authority to enact laws and regulations protecting workers’ rights. They frequently exercise this ability, creating a sea of legislation through which employers must wade to understand their obligations. 

At times, the laws and regulations coordinate or seamlessly overlap, but in many other instances, contrasting laws create confusion for employers and employees.

When Federal and State Laws Conflict

Federal law applies to employers in all 50 states, the District of Columbia, and federal territories. State and local laws impact only those employers operating within those jurisdictions. When federal, state, and local laws coincide, compliance is much easier for employers, but what happens when federal, state, and local laws do not agree? 

The U.S. Constitution specifies that federal law preempts state and local laws. In other words, federal law wins. There are two exceptions to this rule: if the federal law is unconstitutional or the state or local legislation provides employees with greater rights or protections. 

Here are two examples where employers must follow a state or local law despite the existence of differing federal legislation covering the same topic:

Expansion of Protected Classes

Title VII of the Federal Civil Rights Act of 1964 prohibits employment discrimination on the basis of specific, delineated protected classes (e.g., characteristics or attributes like race and age). Most states and some local governments have passed similar legislation to protect workers from illegal discrimination in the workplace, but a number have expanded the concept of protected class.

For example, the California Family Rights Act makes it illegal to discriminate against an employee who is a victim of domestic violence, sexual assault, or stalking. Several other states, such as Illinois, Florida, and North Carolina, also include this status in their list of protected classes. 

Similarly, New Jersey’s Law Against Discrimination prohibits discrimination based on familial status, such as being a single parent. Many other states, including New York and Connecticut, also protect this category. 

Nonprofits with employees in states with augmented lists of protected classes must take the necessary precautions to avoid and eliminate discriminatory behavior on the basis of categories identified by both federal and state law.

Minimum Wage 

Congress sets the federal minimum wage (currently $7.25 as of this article's publishing) as the floor for paying hourly workers, but that does not bar states and municipalities from requiring employers within their jurisdictions to pay more. Most states and territories set their minimum wage above the federal level.

A sampling of states and local governments demonstrates this flexibility:

  • Maryland – $13.25
  • Michigan – $10.10
  • Oregon –$13.50
  • Puerto Rico – $8.50

These scenarios are just a few instances where employers must follow local edicts even though they differ from federal requirements.

Legal Alignment Can Still Lead to Pitfalls

When applicable laws agree or at least are not divergent, you might think that satisfying legal requirements would be easy. However, this is not always the case. There are many instances where federal and local laws work in tandem yet still create a complex legal landscape for employers. Managing leaves of absence is a quintessential example of how multiple sources of legislation can cause implementation headaches. 

The primary federal law regulating employee health or family-related leaves of absence is the Family and Medical Leave Act (FMLA). Following Congress’s lead, several states enacted similar legislation providing workers with job-protected time off to tend to their or a family member’s significant illness. 

Many state versions of the FMLA add terms that run concurrent with, expand upon, or augment rights enumerated in the FMLA. For example, laws passed in Massachusetts, New Jersey, and New York provide for paid leave in certain circumstances. Additionally, the Massachusetts and New York leave laws apply to all employers, not just those with 50 or more employees.

Understanding how to coordinate federal and state laws to an employee’s unique situation can be tricky, and this intricacy can be compounded if multiple state legal schemes apply to a particular leave situation, such as state family and medical leave, state disability insurance laws, state sick leave requirements, and state anti-discrimination laws.

Multi-State Workforce

In addition to the tension between federal and state laws, nonprofits with employees located in multiple states must abide by the applicable laws of each state and municipality where their employees perform duties. Even if your nonprofit does not have a physical location in a particular state or city, the presence of employees in the locale will often trigger oversight by local authorities. 

Large, national charitable organizations routinely manage these coexisting obligations, but they can also affect regional or smaller outfits with employees located across state lines. Here’s an example: ABC organization is headquartered in New York City (NYC). It has a small branch location in New Jersey and remote employees in Connecticut.

ABC must adhere to the requisite New Jersey and Connecticut laws for their employees in those states. They must also follow federal, New York State, and NYC laws. Some organizations that find themselves in this situation will broaden their policies to account for mandates in all locations; others will publish a general policy that is clarified by relevant state or local-specific supplements.

Other Areas that Warrant Monitoring

In addition to the layered legal obligations from operating under the authority of multiple jurisdictions, there are some topics that are common compliance pain points for nonprofit HR professionals and leadership. They include: 

These and other areas governed by employment-related laws need special attention to ensure your nonprofit avoids liability.

Maintaining Compliance—What to Do

Running a legally compliant nonprofit can be overwhelming as you determine which laws apply to you, how they impact your organization, and if your HR practices meet the mark. Tools that can help you take that introspective look include HR Audits and HR Assessments.

These terms may sound interchangeable, but they are not. HR Audits drill down to identify how well your employee policies and procedures guide consistent and equitable practices and minimize legal liability. HR Assessments take a more sweeping review of the HR function. They check for compliance and evaluate how effective your HR policies, programs, and practices are in meeting employees’ needs and aligning with organizational goals.

Some organizations have the internal resources and expertise to perform these reviews and craft the necessary program updates, but not every nonprofit has these capabilities. In those instances, employment law attorneys or HR consultants can provide the support that matches your needs.

Regardless of how you ensure compliance, a commitment to understanding legal requirements and designing policies and practices that honor those obligations are critical to avoiding costly liabilities and maintaining fair and equitable employment practices.

This blog is an original work of the attributed author and is shared with permission via Foundant Technologies' website for informative purposes only as part of our educational content in the philanthropic sector. The views, thoughts, and opinions expressed in this text belong solely to the author and do not necessarily reflect Foundant's stance on this topic. If you have questions or comments, please reach out to our team.

About the Author

Jill brings to RealHR Solutions experience as a business owner, executive search consultant, and corporate HR professional. Throughout her career, she has had the ability to build strong relationships, identify client needs, and help company’s find solutions. As a search professional, she used these strengths to source and identify talent. Before joining RealHR, Jill was a Principal at Charleston Partners, a global executive search and talent advisory firm for Fortune 500 companies. She was also a Partner at Hayden Resource and previously founded her own search firm. Her prior HR experience includes retail and healthcare industry HR and operations management positions. Jill holds a master's in Industrial Social Work from Fordham University

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