Common Compliance Mistakes – And How HR Tech Can Help Fix Them

Staying on top of compliance is no small feat these days. This month, HR pros have been busy with the usual January 1 legislative updates and getting up to speed on the executive orders President Trump issued during his first week in office.

For HR pros, especially those at small- to medium-sized businesses (SMBs) with limited resources, keeping up with compliance updates can quickly become overwhelming – which is why they often turn to experts for guidance. 

Dave Deitering, General Manager for the HR compliance solutions at Mitratech, specializes in strategy, growth and making clients successful using Mitratech technology and services to improve their outcomes while Susan Anderson, Head of HR Compliance Services and Content at Mitratech, focuses on the strategic integration of emerging technology into HR practices.

Together, they offer a comprehensive perspective on how HR pros can use technology to keep up with employment law changes to stay in compliance with evolving legislation.

Common Compliance Mistakes Employers Make

Compliance challenges often arise from a few common mistakes, including a lack of knowledge about legal obligations, a failure to plan for growth, and over-reliance on Google and generative AI.

1. Lack of Knowledge About Legal Obligations

Many organizations fail to understand exactly what regulations apply to them, Deitering said. There’s often a general lack of knowledge about the required actions, controls, policies and procedures that need to be in place. For example, several compliance requirements vary by employee count, state and industry. 

To be fair, it’s complicated. These complex layers can make it challenging for businesses to stay informed – especially for SMBs that don’t have dedicated compliance specialists on staff.

2. Failure to Plan for Growth 

Plus, as businesses grow, so do their compliance responsibilities, Anderson pointed out. Crossing certain growth thresholds – like hiring in a new state or hiring an 11th or a 50th employee, for example – triggers new regulations, which some companies overlook.

Reviewing local, state, and federal regulations to learn what applies at different employee thresholds can be very time-consuming. 

3. Over-Reliance on Google and Gen AI

One challenge for many SMBs is the temptation to rely on self-service solutions like Google and ChatGPT, according to Anderson.

Many people feel they can figure things out on their own, but this can lead to unintended consequences due to the complexity of local, state, and federal regulations, as well as situational nuances, Anderson explained.

One particular area of concern is the increasing reliance on generative AI tools in a self-service capacity without the oversight of human expertise, such as legal counsel or professional legal or HR compliance experts.

Without supervision by qualified experts, Google searches and generative AI can lead to potential problems, including: 

• Outdated or inaccurate info. Labor and employment laws change regularly, and the highest-ranking search results – the first page of Google – may not reflect the latest regulations. Plus, AI-generated content may also be pulled from outdated sources. Relying on incorrect info can lead to compliance violations.
• Oversimplified or misleading interpretations. Employment laws – think the ADA, FMLA, and FLSA – are complicated. AI models summarize info but often lack crucial legal nuances. Even attorneys have gotten tripped up by AI hallucinations while doing legal research. 
• A lack of context-specific guidance. A Google search can provide information on a single FMLA case, but the specific facts matter. If the details differ, the law may be applied differently. Plus, HR compliance often depends on factors like jurisdiction, company policies, and union agreements, which require tailored legal or expert advice.
• Employee perception and engagement. An over-reliance on AI in HR functions can lead to disengagement if employees perceive a lack of the human element in employee relations.

Of course, AI and search engines are valuable tools, but complicated issues, like HR compliance, require more sophisticated technology and human expertise.

How HR Technology Provides Compliance Solutions

The good news is, the right HR technology can help mitigate compliance risks. Here’s how:

1. Integrated Workflows Save Time, Reduce Errors

An important factor in choosing HR technology is the ability to integrate processes directly into the workflow, according to Deitering. Integrated workflows make compliance easier by connecting tasks across departments and automating key processes. 

In practical terms, integrated workflows reduce manual work, minimize errors and ensure everything is done on time. It’s an easier way to keep things running smoothly and avoid compliance headaches.

For example, take Mitratech’s I-9 solution, Deitering said. Most clients won’t use it in isolation – it’s part of a larger onboarding process. That’s why Mitratech prioritizes interoperability, ensuring HR pros and SMBs aren’t left managing disconnected systems. 

2. Proactive Notifications: Alerts Flag Potential Issues

Some HR software is currently sophisticated enough to flag potential compliance issues before they occur, according to Anderson. 

For example, if an employer is planning to hire in a new state, there’s a whole new set of regulations to consider, Anderson pointed out. Or, if a company with 10 employees is about to hire its 11th staffer, this triggers new federal regulations.

Mitratech’s platform software suite proactively notifies HR with alerts when the company is about to be subject to new regulations, Anderson explained. This feature helps SMB leaders make smart business decisions during the planning phase.

3. Smart Tools for Ongoing Compliance Efforts

Once employers have a clear plan in place, the next step is turning those strategies into action, Anderson said. 

Using the example from above, let’s say the employer moves from planning to action by hiring an employee in a new state. Now the employer needs clear, actionable guidance to comply with its new legal obligations.

We equip employers with tools that make compliance easier to manage, Anderson explained. A great example of this is the employee handbook. Every employer should have one, as it often reflects regulatory requirements. However, if you’re a multistate employer, managing a handbook can get complicated. 

Mitratech’s compliance suite includes a smart employee handbook feature that notifies employers of any changes, Anderson said. When a new law or best practice comes into effect, the system sends a notification and automatically updates relevant handbook policies, ensuring compliance without manual effort.

4. Leveraging AI Responsibly

In the employment law and compliance context, leveraging AI responsibly means combining AI with human expertise for accurate and actionable compliance guidance that protects the company.

“What I would caution your readers on in the adoption of AI is to use it in a way that’s going to make your business more efficient but without removing the human elements,” said Deitering.

“We have found that it’s the combination of human experts and technology together that creates the most reliable outcome for our customers,” Anderson explained.

In a 2023 study, Mitratech asked ChatGPT several HR compliance questions and asked HR pros and an attorney to rate the answers on several factors, including accuracy. ChatGPT’s answers were “too often inaccurate, incomplete or misleading in a way that could be costly to a business that wants to lean on the tool to answer HR questions,” Anderson commented.

That holds true in the real world, too. Anderson said she’s had customers contact her after using generative AI to confirm whether the information they received was legit — and in many cases, the advice they received was incomplete or missed important updates or nuances.

It’s important to ensure that a tech vendor isn’t just providing automated tools but also has deep expertise behind those tools to ensure accuracy and reliability, Anderson explained. With the growing number of new technologies leveraging generative AI, caution is needed to maintain both accuracy and quality in the solutions offered.

Deitering agreed that working with a reputable HR tech vendor is crucial. For example, Mitratech’s I-9 solution has maintained a perfect record for more than 17 years without any fines for I-9 errors.

That kind of proven track record demonstrates a vendor’s reliability to help you avoid expensive compliance missteps.

The Cost of Noncompliance

When compliance is overlooked or managed poorly, costs add up quickly, whether the cases involve investigations from federal agencies or legal disputes that wind up in front of a jury.  Here are a few examples:

EEOC Recovered Almost $700M in FY 2024

Two new reports from the EEOC show just how expensive noncompliance can be. In FY 2024, the agency secured nearly $700 million for victims of alleged employment discrimination. And the agency’s Office of General Counsel obtained a settlement or favorable judgment in 128 of the 132 suits resolved in FY 2024 – or 97% of its caseload!

DOL Recovered Nearly $150M in Back Wages

And according to Impact in Fiscal Year 2024, the DOL’s Wage and Hour Division (WHD) recovered more than $149.9 million in back wages due to FLSA mistakes alone. 

This tally includes OT violations, minimum wage violations, tips-related violations, retaliation claims and penalties for violations of the child labor provisions of the FLSA.

Concerns About ‘Nuclear Verdicts’ Reach 80%

In Norton Rose Fulbright’s Annual Litigation Trends Survey, eight in 10 respondents said they were increasingly concerned with the growing number of “nuclear verdicts” – unexpectedly high jury verdicts, generally exceeding $10 million. For example: 

• In New York, a jury awarded $11.25 million to a Black fitness instructor who filed a lawsuit alleging she was fired after she complained about a co-worker’s racist and sexually inappropriate comments. 
• In Texas, a jury awarded $25.1 million to a former food and beverage manager who filed an unfair pay claim, alleging she was paid less than her male colleagues due to the “boy’s club” culture at the company.

The Tipping Point: Knowing When to Invest in HR Technology

The costs of noncompliance add up quickly, from fines and settlements to jury awards and added expenses. So, it’s clear that getting the right tools in place isn’t just a nice-to-have, it’s a must. 

But when’s the right time to invest in HR technology? Investing in HR tech becomes essential when manual processes can no longer keep up with the demands of a growing business.

As companies expand, managing compliance, tracking employee data, and streamlining workflows manually can lead to errors, inefficiencies, and missed deadlines.

The promising news is, there’s a good chance it will be easier to get approvals for tech upgrades in 2025, according to a Grant Thornton survey that garnered insight from more than 230 senior finance leaders.  

A whopping 66% of respondents said they expect to increase their spending on IT and technology over the next year.

Looking Ahead: Compliance Challenges in 2025

No matter what changes occur at the macro-political level – whether it’s an incoming administration or shifts driven by broader environmental factors – the reality for employers is the same: increased complexity, Deitering pointed out.

Employers face challenges from states and municipalities responding differently to federal actions, resulting in a patchwork of regulations that make compliance even harder, he said. Whether it’s higher or lower regulation, constant change requires employers to adapt. That’s where our solutions come in – to help employers stay ahead of the changes and understand what they need to do to comply with the law.

For an analysis of the legislative changes impacting HR this year, don’t miss the webinar, “Trump’s Agenda & HR: Understanding Legislative Actions and Preparing for Impact,” for actionable strategies.