If you’re thinking of starting your own recruitment firm, one of the areas where you need to invest in some research is employment law. It seemed like employment law was static for many years and over the past few years has been changing so much it’s hard to keep track. There are a number of legal requirements for recruitment firms; here is a partial list of some of the most important. (Disclaimer: This is NOT legal advice. Please consult an attorney who specializes in employment law.)
The United States Equal Employment Opportunity Commission enforces a number of laws related to hiring practices, particularly those that are related to discrimination of protected classes. Recruitment firms are generally required to follow all of these laws if they regularly refer employees to employers, even if you don’t get paid for those referrals. Some of these laws include:
- Age Discrimination in Employment Act
- Americans with Disabilities Act
- Equal Pay Act
- Pregnancy Discrimination Act
- Title VII of the Civil Rights Act
These laws govern, among other things, information that you collect about job seekers, information you store about job seekers, and information you share about job seekers. Discrimination is not permitted in any part of the hiring process. Recruitment firms that are found guilty of violating these laws may be subject to significant civil and punitive damages that make it difficult for a business to continue operating.
Depending on location, there are legal requirements for recruitment firms that require different types of licensing. In addition to a general business license, there may be requirements for sales tax licenses, individual licenses, and more.
Employee Classification and Compliance
Whether you’re hiring people for your own team or working with clients, it’s important to understand the difference between employees and 1099 contractors. This is an area that gets a lot of scrutiny with many organizations running afoul of the law. Generally, if an organization controls when, where, and how someone works, they’re an employee. If you’re thinking about offering contract staffing to your business mix, you’ll also need to understand compliance (or hire a good EOR partner) for things like insurance, taxes, and other benefits.
Background Checks and Drug Screening
A number of US states and the federal government have legal requirements for recruitment firms surrounding background checks and drug screening. In many places, there are limits on when a background check can happen, what kind of information can be obtained, and whether or not permission is required. “Ban the Box” legislation seeks to exclude criminal history from employment decisions. As more and more US states decriminalize marijuana (while it currently remains illegal at the federal level), drug screening laws are another area that is rapidly changing.
Other Legal Requirements for Recruitment Firms
Employment law draws a lot of interest among lawmakers at both the state and federal levels (and internationally as well). States like California and New York often lead the way with new legislation that gets adopted in other states as well. This includes new legislation like salary history laws, salary ranges on job postings, and website accessibility. These laws often transcend geographical borders, so you and your clients may need to comply with laws in states other than the state where you are doing business. Because the laws are changing so rapidly, many employers are not aware of them. You may find that you’ll need to educate clients, push back against illegal practices or potentially stop working with them. Ongoing legal education will need to be part of your business practices and as always, access to a good attorney is paramount.