HR compliance is more than red tape—it’s a legal obligation that protects both your company and your employees. Yet, for many organizations, compliance becomes a minefield of regulations that are hard to track, interpret, and implement. From discriminatory hiring practices to improper employee classification, one mistake can lead to fines, lawsuits, reputational damage, or worse—government audits.
The challenge multiplies when HR teams manage these responsibilities manually. That’s where an Applicant Tracking System (ATS) becomes indispensable. An ATS doesn’t just streamline hiring—it embeds compliance into your recruitment processes so you’re not constantly playing catch-up or cleaning up after mistakes.
Below are seven of the most common HR compliance issues—and how an ATS helps mitigate them.
HR Compliance Issues & How to Solve Them with an ATS
1. Violating Equal Employment Opportunity (EEO) Laws
The Equal Employment Opportunity Commission (EEOC) enforces laws that prohibit discrimination based on race, color, religion, sex, national origin, age, disability, or genetic information. Violating these laws—even unintentionally—can result in legal action, settlements, or brand damage.
Job postings are often the first place where noncompliance begins. Biased language, such as gender-coded words (“rockstar developer” or “ninja marketer”), or specifying age ranges or physical capabilities, can be flagged as discriminatory.
An ATS can help by providing standardized, EEO-compliant job description templates and offering language analysis tools that detect potentially biased or non-inclusive wording. It also ensures that all job postings adhere to company-approved formats, reducing risk from inconsistencies created by individual hiring managers.
2. Asking Legally Prohibited Interview Questions
Certain questions are off-limits during interviews under laws like Title VII of the Civil Rights Act, the Age Discrimination in Employment Act, and the Americans with Disabilities Act. Asking about marital status, plans to have children, religious practices, or even where someone was born could be seen as discriminatory.
ATS platforms reduce this risk by offering structured interview guides with pre-approved, compliant questions. They ensure every candidate is evaluated consistently based on job-related criteria, not subjective or personal factors. With digital record-keeping built in, the ATS also preserves a compliance trail in case your hiring practices are ever called into question.
3. Non-Compliance with Data Privacy Regulations (e.g., GDPR, CCPA)
Modern hiring involves collecting vast amounts of personal data—resumes, identification documents, contact info, salary history. Failing to safeguard this data violates data protection regulations such as the General Data Protection Regulation (GDPR) in the EU or the California Consumer Privacy Act (CCPA) in the U.S.
Manual systems—like spreadsheets or email threads—make it easy to mishandle or expose sensitive data. A good ATS uses encryption, role-based access controls, and secure cloud infrastructure to protect applicant information. Most also include data retention tools that automatically delete outdated records to comply with legal timelines.
4. Misclassifying Employees and Independent Contractors
Incorrectly classifying a worker can have serious consequences under IRS rules, the Fair Labor Standards Act (FLSA), or local labor laws. If a contractor is treated like a full-time employee, your company may owe back pay, unpaid taxes, and benefits contributions.
An ATS reduces classification risks by enforcing structured job templates and workflows. These templates can help distinguish clearly between employee and contractor roles, ensuring that employment terms align with current legal standards. Some ATS platforms even integrate with legal advisory tools to flag inconsistencies before an offer is made.
5. Payroll Errors and Wage-and-Hour Violations
The FLSA requires employers to pay minimum wage, track hours, and pay overtime. Mistakes in wage calculations or failure to pay overtime can lead to Department of Labor audits and employee lawsuits.
Although an ATS doesn’t process payroll directly, it plays a pivotal role in ensuring accurate wage setup. Integrated ATS and HR systems ensure that job offers, compensation bands, and work hours are properly captured at the point of hire. This information then flows into payroll systems, reducing manual errors and ensuring compliance with wage-and-hour laws.
6. Mishandling Protected Leaves (e.g., FMLA, ADA, State Laws)
Leave management must comply with the Family and Medical Leave Act (FMLA), the Americans with Disabilities Act (ADA), and various state-level laws. Failing to approve legitimate leave or penalizing someone for taking protected time off can result in lawsuits or federal investigations.
An ATS helps by integrating with HR systems that track time off requests and flag discrepancies. More advanced systems offer rule-based automation that checks eligibility, maintains documentation, and alerts HR when specific legal thresholds are reached. This ensures leaves are handled in a consistent and legally compliant manner across departments.
7. Failing to Promote Diversity and Inclusion in Hiring
Affirmative action requirements and Equal Opportunity regulations often require companies—especially those with federal contracts or in regulated industries—to demonstrate active efforts toward inclusive hiring. Lack of diversity not only affects company culture but may trigger audits or public scrutiny.
ATS platforms support inclusive hiring by enabling blind screening (removing names, genders, or photos from resumes), providing real-time diversity analytics, and helping HR track outreach across underrepresented groups. Some systems also analyze job ads for exclusive language and suggest changes to appeal to a wider range of applicants. This removes subjectivity from early screening and promotes equitable opportunity.
Conclusion
Managing HR compliance doesn’t have to be stressful. With so many moving parts – from job listings to data security and diversity – it’s easy to feel overwhelmed. However, ignoring these issues can lead to more than just fines. It can disrupt workflow, drain resources, and slow hiring.
FAQs:
- What is an ATS, and how can it help with HR compliance?
An Applicant Tracking System (ATS) automates the hiring process, from job postings to candidate tracking. It helps with HR compliance by standardizing job descriptions, managing data securely, guiding interviews, and promoting unbiased hiring. - How does an ATS prevent discriminatory job listings?
ATS platforms often include standardized templates and language analysis tools to help eliminate biased wording. This ensures job postings align with Equal Employment Opportunity (EEO) guidelines. - Can an ATS secure applicant data?
Yes, modern ATS systems come with encryption and access controls. They store applicant data securely and restrict access to authorized users, helping you meet GDPR and other data protection regulations. - How can an ATS promote diversity in hiring?
Many ATS tools offer blind hiring features that anonymize applicant data during initial screening. They can also analyze job descriptions for biased language and track diversity metrics throughout the hiring process. - What should I look for when choosing an ATS for compliance?
Look for features like data security, compliance tracking, standardized templates, and integration with payroll systems. Ensure the platform updates regularly to keep up with changing regulations.