HR compliance updates employers need to know this quarter

In recent months, employers have sought guidance on the changing federal and state landscape for topics such as pay-or-play rules and tip regulations. In addition, employers are trying to refine their practices for standard HR operations like harassment prevention, performance improvement plans, and open enrollment. While answers to these topics can vary by locality, employer, and individual circumstances, federal agencies offer guidance that can help employers address day-to-day challenges in the workplace.

This article answers common questions about HR situations.

What are the best practices for preventing harassment in a remote work environment?

The U.S. Equal Employment Opportunity Commission is a federal agency responsible for enforcing federal equal employment opportunity laws. Each law listed below covers certain private-sector employers and prohibits harassment:

• Title VII of the Civil Rights Act of 1964
• Age Discrimination in Employment Act
• Americans with Disabilities Act
• Genetic Information Nondiscrimination Act

Employers with a partially or fully remote workforce face unique challenges in preventing harassment. The following sections highlight best practices employers can use to prevent harassment in a remote work environment.

Implement an anti-harassment policy

As a best practice, all employers should adopt a written anti-harassment policy and distribute it to all employees, either as a standalone policy or as part of the employee handbook. Employers with a remote workforce should ensure that their policy explicitly covers remote harassment. The policy may state that it applies everywhere work occurs, including at home, and provide examples of conduct that could constitute unlawful harassment in a remote work environment, such as inappropriate messages, offensive virtual backgrounds, unwanted behavior on video, or unwelcome after-hours conduct.

The policy should clearly state how employees may report instances of harassment and outline the consequences for failing to comply with the organization’s anti-harassment policy. Additionally, the policy should be easily accessible to remote employees by including it on the organization’s intranet website or sending it to all employees via email.

Employers should regularly review their anti-harassment policies to ensure they are up to date with current federal, state, and local requirements.

Provide virtual training

An important step in preventing harassment is providing anti-harassment training to all employees that identifies their rights and responsibilities under the employer’s anti-harassment policy and applicable laws. Employers with a remote workforce will generally need to administer such training virtually. To increase the efficacy of virtual training, employers may consider using an interactive training protocol (and may be required to do so under certain state anti-harassment training requirements). Employers may also consider providing live training with a mechanism for employees to ask questions during the training (e.g., through a chat messaging system).

The training should give clear examples of harassment that may occur in a remote work environment, how other employees can identify such harassment, steps employees can take as a bystander to prevent and mitigate harassment, how employees can report such harassment through the company’s reporting system, and the consequences for failure to comply with the policy. The training should also establish that the same professional standards apply regardless of where the work is occurring and provide clear expectations.

Employers may also consider providing separate training for managers and supervisors (and may be required to do so under certain state laws). Such training should teach managers and supervisors how to identify potential harassment in remote environments, how to respond to formal and informal complaints (including how to escalate to HR personnel or more senior employees), and how to avoid retaliating against employees who allege harassment.

Develop an effective virtual reporting mechanism

Reporting harassment may be more difficult in a remote work environment, as employees often have less frequent contact with the parties responsible for receiving and responding to such allegations. Therefore, employers with a remote workforce must establish effective virtual reporting mechanisms and clearly communicate them to all employees. Employers should list the parties with whom employees may file harassment claims (e.g., their direct manager, HR personnel, or a designated alternate when the manager or HR representative is the subject of the claim) and provide their contact information. Employers may also provide an anonymous online portal or hotline employees can use to report harassment.

Finally, employers should ensure that guidelines for reporting harassment are easily accessible to remote employees, such as by including the information on the company’s intranet, in an employee handbook, or in a standalone policy.

Establish guidelines for technology and communication

In some instances, remote work environments are more casual and informal, which can inadvertently lead to unprofessional behavior. To mitigate this problem, employers may consider establishing written expectations for how remote employees communicate and use the organization’s work platforms. For example, employers may require a professional tone and limit the use of such channels to appropriate work-related discussions during regular business hours. Employers may also establish guidelines for video meetings, including appropriate backgrounds, attire, and behavior. For instance, employers may require business-casual attire or ask employees to use a neutral virtual background for video calls. In all cases, employers should emphasize that the virtual workplace requires the same level of professionalism expected in an office or other in-person environment.

In addition, employers may establish internal guidelines for how the organization monitors communications made through its platforms. Employers that choose to monitor employee communications should generally advise employees of such monitoring in a written policy and ensure compliance with state laws regarding electronic monitoring.

Employer takeaways

Harassment claims can lead to significant legal penalties and reputational harm to employers. Employers with a remote workforce face unique challenges in preventing and responding to allegations of harassment as the lines between work and home are blurred. To prevent harassment in a virtual workplace, employers should modernize their anti-harassment practices to reduce the risk of harassment claims.

What happens if an employee misses open enrollment?

For an employee, missing the open enrollment deadline can mean losing coverage or being unable to change benefits elections, which can have a significant financial impact. For employers, an employee’s missed deadline can result in additional administrative burdens and unhappy or unproductive employees.

Legally, employers are not required to take any action for employees who have missed the open enrollment deadline. In fact, an employer’s benefits plans may prohibit it from making exceptions for employees who do not elect benefits within a certain period, such as before the new plan year begins.

A key exception to these terms is if an employee qualifies for a special enrollment period (SEP). Employees who experience qualifying life events (such as getting married, divorced, or legally separated; having or adopting a child; or moving to a new residence or work location that affects benefits eligibility) are eligible to enroll in or make changes to their benefits elections outside of the open enrollment period. It is in an employer’s best interest to create simple and comprehensive policies and procedures, so they are prepared in the event of a SEP.

Employers that are applicable large employers (ALEs) under the Affordable Care Act may have additional concerns. These employers must offer affordable minimum-value coverage to their full-time employees or risk the employer shared responsibility penalty. An ALE will not be subject to this penalty if it offers appropriate coverage to employees, regardless of whether they enrolled.

To ensure their businesses do not face penalties, ALEs should document that coverage has been offered. By requiring employees to sign either an acknowledgment-of-benefits form for those who opt in to coverage or a waiver-of-coverage form for those who opt out or miss the enrollment deadline for employer-based benefits packages, employers will create a uniform policy.

When is a performance improvement plan an appropriate use of employee discipline?

Employee discipline is one of the most challenging aspects of workforce management and can take various forms. One common form of employee discipline is a performance improvement plan (PIP). A PIP is typically a formal, written document that outlines an employee’s performance or behavioral deficiencies, sets forth clear, quantifiable goals, and establishes a timeline for completing those goals.

Lawful reason for a PIP

When determining whether to place an employee on a PIP, it’s vital to establish a lawful, valid, and nondiscriminatory reason for the PIP. Valid reasons for a PIP may include ongoing performance-related or attendance issues or inappropriate behavior in violation of company policy. However, a PIP may not be appropriate for more severe misconduct (such as violence, sexual harassment, or theft) or isolated incidents.

In all cases, employers may not put an employee on a PIP for any unlawful reason, including the following:

• Due to an employee’s protected characteristic, such as those protected under the following laws:
  
  • Title VII of the Civil Rights Act of 1964 prohibits discrimination on the basis of race, color, sex (including pregnancy and related medical conditions), national origin, and religion.
  • The Americans with Disabilities Act (ADA) prohibits discrimination on the basis of an employee’s disability.
  • The Age Discrimination in Employment Act prohibits discrimination on the basis of age (40 or older).
  • The Genetic Information Nondiscrimination Act prohibits discrimination on the basis of genetic information.
  • The Uniformed Services Employment and Reemployment Rights Act (USERRA) prohibits discrimination on the basis of past, current, or prospective military service.
• Because an employee seeks or takes protected leave, including:
  
  • Family and Medical Leave Act leave
  • USERRA military leave
  • Workers’ compensation leave
  • ADA disability leave
  • Temporary or short-term disability leave (including on the basis of pregnancy)
• Because an employee seeks or obtains a disability, pregnancy, or religious accommodation
• In response to protected whistleblowing activities
• In response to union-organizing activity as protected by the National Labor Relations Act
• In response to an employee who sought to enforce their wage rights, including those under the Fair Labor Standards Act

Additional legal risks

Even if the employer has established a lawful justification for placing an employee on a PIP, employees may take legal action when other circumstances reasonably suggest the PIP was implemented for unlawful reasons. Such circumstances may include:

• The employee recently requested or received an accommodation for disability, pregnancy, childbirth, or a related medical condition, or religious beliefs.
• The employee recently complained of discrimination, retaliation, unfair labor practices, inadequate wages, or similar issues.
• The employee has engaged in union-organizing activity.

Document the reason for the PIP

Employers must document the lawful, nondiscriminatory reason for placing an employee on a PIP to avoid a potential claim of discrimination or retaliation. Specifically, if an employee later claims they were disciplined for an unlawful reason, proper and timely documentation can provide the employer with a contemporaneous defense.

Employer takeaways

Employee discipline can be challenging, and an effective PIP practice can be a critical tool for employers. PIPs can provide a helpful framework for employees to understand and improve performance deficiencies and for employers to work with employees to improve poor performance. Additionally, a PIP can help support employers who decide to take further disciplinary action against an employee who cannot improve through a PIP. Therefore, employers must develop a clear and consistent PIP practice and ensure proper documentation. Employers may also wish to train managers, supervisors, and HR personnel to create and implement effective PIPs.

What ACA changes will impact employers in 2027?

The Affordable Care Act (ACA) requires applicable large employers (ALEs) to offer affordable, minimum-value (MV) health coverage to their full-time employees (FTEs) or risk paying a penalty. This employer mandate provision is known as the “employer shared responsibility” or “pay-or-play” rules. An ALE is liable for a penalty only if one or more of its FTEs receive a premium tax credit (PTC) to pay for health insurance through an ACA Exchange (or Marketplace).

Employers should be aware of the following changes related to the ACA’s pay-or-play rules for 2027:

• An ALE’s health coverage is considered affordable for FTEs if their required contribution for self-only coverage does not exceed 10.22% of their household income for the year (up from 9.96% for 2026).
• Pay-or-play penalty amounts increase. For example, ALEs assessed with penalties because their coverage is unaffordable may be charged a monthly penalty of $472.50 for each FTE who receives a PTC (up from $417.50 for 2026).

In addition, the enhanced PTC expired at the end of 2025, meaning fewer individuals qualify for the PTC and subsidy amounts are smaller.

Action items

ALEs should review the pay-or-play changes for 2027 before the upcoming plan year. The increase in penalty amounts may make it more important than ever for an ALE to offer affordable, MV health coverage to its FTEs. Also, due to the increased affordability percentage, ALEs may be able to charge employees more for coverage while still avoiding penalties. Because the enhanced PTC has expired, fewer employees may qualify for the subsidy.

How can employers comply with FLSA tip regulations?

Tipped employees are common in restaurants, hotels, salons, and other service industries. The Fair Labor Standards Act (FLSA) imposes specific wage and hour rules that apply only to tipped workers. These rules include requirements for calculating minimum wage and overtime pay for tipped employees, restricting which workers may share in tip pools, and addressing mandatory service charges.

Tip-related violations are a frequent source of administrative investigations and private lawsuits. Failure to comply with the FLSA’s tip requirements can lead to costly investigations, civil penalties, back wages, liquidated damages liabilities, and reputational harm. Establishing best practices can help employers reduce legal risks and stay compliant with the FLSA’s wage and hour requirements for tipped workers.

Best practices for complying with FLSA tip regulations

The FLSA requires employers who take a tip credit to comply with certain notice, recordkeeping, and other requirements. Establishing effective practices to comply with these requirements not only satisfies legal obligations but also protects organizations during audits and disputes. To comply with the FLSA’s tip regulations, employers can consider implementing the following employment practices.

Provide tipped employees with written notice

Before claiming any tip credit, employers should provide each tipped employee with a written notice containing the required information, including the cash wage rate, the tip credit amount, and their rights to retain tips. While the notice need not be in writing, the U.S. Department of Labor (DOL) encourages employers to do so. Employers can also have employees sign an acknowledgment that they have received and understand the tip credit notice. In addition, employers should provide tipped employees with written notice whenever the cash wage or tip credit changes.

Ensure tip pools are properly structured

Before implementing a tip pool, employers should decide if the pool will be traditional or nontraditional. Employers that implement a traditional tip pool should notify tipped employees in writing of any required tip pool contributions and restrict participation to employees who customarily and regularly receive tips. Employers with a nontraditional tip pool should ensure that all employees participating in the pool are paid at least the federal minimum wage. In workplaces with a tip pool, employers should ensure that the employer, managers, and supervisors are excluded from the pool, regardless of whether they perform tipped duties.

Treat service charges as wages

If employers require customers to pay mandatory service charges, they must decide whether to distribute any portion of those charges to employees. If employers distribute service charges to employees, they should categorize and document these payments as wages rather than tips. Employers should include any portion distributed to employees as part of their regular rate of pay when calculating overtime.

Track tipped and nontipped duties for tipped employees

For dual-job employees, employers should track the hours employees spend performing tipped and nontipped duties and ensure they do not take a tip credit for hours tipped employees spend working in their nontipped occupations. If employees regularly perform work in a separate, nontipped occupation, employers should ensure that they are paid at least the full minimum wage for that time. Employers should also consider creating job descriptions for each tipped position, identifying the core duties of each tipped occupation, and separating duties that directly produce tips from those that do not.

Review credit card tip deductions

If employers deduct credit card fees from employee tips, they should ensure that the deduction matches the actual fee charged by the credit card company. In addition, employers should ensure that the deducted amount does not reduce a tipped employee’s hourly wage below the minimum wage. Employers should also ensure that tip amounts due to employees from credit cards are paid by the next regular payday, even if the employer is waiting for reimbursement from the credit card company.

Maintain accurate tip and time records

Maintaining accurate tip and time records is essential for complying with the FLSA. Detailed records of hours worked, wages and tips paid, and amounts claimed as tip credit are necessary for verifying an employer’s compliance with the FLSA’s minimum wage and overtime requirements. Accurate records can help employers demonstrate their compliance and protect themselves against penalties and civil litigation. In addition, employers should ensure that their recordkeeping policies and practices align with the FLSA’s recordkeeping requirements.

Conduct internal audits

Establishing compliant policies and practices for tipped employees is essential for preventing FLSA violations. Conducting regular audits of tip credit, tip pooling, employee notice, and service charge practices and policies helps ensure these systems and policies are operating properly. Audits can help employers catch and correct errors before they become legal issues.

Train managers and supervisors

Employers can better ensure compliance with the FLSA’s tip regulations by training managers and supervisors. Employers can train managers and supervisors on tip credit requirements, tip pools, dual-job requirements, and the documentation of an employee’s nontipped duties. Managers and supervisors should know how to identify potential tip credit issues and how to report them. Employers should train managers and supervisors regularly on FLSA tip credit regulations, but at a minimum, at the time of hire and once per year thereafter. Employers can consider providing managers and supervisors with resources to enhance their understanding of the FLSA’s tip credit regulations.

Comply with state and local laws

Many states and localities impose additional or different tip regulations on employers. Several states do not permit a tip credit, while others allow a tip credit but establish a higher minimum wage rate or apply their own notice, certification, or recordkeeping requirements. Therefore, employers should ensure that their policies and procedures related to tipped employees comply with the laws of each jurisdiction in which they operate.

Employer takeaways

Employers that fail to comply with the FLSA’s tip credit regulations can be exposed to significant legal and reputational harm. Accordingly, employers should ensure they understand their obligations under the FLSA’s tip regulations and implement best practices to comply with the law.

Links and resources

• The FLSA’s tip regulations
• The DOL’s guidance on tip regulations under the FLSA
• The DOL’s Fact Sheet #15: Tipped Employees Under the FLSA

Employers should note that compliance requirements vary by locality, and they should contact local legal counsel for legal advice. We’ll keep you apprised of noteworthy updates on these topics. For resources on any of these topics discussed, contact us today.

This article is not intended to be exhaustive, nor should any discussion or opinions be construed as legal or professional advice. © 2026 Zywave, Inc. All rights reserved.