Penalties for Non-Compliance with Employment Laws 

Compliance with employment laws is an integral part of running a business. Many of these laws are complex, and even minor violations can result in hefty fines. That’s why it’s crucial to understand how to avoid breaking the law. With the help of payroll outsourcing, you can ensure that your business complies with complex employment laws, so you can do your job without worrying about the legal side. 

Payroll outsourcing can help you stay on top of these laws by providing a single point of contact for all your employment-related needs.  

business leaders reevaluating actions for payroll outsourcing

What Are Grounds for Non-Compliance With Employment Laws? 

While labor laws are complicated, the government does not take non-compliance with leniency. When you run a business, you are expected to educate yourself about the labor laws you need to follow. You need to be careful about many aspects, including safety and health, minimum wage and overtime, workers’ compensation, workers’ classification, child labor law, anti-discrimination law, federally mandated leaves, and more.  

Failure to comply with any of these laws may raise an investigation, and if you’re found guilty of breaking these laws, you will expect to face charges and penalties accordingly.  

Penalties for Non-Compliance with Employment Laws 


Fines are one of the most common penalties for violating employment laws. The size of the fine depends on the size of the company, the number of employees, and the amount of money the company is accused of. The company will have to pay fines and backpay for each employee affected by the violation.  

Early last year, a Florida beauty supply retailer, Classy Beauty Supply Inc., violated the law by paying illegal wages to its workers. This company faced $53,841 in back wages after the Wage and Hour Division had confirmed their offense. Thus, it’s essential to know the minimum wage for each state and comply with the rules.  


Imprisonment is another standard penalty for violating employment laws. In the case of Classy Beauty Supply Inc., the company was ordered to pay $53,841 in back pay. That’s a pretty hefty fine. If you do not have the money to pay back, the court can order you to serve jail time. This punishment is often the result of a more extensive violation.  

In a separate case, Papa John’s franchisee, Abdul Jamil Khokhar, faced 60 days of jail time on top of paying $230,000 in restitution. Khokhar was found guilty of not paying overtime fees to his workers – a misdemeanor, and fabricating false business records – a felony.  

Loss of Reputation 

Your company’s loss of reputation usually follows when you break the law. In 2019, Founders Brewing Co. in Michigan was found guilty of discriminating against an employee. They may have settled the complaint after paying the charges, but their reputation took a solid hit when consumers took a boycott following the racial discrimination lawsuit.  

Some bars and stores stopped their beer orders while those who continued selling them noticed a significant drop in their sales.  

Loss of Current or Potential Staff 

It’s expected for employees or potential staff to refuse to work for a company that has violated the labor laws. If you’re in the habit of breaking any of the rules, it will send a horrible message and could cause your business to lose a lot of employees. 

Loss of Productivity 

Violating employment laws will impact a company’s productivity. When you cannot pay your employees on time, you will have fewer employees, which will make the work take longer. The longer you wait to pay your employees, the less likely they will get the job done on time. 

business heads thinking of payroll outsourcing

Consider Payroll Outsourcing to Prevent These Problems 

As a business owner, you must take proactive steps in ensuring you are compliant with employment laws. However, with their complexity, we understand that compliance can be overwhelming.  

Therefore, we at ClearPath, are here to help. We can handle legal compliance matters, payroll management, and employee benefits, so you can focus on running your business. Call us today to book a consultation.