American employers are facing increasing burdens when it comes to hiring, especially for blue-collar positions. On top of recruiting challenges in a tight labor market, employers must navigate complex and frequently changing compliance rules around issues like healthcare, family leave, accommodations, and more. 

Unfortunately, the risks and costs associated with non-compliance have also grown over time. To make matters worse, employers now face increasing threats of litigation from rejected applicants alleging discriminatory hiring practices.

As a result, many employers — especially small and midsize businesses — are thinking twice before bringing on new hires. Some are even opting to freeze hiring altogether rather than expose themselves to compliance violations, lawsuits, or unbudgeted costs. 

“While this is understandable,” shares Jason Lamonica, COO of Spec on the Job, “widespread hiring freezes could spell trouble for an economy already teetering on the edge of recession after the pandemic’s blows.” 

Worker shortages have already emerged across many blue-collar fields like manufacturing, construction, and restaurants. Prolonged hesitancy around hiring threatens to lengthen any economic downturns and dampen the prospects for a timely recovery.

“Employers clearly need support, not more obstacles, to hire with confidence again,” says Lamonica. “Only then can job growth and economic gains have a chance to get back on track.” 

However, with litigation and regulatory risks mounting, hiring managers are understandably anxious. Unless policymakers take reasonable steps to simplify compliance rules, curb frivolous lawsuits, and provide hiring incentives, more and more positions may remain vacant for longer. The impacts on struggling industries and everyday Americans looking for jobs may be extremely painful.

The Main Challenges Around Hiring

When hiring new employees, particularly in blue-collar roles, employers must grapple with several key compliance challenges that have grown increasingly complex and risky in recent years.

One central area is providing affordable healthcare coverage and other statutory benefits. With costs escalating sharply, keeping up with annual reporting rules, and facing stiff penalties for violations, health insurance mandates have become a migraine for hiring managers. Additionally, a slew of state and local paid leave laws have been enacted to require sick days, family leave, bereavement leave, and more. Ensuring compliance with this patchwork of varying standards leaves companies exposed.

Employers aiming to follow best practices around inclusion and accommodation needs are also at heightened risk of litigation. Despite acting in good faith, businesses may face lawsuits if a candidate deems a question improper or an adverse decision discriminatory. For example, Title VII of the Civil Rights Act “protects employees and job applicants from employment discrimination based on race, color, religion, sex, and national origin.” 

According to Lamonica, employers with 15 or more employees must provide reasonable accommodation for employees’ sincerely held religious beliefs, practices, or observances that conflict with work duties “unless doing so would cause undue hardship for the employer,” he says. 

But exactly does “undue hardship” mean? Defending against allegations of this sort has increased, “and this has caused some employers to reconsider their hiring processes,” notes Lamonica. 

Finally, the most diligent hiring managers struggle to stay fully informed as legislation and regulations shift frequently while enforcement regimes toughen. An unintentional misstep could still yield fines or open the door to legal action, but few small or midsize business owners realistically have the time or resources to ensure every “i” is dotted and “t” crossed properly.

Facing this triple threat of complex requirements, litigation risks, and constantly moving goalposts, it is no wonder hiring managers are skittish about adding jobs. The associated burdens appear to outweigh the benefits for many companies these days, dimming outlooks for job seekers and economic growth alike. 

However, several reasonable reforms could help rebalance the scales.

The Broader Economic Impacts

Hiring freezes arising from increased compliance burdens and litigation fears do not bode well for an economy striving to recover from the impact of the COVID-19 pandemic. Worker shortages have already emerged as a hindrance in many blue-collar sectors like restaurants, manufacturing, and construction, and job openings outnumber qualified applicants across trades where demand remains steady or growing. Without an influx of new hires, project delays and production lags are expected to continue without an influx of new hires.

Supply chain disruptions may also intensify if trucking, warehouses, and ports lack adequate personnel for critical operations. As post-pandemic demand from consumers and businesses picks back up, worker shortfalls could mean lost sales, delayed orders, and myriad frustrations. Many industries are still ramping capacity back to pre-2020 levels, but persistent hiring struggles will only undermine this progress.

Over the long term, talent gaps are likely to also drive up labor costs. With fewer skilled workers available to meet operational needs, competitive wages and benefits must follow. Particularly if nationwide labor participation rates remain depressed following COVID-19, employees have negotiating leverage that necessitates higher compensation packages from employers looking to staff up. These rising costs may eventually filter down to consumers in the form of price hikes.

Ultimately, “every business slowed by short-staffing or facing unbudgeted costs from compliance missteps translates into another micro-level drag on macroeconomic turnaround efforts,” shares Lamonica. Aggregated over thousands of small and midsize companies, reduced output and revenue numbers can lengthen any recession. Alleviating hiring burdens could provide a societal lift when it is sorely needed.

Potential Solutions

While the risks and frustrations hiring managers feel are valid, steps can be taken to ease the growing burdens they face. Good-faith employers eager to add jobs amidst economic uncertainty deserve support, such as policy reforms and updated employer guidance to help resolve multiple pain points constructively.

To ease the compliance burden on employers, policymakers could streamline duplicative or contradictory regulations by standardizing the rules nationwide, providing clear safe harbor checklists, and guiding companies through the complex web of requirements. Additionally, measures aimed at curbing frivolous lawsuits over hiring practices could enable honest dialogue between employers and applicants without fear of legal retaliation as long as legitimate discrimination claims remain protected. 

Governments could also incentivize hiring through tax credits for jobs in high demand locally and via partially publicly-funded apprenticeship programs that train workers for roles suffering talent shortages. With a combination of simplifying compliance, reducing frivolous lawsuits, and implementing hiring incentives, good-faith employers would regain the confidence to accelerate their hiring capacities and contribute to economic recovery.

With balanced reforms like these, employers can regain the confidence to accelerate hiring, secure in the knowledge that good-faith efforts will not be punished. “This way, our economic engine can restart firing on all cylinders again,” Lamonica says. 

By constructively addressing legitimate employer anxieties, policymakers can pave the way for growth all stakeholders will share. Workers sidelined by the pandemic could find family-supporting jobs, struggling businesses may return to profitability with relief from exaggerated hiring burdens, and communities can access the talent and services needed to thrive once more.

Published By: Aize Perez