Organizations that implement robust human capital management strategies achieve 40% lower turnover rates and significantly higher productivity than those relying on traditional HR approaches. But what is an HCM and how does it differ from conventional human resources management?

Human capital management represents a fundamental shift in how businesses view and manage their workforce. Rather than treating employees as operational costs, HCM recognizes human capital as the most valuable asset driving organizational success and competitive advantage.

In this comprehensive guide, we’ll explore everything you need to know about human capital management, from its core definition to implementation best practices that can transform your organization’s approach to workforce management.

Definition of Human Capital Management

Human capital management (HCM) is a comprehensive business strategy that treats employees as valuable assets rather than costs. This strategic approach encompasses the entire employee life cycle from recruitment and hiring to development and retention, fundamentally changing how organizations invest in and optimize their workforce.

At its core, human capital management combines strategic workforce planning with modern technology solutions to optimize employee performance and align human resources with broader business goals. Unlike traditional HR functions that focus primarily on administrative tasks, HCM emphasizes maximizing employee potential and creating measurable business value through strategic talent management and HCM tools .

The evolution of human capital management HCM represents a significant departure from conventional human resource management. While traditional HR manages basic functions like payroll processing and compliance reporting, HCM integrates advanced analytics, strategic planning, and technology-driven solutions to create a more intelligent approach to workforce decisions.

Modern HCM strategy focuses on treating the organization’s employees as investments that require careful nurturing, development, and optimization. This approach recognizes that human capital represents the primary driver of innovation, optimizing productivity, and long-term organizational success in today’s knowledge-based economy.

Core Components of HCM

Effective human capital management includes several interconnected components that work together to optimize workforce performance and achieve business goals.

Workforce Planning and Strategic Talent Acquisition

Workforce planning forms the foundation of any successful HCM strategy. This process involves analyzing current workforce capabilities, forecasting future staffing needs, and developing strategies to bridge skills gaps. Organizations use workforce planning to ensure they have the right talent in place to support business growth and adapt to changing market conditions.

Strategic talent acquisition goes beyond traditional recruitment processes by aligning hiring decisions with long-term business strategy. This approach uses data analytics and market intelligence to identify and attract top talent that fits both current needs and future organizational direction.

Employee Development and Performance Management

Performance management within an HCM framework extends far beyond annual performance reviews. Modern performance management systems emphasize continuous feedback, goal alignment, and employee development planning. These systems help employees understand how their work contributes to broader business outcomes while providing managers with tools to support employee growth.

Career development and professional development programs are integral components that help retain employees while building the skills necessary for organizational success. These programs often include internal training opportunities, mentorship programs, and clear career planning pathways.

Compensation and Benefits Administration

Comprehensive benefits administration ensures that compensation packages align with market standards while supporting employee satisfaction and retention. Modern HCM approaches use data analytics to optimize HR processes, compensation strategies and ensure pay equity across the organization.

Employee self service portals have revolutionized how benefits administration operates, allowing current employees to manage their benefits, access employee records, and make changes without requiring extensive HR support, thereby supporting employee growth .

Analytics and Compliance Management

Advanced analytics capabilities enable hr professionals to make more intelligent workforce decisions based on data rather than intuition. These tools help organizations track key metrics like employee engagement, workforce productivity, and retention rates.

Compliance management ensures that organizations meet all relevant tax regulations and labor law requirements while minimizing compliance risks. Automated compliance tools help reduce the burden of routine tasks while ensuring accuracy and consistency.

HCM vs Traditional HR Management

The distinction between human capital management and traditional human resources management represents a fundamental shift in organizational philosophy and operational approach.

Traditional HR functions typically focus on administrative tasks and operational efficiency. Human resource departments have historically managed core HR functions like payroll processing, benefits enrollment, and compliance reporting. While these activities remain important, they represent a reactive approach to workforce management.

In contrast, HCM focuses on strategic employee development while HR handles administrative tasks. Human capital management emphasizes maximizing employee potential and aligning workforce with business goals, treating human resources as strategic assets rather than operational costs.

The HCM approach integrates workforce management with broader business strategy, ensuring that every aspect of the employee experience contributes to organizational success. This includes everything from recruitment process optimization to employee engagement initiatives that support company culture development.

Where traditional HR functions execute core activities, HCM drives organizational excellence and growth through strategic workforce optimization. This proactive approach helps organizations anticipate future needs, develop talent pipelines, and create competitive advantages through superior human capital management with the right HCM provider .

Benefits of Implementing HCM

Organizations that embrace comprehensive human capital management strategies realize significant benefits across multiple dimensions of business performance.

Improved Employee Retention and Satisfaction

Effective HCM strategies dramatically improve employee retention through strategic talent development and engagement programs. When employees feel valued and see clear paths for career advancement through a human resources management system , job satisfaction increases substantially. Organizations with strong employee development programs often see retention rates improve by 30-50%.

The focus on employee experience creates environments where employees feel empowered and engaged in their work. This leads to higher levels of employee satisfaction and stronger emotional connections to the organization.

Enhanced Operational Efficiency

HCM systems streamline hr processes and reduce manual tasks, allowing hr professionals to focus on strategic initiatives rather than administrative work. Automation of routine tasks like absence management, employee data updates, and compliance reporting frees up valuable time for higher-value activities.

The integration of various HR systems into unified platforms eliminates data silos and reduces errors associated with manual data entry. This operational efficiency translates directly into cost savings and improved accuracy across all HR functions.

Better Business Outcomes Through Strategic Workforce Management

Organizations implementing comprehensive HCM strategies consistently achieve better business outcomes through optimized workforce productivity. The alignment of employee goals with business objectives ensures that individual performance contributes directly to organizational success.

Data-driven decision making enabled by HCM analytics helps organizations identify trends, predict challenges, and optimize resource allocation. This strategic approach to workforce management often results in measurable improvements in key business metrics.

Stronger Company Culture and Employee Engagement

HCM initiatives that focus on employee development and recognition help build stronger company culture. When organizations invest in their people through training, development, and clear career pathways, employees respond with higher levels of engagement and commitment.

The emphasis on continuous improvement and feedback creates environments where employees feel heard and valued, leading to increased innovation and collaboration across the organization.

What is HCM Software?

Human capital management software, also known as HCM software, represents the technological foundation that enables organizations to implement comprehensive HCM strategies effectively. These integrated platforms combine multiple HR systems using cloud and mobile technology to create seamless, user-friendly experiences for both employees and administrators.

Modern HCM software automates payroll processing, benefits administration, employee self-service functions, and performance tracking within a single, unified platform. This integration eliminates the need for multiple disparate systems while providing comprehensive analytics tools for workforce planning and strategic decision-making.

The software provides powerful analytics capabilities that help organizations understand workforce trends, predict future needs, and optimize resource allocation. Insights like this allow HR professionals to make data-driven decisions in support of employee development.

Contemporary HCM platforms include sophisticated applicant tracking systems, comprehensive onboarding modules, and integrated training and development tools. This end-to-end functionality supports the entire employee lifecycle from initial recruitment through career development and eventual transition.

Types of HCM Software Solutions

Organizations can choose from several different approaches to implementing human capital management software, each with distinct advantages and considerations.

Best-of-breed solutions offer specialized functionality in specific areas like recruitment, performance management, or learning and development. While these solutions often provide deep functionality in their focus areas, they typically require integration with multiple vendors and can create complexity in data management and user experience.

Unified HCM platforms provide integrated solutions that cover all aspects of human capital management within a single system. These comprehensive HCM solutions offer simplified maintenance, consistent user experiences, and seamless data flow between different functional areas. The unified approach often provides better long-term value despite potentially higher initial costs.

Cloud-based SaaS models have become increasingly popular due to their ability to reduce IT costs while improving accessibility and scalability. Cloud based HCM software enables organizations to access their systems from anywhere while ensuring automatic updates and enhanced data security.

Mobile-enabled platforms support the growing trend toward remote and flexible work arrangements. These solutions ensure that employees and managers can access essential functions regardless of location, supporting modern workforce management requirements.

Key HCM Functions and Features

Comprehensive HCM systems provide a wide range of integrated functions designed to support every aspect of workforce management and employee development.

Talent Acquisition and Recruitment

Modern talent acquisition modules include sophisticated applicant tracking systems that streamline the entire recruitment process. These tools help organizations identify qualified candidates more efficiently while providing better experiences for both recruiters and applicants.

Advanced recruitment features often include automated candidate screening, interview scheduling, and integration with job boards and social media platforms. This technology helps organizations build stronger talent pipelines while reducing time-to-hire and improving candidate quality.

Performance Management and Employee Development

Comprehensive performance management tools support goal setting, continuous feedback, and regular performance evaluations. These systems help align individual objectives with organizational goals while providing frameworks for ongoing development and improvement.

Learning and development platforms integrated within HCM systems enable organizations to provide targeted training programs that support both individual career growth and organizational skill requirements. These tools often include compliance training tracking, skills assessments, and personalized learning pathways.

Workforce Analytics and Strategic Planning

Advanced analytics capabilities provide insights into workforce trends, productivity patterns, and employee engagement levels. These tools help organizations identify areas for improvement while supporting strategic workforce planning initiatives.

Predictive analytics features can help organizations anticipate future staffing needs, identify flight risks among high-value employees, and optimize workforce allocation across different business units or projects.

Employee Self-Service and Experience

Modern employee self service portals empower employees to manage many aspects of their employment relationship independently. These tools typically include access to pay stubs, benefits information, time-off requests, and personal information updates.

Self-service capabilities reduce administrative burden on HR staff while providing employees with immediate access to the information and services they need. This improved employee experience often leads to higher satisfaction and engagement levels.

How to Choose the Right HCM System

Selecting the right HCM software requires careful consideration of organizational needs, technical requirements, and long-term strategic objectives.

Define Clear Objectives and Requirements

Begin by identifying specific HR challenges that need to be addressed and establishing clear objectives for what the HCM system should accomplish. Consider factors like current workforce size, growth projections, compliance requirements, and integration needs with existing business systems.

Involve stakeholders from across the organization, including hr professionals, IT staff, and department leadership, to ensure that all perspectives and requirements are considered during the selection process.

Evaluate Scalability and Integration Capabilities

Choose solutions that can grow with your organization and adapt to changing business needs. Consider both current requirements and projected future needs when evaluating different HCM solutions.

Assess integration capabilities with existing business systems, including payroll providers, accounting software, and other enterprise applications. Seamless integration reduces implementation complexity and ensures consistent data across all business systems.

Consider Customization and User Experience

Look for HCM platforms that offer sufficient customization options to fit unique organizational workflows and processes. The system should be flexible enough to adapt to your business rather than forcing your organization to change established processes.

Evaluate the user experience for both administrators and end-users. Systems that are intuitive and easy to use typically see higher adoption rates and better long-term success.

Review Total Cost of Ownership

Calculate the complete cost of ownership, including implementation fees, training costs, ongoing maintenance, and potential customization expenses. Consider both initial investment and long-term operational costs when comparing different solutions.

Assess vendor support quality, training resources, and implementation services. Strong vendor support can significantly impact implementation success and long-term satisfaction with the chosen solution.

HCM Implementation Best Practices

Successful human capital management system implementation requires careful planning, stakeholder engagement, and attention to change management principles.

Stakeholder Involvement and Planning

Involve stakeholders from HR, IT, and department leadership throughout the selection and implementation process. This collaborative approach ensures that the chosen solution meets diverse organizational needs while building support for the new system.

Develop a comprehensive implementation plan that includes realistic timelines, resource allocation, and clear milestones. Consider potential challenges and develop contingency plans to address implementation obstacles.

Data Management and Migration

Clean and validate employee data before migrating to the new HCM platform. Poor data quality can significantly impact system performance and user adoption, so invest time in data cleanup and validation processes.

Develop data backup and recovery procedures to protect against potential data loss during the migration process. Test data migration procedures thoroughly before implementing the final transition.

Training and Change Management

To empower employees, provide comprehensive training to ensure successful user adoption across all levels of the organization. Different user groups may require different types of training, so develop targeted programs for administrators, managers, and general employees.

Implement change management strategies that help employees understand the benefits of the new system and address concerns about workflow changes. Clear communication about system benefits and ongoing support can significantly improve adoption rates.

Continuous Monitoring and Optimization

Monitor system performance and gather user feedback regularly to identify areas for improvement. Track key metrics like user adoption rates, system performance, and achievement of implementation objectives.

Plan for ongoing system optimization based on user feedback and changing business needs. Regular system reviews help ensure that the HCM platform continues to deliver value as the organization evolves.

The Future of Human Capital Management

The future of human capital management is being shaped by technological advancement, changing workforce expectations, and evolving business requirements.

Artificial Intelligence and Machine Learning Integration

Artificial intelligence and machine learning technologies are transforming HCM capabilities through enhanced analytics, automated processes, and predictive insights. These technologies enable more sophisticated workforce planning, automated candidate screening, and personalized employee development recommendations.

AI-powered systems can analyze vast amounts of employee data to identify patterns and trends that human analysts might miss. This capability supports more effective decision-making and helps organizations optimize their human capital investments.

Mobile-First and Remote Workforce Support

Mobile-first platforms are becoming essential as organizations embrace flexible work arrangements and remote workforce management. These solutions ensure that employees and managers can access critical HCM functions regardless of location or device.

The trend toward remote work is driving demand for more sophisticated collaboration tools, virtual onboarding capabilities, and digital employee engagement platforms integrated within comprehensive HCM solutions.

Personalized Employee Experience

Future HCM platforms will provide increasingly personalized experiences tailored to individual employee needs, career goals, and learning preferences. This personalization extends to everything from training recommendations to career development pathways.

Advanced analytics will enable organizations to create highly customized employee experiences that support both individual growth and organizational objectives. This personalized approach is expected to significantly improve employee engagement and retention.

Integration with Emerging Technologies

The integration of HCM systems with emerging technologies like blockchain, IoT devices, and advanced analytics platforms will create new possibilities for workforce management and employee engagement.

These technological integrations will enable more sophisticated tracking of employee performance, automated compliance management, and enhanced security for sensitive employee data.

Conclusion

Human capital management represents a fundamental transformation in how organizations approach workforce management, shifting from viewing employees as costs to recognizing them as strategic assets that drive competitive advantage. This comprehensive approach integrates strategic planning, advanced technology, and employee-focused practices to create sustainable business value.

The evolution from traditional HR functions to strategic human capital management reflects the growing recognition that organizational success depends on effectively developing, engaging, and retaining talent. Organizations that embrace this transformation consistently achieve better business outcomes through improved employee retention, enhanced operational efficiency, and stronger company culture.

As the business landscape continues to evolve, human capital management will become increasingly critical for organizations seeking to maintain competitive advantages in talent-driven markets. The integration of artificial intelligence, mobile technologies, and personalized employee experiences will further enhance the strategic value of comprehensive HCM approaches.

For organizations considering this transformation, the key lies in developing a clear HCM strategy that aligns workforce management with broader business objectives while investing in the technology and processes necessary to support long-term success. The future belongs to organizations that recognize human capital as their most valuable asset and manage it accordingly.

The Fair Labor Standards Act (FLSA) is one of the most foundational employment laws in the United States, governing issues such as minimum wage, overtime pay, recordkeeping, and child labor standards. While essential for protecting workers, the FLSA can pose significant compliance challenges for employers, particularly small and mid-sized businesses without large HR departments or in-house counsel.

Failing to comply with the FLSA can lead to costly litigation, government audits, penalties, and even reputational damage. That’s where a Professional Employer Organization (PEO) can make a difference.

What Is the Fair Labor Standards Act (FLSA)?

Enacted in 1938, the FLSA establishes critical employment standards in four primary areas:

• Minimum Wage: Currently set at $7.25 per hour at the federal level (states may set higher rates).

• Overtime Pay: Employees must receive one-and-a-half times their regular rate of pay for hours worked over 40 in a workweek, unless exempt.

• Recordkeeping: Employers must maintain accurate records of hours worked and wages paid.

• Child Labor: Restrictions exist regarding the types of jobs minors can perform and the hours they can work.

The law applies to most employers and employees, but complexities arise in classifying employees correctly, applying exemptions, and ensuring accurate time tracking.

The FLSA sets federal minimum standards, but many states—and even municipalities—enforce stricter labor laws. 

Employer Liability Under the FLSA

When employers violate the FLSA or their local equivalents, whether by misclassifying employees, failing to pay overtime, or neglecting recordkeeping requirements, they can face:

• Wage and Hour Lawsuits: Both individual and class-action suits are common.

• Back Wages and Penalties: Employers may be liable for unpaid wages, often covering two to three years plus interest and substantial penalties.

• Reputational Damage: Public lawsuits and audits can impact brand perception and recruiting.

For many businesses, especially those experiencing growth or high turnover, managing compliance with the FLSA can be daunting. That’s where PEOs provide critical support.

What Is a PEO and How Does It Work?

A Professional Employer Organization (PEO) like C2 Essentials is a firm that enters into a co-employment relationship with a business. Under this model, the PEO becomes the employer of record for tax and administrative purposes, while the client retains control over day-to-day operations.  Since the employees are paid under the PEO employer tax ID number, the client organization is completely immune to any payroll and payroll tax liabilities.

Key services PEO’s like C2 Essentials offer include:

• Protection from Employment Related Liability

• Payroll processing and reporting

• Complete employee lifecycle HR services 

• HR compliance - Federal, State, and Local

• Benefits administration

• Workers’ compensation and risk management

• Employment law support

This co-employment model allows businesses to offload many of the administrative burdens and potential liabilities associated with employment compliance while maintaining complete operational autonomy.

Legal and Regulatory Monitoring

FLSA regulations evolve over time through legislation, administrative rule changes, and case law. Staying ahead of these developments is essential, but can be time-consuming for small businesses.  When your workforce spans multiple jurisdictions, a PEO becomes a vital resource for maintaining consistent and lawful employment practices across the board.  For a full list of state labor departments and applicable wage laws, the U.S. Department of Labor offers an interactive resource here..

Final Thoughts: A Strategic Shield Against Liability

For employers navigating the complex world of FLSA compliance, a PEO like C2 Essentials is more than an outsourced service provider—it’s a strategic partner. By offering expertise in employee classification, wage and hour law, documentation, and ongoing compliance, a PEO helps businesses reduce risk and focus on growth.

While no partnership can eliminate all liability, a well-structured co-employment relationship backed by proven systems and legal knowledge puts businesses in a far stronger position to meet their obligations under the FLSA.

C2 Essentials: Your Trusted HR Compliance Partner

At C2 Essentials, we help employers navigate the complexities of wage and hour laws through proactive HR management, reliable payroll processing, and expert compliance support. Whether you're looking to mitigate risk or strengthen your internal processes, our team is ready to help you stay protected and focused on your business goals.

Contact us today to learn how a PEO relationship with C2 Essentials can support your compliance with the FLSA.

If you’re running a business, you already know that workers’ compensation is one of those areas that can quickly get complicated—and expensive. Between making sure you’re following every state’s rules, handling claims the right way, and trying to prevent workplace injuries in the first place, it’s easy for things to fall through the cracks. And when they do, the consequences can be serious: higher premiums, lawsuits, penalties, and unnecessary headaches.

That’s why more companies are turning to PEOs, or Professional Employer Organizations. These firms partner with businesses like yours to take on many HR responsibilities—payroll, benefits, compliance, and, yes, workers’ compensation. But a PEO does more than just lighten the load. When it comes to workers’ comp, they can actually help reduce your legal and financial liability in ways that go far beyond convenience.

Let’s talk about how.

Understanding the Risk You’re Carrying

Workers’ compensation exists to protect both employees and employers. If someone gets hurt on the job, they receive medical care and wage replacement, and in return, they typically can’t sue their employer. But even with this system in place, employers still shoulder a lot of risk.

You’re responsible for making sure your business complies with state workers’ comp laws, which can vary wildly depending on where you operate. You need to accurately classify employees, file reports, manage claims, and implement safety practices. And if something goes wrong—say, a misclassified employee gets injured, or a claim is mishandled—you could face audits, lawsuits, or a steep hike in your insurance premiums.

That’s a lot to manage, especially if you don’t have a large HR team. This is exactly where a PEO steps in.

How a PEO Helps Lighten the Load (and the Risk)

When you partner with a PEO, you're not handing over control of your business—but you are gaining a team of experts who share the responsibility. Through a co-employment model, the PEO becomes the employer of record for things like taxes and benefits, while you continue to run your day-to-day operations. This setup allows the PEO to manage much of your workers’ comp burden in ways that can directly lower your risk and reduce costs.

One of the biggest advantages is access to a master workers’ compensation policy. Instead of having to shop around for your own coverage—which might be expensive or limited based on your company size or claims history—you’re folded into the PEO’s broader policy. Because they pool multiple clients together, PEOs typically negotiate better rates with more comprehensive coverage. And since the PEO manages the policy, you don’t have to deal with yearly renewals, deposit requirements, or rate hikes tied to minor claims.

But it doesn’t stop at better insurance access. PEOs also bring serious claims management expertise to the table. If an employee gets hurt, the PEO handles everything from coordinating medical care to completing required documentation and communicating with the insurance carrier. 

They monitor recovery progress and make sure the claim doesn’t drag on longer than necessary, which helps keep your costs down. And because they deal with these scenarios every day, they know how to avoid the common errors that can turn a standard claim into a legal or financial mess.

Preventing Injuries Before They Happen

Here’s another big piece: safety. Preventing workplace injuries in the first place is one of the smartest ways to lower your liability—and your workers’ comp costs. Most PEOs don’t just help you react when something goes wrong. They help you build a safer workplace from the ground up.

That means offering safety training tailored to your industry, identifying workplace hazards, and even helping you develop safety manuals and emergency response plans. Some will come on-site to do evaluations or help you prepare for an OSHA inspection. And they don’t just set it and forget it—they’ll often monitor injury trends in your company and adjust their recommendations accordingly.

By partnering with a PEO, you’re not just getting help cleaning up after an accident. You’re getting help preventing accidents in the first place.

Getting the Back-End Right: Payroll and Classifications

It might seem small, but classifying employees correctly is one of the most important details in workers’ compensation compliance. Every job role has a specific classification code that helps determine how much you’ll pay for coverage. Misclassify an employee, and you could either end up overpaying—or worse, underpaying and facing penalties later.

PEOs handle this stuff all the time. Their teams are trained to make sure each employee is assigned the right class code, and that job descriptions and payroll data match what’s reported to insurers. That means no unpleasant surprises during audits, and fewer chances of a costly correction down the line.

Speaking of audits—those annual deep dives into your insurance and payroll records—PEOs can help you navigate those, too. Since they manage your payroll and workers’ comp reporting, they’re well equipped to handle insurance carrier audits and make sure all your data is clean, compliant, and well-documented. That alone can save you hours of stress and admin work

Managing Claims the Smart Way

One of the most common ways businesses lose control of their workers’ compensation costs is through mismanaged claims. If a case isn’t handled promptly, or if communication with the injured worker isn’t clear, it can snowball. Extended recovery times, unnecessary treatments, or even litigation can result. PEOs take on the responsibility of claims administration, and they do it with a level of experience that most small companies can’t match internally.

They coordinate directly with medical providers and insurance carriers. They follow up with employees, ensuring treatment plans stay on track and return-to-work plans are implemented smoothly. If modified duties are available, they help structure those. And if something seems off—like the claim is dragging out unnecessarily or seems exaggerated—they investigate and act quickly.

In other words, a PEO doesn’t just file the paperwork. They actively manage the process to protect your business and support your employee.

Catching Fraud Before It Hurts You

Workers’ comp fraud is real, and it can be costly. Whether it’s an employee exaggerating an injury or filing a claim for something that didn’t happen on the job, fraudulent claims drive up premiums and damage morale. 

A PEO is trained to recognize red flags and has systems in place to investigate suspicious claims. They work with insurance carriers and, when needed, third-party investigators to confirm the validity of a claim.

That means if someone’s gaming the system, it won’t go unnoticed—and it won’t be on your shoulders to figure it out alone.

Legal Protection You Might Not Know You Needed

Here’s a hidden benefit of working with a PEO: legal compliance support. Employment law is tricky enough as it is, and when you throw in a workers’ comp claim, the stakes get higher. Retaliation claims, wrongful termination suits, and missteps in communication with injured workers can all lead to legal trouble.

Most PEOs offer legal guidance to help you avoid those traps. If you’re unsure about how to handle a post-injury disciplinary issue, or if you’re worried that a termination could look like retaliation, the PEO can guide you. Some even provide access to employment attorneys to help you make the right call. That kind of protection is invaluable—especially for small businesses without in-house legal counsel.

Bonus Benefit: Lowering Your Experience Modifier (E-Mod)

Your workers’ comp costs aren’t just based on your payroll—they’re also impacted by your experience modifier, or e-mod. This number is based on your company’s claims history, and it directly affects your premium. The more claims you’ve had, the higher your e-mod—and the more you’ll pay.

When you work with a PEO, you’re covered under their master policy, which means your individual e-mod may no longer apply the same way. Because PEOs manage large volumes of employees across many clients, their pooled risk is often lower than what an individual small business might face. That can result in more stable premiums and fewer jumps after a claim.

Is It Time to Rethink How You’re Handling Workers’ Comp?

If managing workers’ compensation feels like a constant stressor—or if you’ve already dealt with the fallout from a claim gone wrong—it might be time to rethink your approach. A PEO doesn’t just make things easier; it changes the game.

From getting better insurance rates and managing claims more effectively to ensuring compliance and preventing injuries in the first place, a good PEO helps protect your business from the ground up.

Take the Pressure Off—Let C2 Essentials Help

At C2 Essentials, we understand how much is riding on your ability to manage workers’ comp the right way. Our PEO services are designed to reduce your liability, simplify your processes, and help your business grow without the risk dragging you down.

Let us help you stop worrying about workers’ compensation—and start focusing on running your business.

Contact C2 Essentials today to learn more about how our team can protect your company and support your employees.

Frequently Asked Questions (FAQs)

What exactly is co-employment, and how does it affect workers' compensation?

Co-employment is the arrangement where a business shares certain employer responsibilities with a PEO. In this relationship, the PEO becomes the employer of record for tax and insurance purposes, including workers’ compensation. This allows the PEO to manage claims, provide coverage, and ensure compliance—while you maintain control over daily operations.

Will my business still have control over employee management if I work with a PEO?

Yes, absolutely. While the PEO handles administrative tasks and assumes some liability, you remain in charge of managing your team’s daily responsibilities, culture, and performance. The PEO supports your goals—it doesn’t override them.

Can a PEO really lower my workers’ comp insurance premiums?

In many cases, yes. Because PEOs pool employees from multiple companies under one master policy, they can negotiate better rates with carriers. This often results in lower premiums for small to mid-sized businesses compared to what they could secure on their own.

What happens if an employee files a workers’ compensation claim while I’m partnered with a PEO?

The PEO will handle the claims process from start to finish. That includes reporting the claim, coordinating medical care, managing paperwork, and communicating with the insurance carrier. You’ll be kept in the loop but won’t have to manage the claim alone.

Is partnering with a PEO only for large companies?

Not at all. PEOs are especially beneficial for small and mid-sized businesses that may not have full-time HR or legal staff. In fact, businesses with as few as 10 employees can benefit from the risk management, compliance, and cost savings a PEO provides.

How do I know if a PEO is trustworthy or accredited?

Look for PEOs that are certified by the IRS as a Certified Professional Employer Organization (CPEO) and accredited by the Employer Services Assurance Corporation (ESAC). These certifications ensure the PEO meets strict financial, ethical, and operational standards.

Running a business comes with plenty of challenges. Between growing your client base, keeping operations smooth, and managing your team, there’s hardly enough time to breathe, let alone deal with payroll, benefits, compliance, and everything else HR throws at you. That’s where a PEO comes in.

A PEO, or Professional Employer Organization, is a company that takes on your most time-consuming HR tasks so you can redirect and truly focus on running your business. Basically, you can handle not only the important things but also the things you enjoy with peace of mind. You’ll know that your business is in good hands. 

Imagine having the time and energy needed to successfully focus not only on your business but other areas of your life too. You won’t feel exhausted, instead you can effortlessly handle everything with a PEO. 

This article will break down what a PEO is, how it works, and why it could be one of the smartest moves you make for your company.

What Does a PEO Do?

At its core, a PEO is an outsourced HR partner. When you work with one, you're essentially sharing employment responsibilities through a co-employment arrangement. You still manage your staff day-to-day. However, the PEO becomes the "employer of record" for administrative and legal purposes (which is a huge load off my shoulders). 

In a nutshell, that means the PEO handles everything from payroll processing and employee benefits to tax filings and workplace compliance.

This setup allows you to offload the complex and risky parts of HR without losing control over how you run your team. It’s like having a full HR department without actually having to build one from scratch.

How PEOs Help Businesses

PEOs are especially valuable for small and mid-sized businesses that want to stay lean and agile. Partnering with a PEO lets you tap into enterprise-level HR resources without paying for an in-house team. 

A PEO offers services like processing payroll, negotiating better rates on health insurance, managing benefits enrollment, and staying on top of changing labor laws.

For growing companies, the kind of support given by a PEO is a genuine game changer. It allows you to attract and retain talent with competitive benefits, all while avoiding costly HR mistakes. 

Just think about it, with a PEO you get peace of mind, your employees get better perks, and your business runs smoother. Basically, it’s a win-win for everything involved. 

Understanding Co-Employment

The idea of co-employment might sound confusing at first, but it’s actually pretty straightforward. 

Let’s take a close look at it: 

In a co-employment relationship, the PEO handles all the back-office responsibilities, things like taxes, payroll, benefits, and regulatory compliance. Meanwhile, you continue to direct your team’s daily work, company culture, and business goals.

This division of responsibility is outlined in a client service agreement, which spells out exactly who does what. It’s a partnership that plays to each party’s strengths: you lead your business, and the PEO keeps your HR in check. The PEO has your back plus your company and employees’ best interests constantly in sight. 

What Services Do PEOs Offer?

While each PEO is a little different, but most offer a similar suite of services. 

You’ll find that they cover the full spectrum of HR needs:

• Payroll processing and tax filings

• Employee benefits administration

• Compliance with labor laws and regulations

• Risk management and workplace safety

Many PEOs also offer access to HR software, employee onboarding tools, training programs, and more. Some even provide 24/7 customer support or industry-specific compliance resources.

Why Businesses Choose PEOs

Cost savings is often one of the first reasons companies consider a PEO. By bundling HR services for many clients, PEOs can negotiate lower rates for health insurance and other benefits. Those savings get passed on to you which works out to a serious win for you and your team. 

Beyond the financial side, a PEO also brings deep HR expertise which is something your business will benefit from. Instead of spending hours Googling labor laws or trying to write a handbook, you get advice from professionals who live and breathe HR. That means fewer headaches, fewer mistakes, and way more confidence.

And most important, a PEO frees up your time. When you’re not buried in admin work, you can focus on what really matters: growing your business, serving your customers, and leading your team. Not to mention, you can create a healthy work/personal life balance. 

Things to Keep in Mind - Potential Downside

Like any business decision, working with a PEO isn’t perfect for everyone. One possible downside is giving up some control over how certain HR functions are handled, particularly around benefit providers or HR software platforms. 

Another thing to consider is that some business owners may also feel removed from the benefits process since decisions might be made or managed by the PEO.

Another concern is communication. As a business owner, you know how important communication is for your success and your team. 

Since PEOs work with many clients, their response time may vary depending on the provider. It’s important to find a PEO that offers strong customer support and transparency about how issues are resolved.

While the PEO takes on many employer responsibilities, you're still legally responsible for your business. 

Choosing the Right PEO

Finding the right PEO starts with understanding your business needs. Are you struggling with compliance? Is payroll taking up too much time? Do you need better health benefits to stay competitive? Once you know what you're looking for, start comparing providers.

Look for PEOs with strong reputations and relevant experience in your industry. 

Certifications also matter—especially the IRS Certified PEO (CPEO) designation and ESAC accreditation, which indicate financial stability and operational excellence.

Ask for references or read client reviews. A great PEO will have testimonials from happy clients and a clear track record of delivering results.

How Much Does a PEO Cost?

PEOs typically charge either a flat monthly fee per employee or a percentage of your payroll. On average, you might expect to pay between $100 and $200 per employee per month.

The price tag might seem high at first glance, but when you factor in what you're getting—HR support, legal compliance, payroll services, better benefits—it often ends up being more cost-effective than hiring in-house staff or trying to do it all yourself.

Just be sure to ask about hidden fees, such as setup charges or early termination penalties. A good PEO will be upfront about the full cost.

What Is a Certified PEO?

A Certified PEO, or CPEO, is a PEO that meets strict standards set by the IRS. This certification gives you extra peace of mind. CPEOs are vetted for their financial practices, reporting standards, and compliance history.

The Bottom Line

A PEO can be a powerful ally for your business. Whether you're struggling to keep up with HR demands or just want to offer better benefits without adding staff, partnering with a PEO could be your next smart move.

They help streamline operations, reduce risks, and improve employee satisfaction—all while saving you time and money. Just be sure to do your homework, ask the right questions, and find the provider that fits your goals and company culture.

Because when HR runs smoothly, your business can do what it’s meant to do: grow.

Frequently Asked Questions

What does a PEO actually do?

A PEO handles payroll, benefits, HR compliance, and other back-office tasks so business owners can focus on operations and growth.

How does co-employment work?

Co-employment means your employees are technically employed by both your company and the PEO. You manage daily operations, while the PEO manages HR tasks.

Is using a PEO expensive?

It depends on the provider, but many PEOs charge between $100–$200 per employee per month. The cost often balances out with the benefits and savings they provide.

Do I lose control over my team with a PEO?

No, you still handle hiring, managing, and directing your employees. The PEO focuses on HR support and administrative compliance.

How do I choose the right PEO?

Look for one with strong industry experience, good client reviews, and certifications like CPEO or ESAC accreditation. Make sure their services match your needs.

What’s the difference between a PEO and an HR consultant?

HR consultant offers advice and recommendations. A PEO takes action by managing your payroll, benefits, and compliance on an ongoing basis.

The Department of Labor (DOL) reported on March 14, 2025 that President Trump issued Executive Order (EO)  14236, “Additional Rescissions of Harmful Executive Orders and Actions,” (90 FR 13037) which revoked 2021’s Executive Order 14026 .  The Department of Labor is no longer enforcing Executive Order 14026 or the implementing rule (29 CFR part 23). 

EO 14236 did not rescind the Obama-era Executive Order 13658 (2014) which had a lower minimum wage and narrower scope so it stands as the most recent effective executive order setting a federal contractor minimum wage.  The rate set in EO 13658  is $13.30 per hour ($9.30 for tipped workers).

The concept of a federal contractor minimum wage was first introduced by President Obama in 2014 under EO 13658. This order set an initial minimum wage of $10.10 per hour for covered contracts, with annual adjustments based on the Consumer Price Index (CPI).  

Federal contractors and subcontractors must continue to follow their current contract requirements as well as other federally mandated compensation requirements, including minimum wage rates and applicable SCLS and Davis-Bacon Act wage determinations.  Many states and local jurisdictions impose higher minimum wages than the federal standard as well.  In addition, the Davis-Bacon Act and the McNamara-O’Hara Service Contract Act (SCLS) continue to require prevailing wages by certain federal contractors and subcontractors that perform services or construction work.

Contractors may want to engage with contracting officers to understand any agency-specific guidance or expectations regarding wage requirements under existing and future contracts.

On January 21, 2025, an Executive Order was signed entitled “Ending Illegal Discrimination and Restoring Merit-Based Opportunity.”  Section three of the executive order rescinded Executive Order 11246 which releases federal contractor’s and subcontractor’s affirmative action obligations with respect to race and gender.  Federal contractors and grant recipients have until April 21, 2025 (90 days from the issuance of the EO) to comply with the EO’s provisions. During this grace period of 90 days—until April 21, 2025—contractors may continue complying with the prior “regulatory scheme” that was in effect before EO was signed.

According to the White House Fact Sheet accompanying the Executive Order, the specific requirements of the new Executive Order are:

• “All executive departments and agencies are to terminate all discriminatory and illegal preferences, mandates, policies, programs, activities, guidance, regulations, enforcement actions, consent orders, and requirements.”

• The Office of Federal Contract Compliance Programs (OFCCP) is ordered to “cease promoting “diversity,” holding federal contractors and subcontractors responsible for taking “affirmative action,” and allowing or encouraging federal contractors and subcontractors to engage in workforce balancing based on race, color, sex, sexual preference, religion, or national origin.

• An allowance “for 90 days from the date of this order, Federal contractors may continue to comply with the regulatory scheme in effect on January 20, 2025.”

• A requirement that federal contractors shall not consider race, color, sex, sexual preference, religion, or national origin in ways that violate the Nation’s civil rights laws.”

• The development of a new contract provision for federal contracts requiring the recipient to “certify that it does not operate any programs promoting DEI that violate any applicable Federal anti-discrimination laws,” and requiring federal contractors to execute a, “Simple and unmistakable affirmation that contractors will not engage in illegal discrimination, including illegal DEI, facilitated by all federal contracts” that will become effective within 90 days of the EO (April 21) and will be “considered material to the government's payment decisions and is subject to the False Claims Act (FCA).”

• Office of Federal Contract Compliance Programs (OFCCP) enforcement activity relating to EO 11246 have been paused and Section 503 and VEVRAA compliance reviews are on hold.

The FCA combats “fraud in government programs imposing damages and civil penalties on individuals and companies that knowingly submit false claims for payment to the government, because the party billed the government for goods or services that it did not provide, or the party allegedly misrepresented its compliance with rules imposed by statute, regulation, or contract.” (Wilmer Hale).  Making the certification subject to the FCA is significant because the FCA is basically a whistle blower reward program.  If a whistle blower’s complaint turns out to be valid and the government pursues the contractor for the violation, the whistle blower receives a significant portion of the ultimate penalty paid by the contractor and, since it is a criminal statute, a significant violation can also include jail time for corporate officers.   

Affirmative action requirements regarding disabled individuals and protected veterans – under VEVRAA or Section 503  of the Rehabilitation Act – are both required by statute and are unaffected by the EO.   The Office of Federal Contract Compliance (OFCCP), charged with enforcing contractor Affirmative Action requirements, released its own statement acknowledging the issuance of the new EO and limiting its ongoing actions to Section 503 and the VEVRRA. 

Executive Order 11246 was signed by President Lyndon B. Johnson in 1965 to prohibit contractors from discriminating based on protected characteristics (race, color, religion, sex, national origin, sexual orientation, and gender identity).  It required conducting a comparison of the actual utilization of women and minorities to their availability in the workforce and taking affirmative action steps including setting placement goals for women and minorities, developing action-oriented programs to address identified problems, and making good faith efforts to address underutilization.  Placement goals were required if women and minorities were not employed at a rate to be expected given their availability in the relevant labor pool. 

Though the affirmative action and non-discrimination requirements described in EO 11246 are no longer operative, contractors still have requirements under existing anti-discrimination laws such as the Age Discrimination in Employment Act, Title VII of the Civil Rights Act, and the Americans with Disabilities Act not to make employment decisions based on any protected characteristic.  EEO-1 reporting (for employers with 100+ employees), VETS-4212 reporting and state or local pay/data reporting requirements (CA Pay, IL, MA) are also still in effect.

As recommended in an article by Jackson Lewis, contractors should discontinue the development and implementation of EO 11246 affirmative action plans (AAPs) designed to balance the workforces as to race or sex. Executive Order 11246 had required contractors to demonstrate good faith efforts to reach out to and recruit minorities and women so each contractor should evaluate and tailor recruitment strategies such as ceasing to use targeted female and minority-serving recruitment sources, institutions, organizations, and job boards.

Contractors seeking increased diversity, equity, and inclusion will need to tailor their efforts to comply with the Order. As recommended by Burr & Forman, ways to avoid potential violations of federal anti-discrimination law while doing so include:

• removing potentially exclusionary language from job advertisements or applications.

• offering optional unconscious bias training.

• conducting outreach to diverse colleges and student groups.

• establishing mentorship programs and employee resource groups which are open to all employees of any identity.

Contractors should continue development and implementation of VEVRAA and Section 503 AAPs and follow all contractor equal employment opportunity (EEO) and non-discrimination obligations and should continue targeted good faith efforts and keep documentation of those efforts.  The following information should be captured in a good faith efforts log with respect to VEVRAA and Section 503 recruiting efforts:

• the date you reached out to the organization.

• the name of the organization.

• the name of the person you contacted at that organization.

• the phone number / email of the contact person.

• the type of outreach – was it an in-person meeting, a phone call, an email, or an event.

• notes describing what transpired during the outreach.

• links to any pertinent documents such as a job description or flyer sent to the organization.

• any candidate referrals received because of the outreach.

• any hires that occurred because of the outreach.

Based on the outcomes of the outreach, the contractor should determine if the outreach effort is effective or not effective.

All employment decisions must continue to be made without consideration of race, color, religion, sex, or national origin, as well as other factors protected by federal, state, and local law. Title VII of the Civil Rights Act of 1964 is a federal law and protects job applicants and employees from discrimination in recruitment, selection, termination, and other employment terms and conditions based on the protected characteristics.

The Office of Federal Contract Compliance Programs (OFCCP) has announced the reinstatement of the Monthly Employment Utilization Report (Form CC-257).  With the CC-257 report, covered construction contractors and subcontractors with contracts exceeding $10,000 must provide monthly information to OFCCP on their employee work hours and employee count by race/ethnicity, gender, and trade. This reinstated requirement will take effect starting March 2025, with the first report due on April 15, 2025.

About Form CC-257

OFCCP's goal is to strengthen its enforcement, outreach, and compliance assistance activities, particularly to address employment discrimination in the construction industry.  Construction contractors already have an obligation to take proactive measures to promote equal employment opportunity, and the report can assist OFCCP with evaluating how contractors are carrying out these obligations.  Contractors can also use the monthly report to proactively monitor their equal employment opportunity efforts and take corrective measures if they find obstacles to equal employment opportunity.

OFCCP discontinued the use of Form CC-257 in December 1995 because the information provided did not appear to be utilized by the agency. Per an article from JD Supra, “In seeking permission from the Office of Management and Budget to resume the collection of this information, OFCCP argued that it would be able to leverage electronic systems to review Form CC-257 reports so as to “strengthen OFCCP’s enforcement, outreach, and compliance assistance activities, and [. . . ] help the agency better meet its mission of protecting workers in the construction trades, as employment discrimination continues to be a problem in the construction industry.”

The Form CC-257 seeks the following Company Profile information:

• federal contractor or subcontractorname, registered address, Employer Identification Number (EIN), and Unique Entity ID (UEI) or Data Universal Numbering System (DUNS) number.

• name(s) of all U.S. government agencies funding the project, in whole or in part.

• whether the contractor is a prime contractor, subcontractor, or both.

• employee counts and total construction work hours performed monthly for each calendar month as of the last day of the month to include total number of trade employees in each trade, by race, gender, and classification (e.g., foreperson, journey workers, apprentices, trainees, and non-apprenticed laborers or helpers).

• number of standard metropolitan statistical areas (SMSA) or economic areas (EA) in which the (sub)contractor has projects during the reporting period. The geographic areas identified are required under 41 CFR 60-4.2.

• whether the company performed work on a project designated by OFCCP as a Megaproject through its Mega Construction Project Program.

Certification of the information’s accuracy must be provided by the company official submitting the report. 

Report Submission Methods

In OFCCP’s notice proposing to reinstate the form, OFCCP estimated on average it would take 1.5 hours each month for a contractor or subcontractor to prepare and submit Form CC-257.

Per the OFCCP, covered contractors may submit an Excel version of the report via email to ofccp-construction@dol.gov (the preferred method of submission) or may send a PDF version of the report via email to ofccp-construction@dol.gov or via mail to:

United States Department of Labor,
Office of Federal Contract Compliance Programs
Division of Program Operations
200 Constitution Ave NW, Room C-3325
Washington, DC 20210

OFCCP has a help desk with dedicated staff to assist contractors if they have questions or need technical assistance (DPOhelpdesk@dol.gov) along with a frequently asked questions (FAQ) page which can be found here.

Reporting Periods

Each report must cover a full calendar month and is due by the 15th of the following month. If this date falls on a weekend or federal holiday, the report is due on the following business day. The first report will cover the full calendar month of March 2025 and will be due by April 15, 2025.

OFCCP Enforced Equal Employment Opportunity Laws

The OFCCP is a United States Department of Labor agency that enforces equal employment opportunity laws and protects workers working on federal contracts.  The OFCCP's enforcement actions apply to nearly one-in-four American workers employed by 200,000 federal contractors:

• Enforces laws: The OFCCP enforces three laws (Executive Order 11246, Section 503 of the Rehabilitation Act of 1973, and the Vietnam Era Veterans Readjustment Assistance Act of 1974) that prohibit discrimination in employment based on race, color, religion, sex, sexual orientation, gender identity, national origin, disability, and status as a protected veteran.

• Promotes diversity: The OFCCP promotes diversity through equal employment opportunity. 

• Supports voluntary compliance: The OFCCP supports voluntary compliance by federal contractors and subcontractors. 

• Conducts compliance evaluations: The OFCCP conducts compliance evaluations of federal contractors. 

• Investigates complaints: The OFCCP investigates complaints.

Importance of OFCCP Compliance

OFCCP compliance goes beyond just following rules; it reflects an organization’s values of fairness, equity, and respect for diversity. By prioritizing compliance, companies contribute to creating a more equitable society where everyone has the chance to succeed based on merit rather than bias or discrimination.

OFCCP conducts compliance evaluations to assess whether federal contractors meet their obligations. Evaluations may include desk audits, off-site reviews, or on-site visits to examine personnel processes and data for potential disparities or violations. By adhering to the regulations set forth by OFCCP, organizations demonstrate their commitment to promoting equal employment opportunities, avoid costly penalties, and enhances their reputation as socially responsible employers.  OFCCP fosters a diverse and inclusive work environment where all employees have equal opportunities for advancement and fair treatment. Failure to maintain OFCCP compliance can lead to significant consequences for federal contractors. These may include:

• Contractual penalties: Businesses may face contract termination, suspension, or debarment, resulting in substantial financial losses.

• Monetary fines: Contractors and subcontractors can be subject to hefty fines, ranging from thousands to millions of dollars.

• Legal liabilities: Serious violations could lead to civil or criminal charges, potentially resulting in fines and imprisonment.

• Audits and disruptions: The OFCCP conducts regular audits to assess compliance. Non-compliance can lead to time-consuming and disruptive audits, affecting productivity.

• Reputation damage: Public scrutiny of non-compliance can harm a company’s reputation, making it difficult to attract and retain talent, as well as secure new business opportunities.

EEOC Enforced Equal Employment Opportunity Laws

While the OFCCP promotes diversity in hiring practices, the Equal Employment Opportunity Commission (EEOC) focuses on anti-discrimination in the employee base enforcing federal laws that prohibit discrimination in the workplace, investigating complaints of discrimination based on race, color, religion, sex, national origin, age, disability, or genetic information and acting if the EEOC finds that discrimination has occurred.  According to the EEOC report Combating Employment Discrimination in Construction, “Historic federal investments in recent years have increased job opportunities in the construction industry. The EEOC is focusing on construction to ensure doors of opportunity are open to all qualified workers…and is committed to eliminating recruitment and hiring barriers in industries like construction where women and some workers of color are underrepresented.”

HigherGov.com reports Federal construction awards in 2023 reached $54.3 billion.

The U.S. Equal Employment Opportunity Commission (EEOC) has recently taken several employers to task for alleged pregnancy discrimination in violation of the Pregnant Workers Fairness Act (PWFA). The PWFA went into effect on June 18, 2024.   In mid-September 2024, the EEOC announced the first lawsuits alleging a violation of the PWFA and first public conciliation of a PWFA charge. The EEOC prevents and remedies unlawful employment discrimination and advances equal opportunity for all.  PWFA provides critical protections for employees because of pregnancy, childbirth, or related needs.   The PWFA applies to private employers that have 15 or more employees.  The PWFA does not replace federal, state, or local laws that are more protective of workers, job applicants and employees affected by pregnancy, childbirth, or related medical conditions. More than 30 states and cities have laws that require employers to provide accommodations for pregnant workers and several states have paid maternity leave.

Pregnancy Discrimination Protections in the Workplace

Pregnancy discrimination is the unfair treatment of a person in the workplace due to their pregnancy, childbirth, or related medical conditions. It can include:

• Unfavorable treatment during hiring, firing, pay, job assignments, promotions, layoffs, training, or benefits. 

• Harassment by managers, co-workers, or others in the workplace. 

• Denial of a reasonable accommodation, such as a workplace change to allow the employee to perform their job.

First PWFA Settlements

In September 2024, a pest control services provider in Florida, agreed to pay $47,480 in damages to resolve a pregnancy accommodation charge, the EEOC announced.  The charge claimed the company fired a pregnant employee after she requested a reasonable accommodation to attend monthly medical appointments for her pregnancy which violated the PWFA. The company entered into a conciliation agreement and will pay $47,480 in damages to the former employee, appoint an EEO coordinator, revise employment policies to include making reasonable accommodations under the PWFA, and provide training to both management and non-management employees on pregnancy discrimination

In October 2024, a Florida federal court approved a consent decree between the EEOC and a Lago Mar Properties Inc. in Florida under PWFA.  A line cook who was five months pregnant was admitted to the hospital due to complications that ultimately resulted in a stillbirth. She requested six weeks of leave to recover from the physical and emotional toll supported by a doctor’s note. The company failed to provide reasonable accommodations, which is required under both the PWFA and the ADA, and instead terminated her employment.   The company will pay $100,000 in damages to the employee and revise company policies to ensure that employees receive reasonable accommodations for pregnancy or disability-related conditions.

First PWFA Lawsuits

The EEOC asserted Polaris Industries, a manufacturing company in Alabama, “refused to excuse an employee’s absences for pregnancy-related conditions and medical appointments and required the employee to work mandatory overtime against doctor’s orders.”  The company assessed attendance points against the employee for pregnancy-related absences. The employee resigned to protect her pregnancy and filed a complaint with the EEOC.  The case is pending in the U.S. District Court for the Northern District of Alabama.

The EEOC filed suit against Wabash National Corporation, a national producer of semi-trailers, alleging the company violated the PWFA by “failing to provide pregnancy-related accommodation to an employee who worked as an assembler, subjected her to an unlawful medical inquiry unlawfully requiring medical documentation, denied the employee’s request to transfer to a role that did not require lying on her stomach, refused to engage in the interactive process to explore other possible accommodations and then forced the employee to take unpaid leave.”  The employee eventually resigned for fear for the health of her pregnancy. The case is pending in the U.S. District Court for the Western District of Kentucky.

Another defendant, Urologic Specialists of Oklahoma, allegedly violated the Americans with Disabilities Act (ADA) by not providing reasonable accommodation to an employee with a disability, and violated Title VII of the Civil Rights Act.  The company did not “allow a medical assistant at its Tulsa facility to sit, take breaks, or work part-time as her physician said was needed to protect her health and safety during the final trimester of her high-risk pregnancy.  The company forced her to take unpaid leave and refused to guarantee she would have breaks to express breastmilk.” The case is pending in the U.S. District Court for the Northern District of Oklahoma

In each case, the EEOC filed suit after first attempting to reach a pre-litigation settlement through its administrative conciliation process.  Administrative conciliation process is a voluntary negotiation process that helps resolve disputes between parties.

Federal Laws Prohibiting Pregnancy Discrimination

The Pregnant Workers Fairness Act (PWFA) requires a covered employer to provide a “reasonable accommodation” arrived at through the interactive process to a qualified employee’s or applicant’s known limitations related to, affected by, or arising out of pregnancy, childbirth, or related medical conditions, unless the accommodation will cause the employer an undue hardship.” 

• The PWFA does not specify length of coverage or an entitlement amount.

• The PWFA covers employees with known limitations related to pregnancy, childbirth, or related medical conditions with no specified end-date as this will differ per employee.

• Employees are not required to establish the existence of a disability when requesting an accommodation under the PWFA.

• In circumstances where the need for a pregnancy-related accommodation is obvious, employees are generally not required to provide medical documentation to establish a need for a pregnancy-related accommodation and, in such cases, an employer’s request for medical documentation may be deemed unreasonable.

• The EEOC considers a stillbirth to be a “related medical condition.” Other related conditions listed in the EEOC guidance include cesarian sections, a miscarriage, postpartum depression, edema, placenta previa and lactation.

• Under the PWFA, an employer must accommodate a worker’s known limitation absent undue hardship. “Undue hardship” means significant difficulty or expense.

• The PWFA prohibits an employer from denying a job or other employment opportunities to a qualified employee or applicant based on the person’s need for a reasonable accommodation, forcing a worker to take an accommodation, or retaliate against an employee or applicant for requesting or using a reasonable accommodation

• An employee or applicant can be “qualified” under the PWFA if they can perform the “essential functions” of the job with or without a reasonable accommodation.  If they cannot perform the essential functions of the job with or without a reasonable accommodation, they can be qualified if the inability is “temporary;” the employee could perform the functions “soon, and the inability to perform the essential functions can be reasonably accommodated.

Workers may also be entitled to accommodations under Title VII or the ADA which can work together and be used in tandem with the PWFA

• Title VII of the Civil Rights Act of 1964 which prohibits sex discrimination, including pregnancy discrimination based on Current pregnancy, Past pregnancy, Potential pregnancy, Medical condition related to pregnancy or childbirth including breastfeeding/lactation, Having or choosing not to have an abortion, and Birth control (Contraception).   Title VII also prohibits discrimination against working parents and others with caregiving responsibilities outside of work.

• Family and Medical Leave Act (FMLA) which allows eligible employees to take up to 12 weeks of unpaid leave per year for medical reasons, including pregnancy and childbirth.

• The Americans with Disabilities Act (ADA) which prohibits discrimination against people with disabilities in employment.  The ADA prohibits discrimination against an applicant or employee based on a disability, including a disability related to a pregnancy such as diabetes that develops during pregnancy. While pregnancy itself is not a disability under the ADA, some pregnant workers may have one or more impairments related to their pregnancy that qualify as a “disability” under the ADA. An employer may have to provide that worker with a reasonable accommodation for the pregnancy-related disability.

PWFA and the Interaction with the ADA

The PWFA is different than the ADA in that PWFA covers temporary, minor, and episodic physical and mental conditions and there is no requirement that conditions rise to a specific severity threshold.

The PWFA “deems an individual impaired by pregnancy, childbirth, or related medical conditions qualified and entitled to reasonable accommodation without the scrutiny the ADA typically places on an employee’s ability to perform job functions.”

Pregnancy itself does not meet the definition of a “disability” under the ADA, because it usually is a short-term condition and only some pregnancy-related conditions will meet the definition of a disability. Under the PWFA, pregnant and postpartum employees who were not covered under the ADA or Title VII can now ask their employers to provide them with workplace accommodations under the PWFA.  

Under both laws, conditions requiring an accommodation may begin prior to conception (including preparation for pregnancy and childbirth) and could continue into postpartum recovery (such as postpartum depression or anxiety).  The employer must engage in the interactive process and covered employers must provide reasonable accommodations.

EEOC Investigation and Conciliation Steps

As outlined by the EEOC,  Upon receipt of a charge or claim, the EEOC will conduct an investigation.  At the end of an investigation, the EEOC decides on the merits of the charge.  If the EEOC concludes that the information obtained in the investigation does not establish a violation of the law, the person who filed the charge of discrimination will be issued a letter called a "Dismissal and Notice of Rights." This informs the person that he or she has the right to file a lawsuit in federal or state court within 90 days from the date of receipt of the letter.  The employer also receives a copy of this document.

If the EEOC determines there is reasonable cause to believe discrimination has occurred, both parties will be issued a "Letter of Determination."  The Letter of Determination invites the parties to join the agency in seeking to settle the charge through an informal and confidential process known as conciliation. 

Conciliation is a voluntary process, and the parties must agree to the resolution. If conciliation fails, the EEOC must decide whether to sue the employer in court.  Filing lawsuits is a last resort - the EEOC files suit in less than 8 percent of the cases where it believes discrimination occurred and conciliation was unsuccessful. 

Key Takeaways for Employers

The PWFA requires employers to provide reasonable accommodations to workers affected by pregnancy, childbirth, or related medical conditions.  Employers must engage in an interactive process to determine reasonable accommodations and cannot terminate or retaliate against workers for making such requests.

The EEOC recommends that once the employee or applicant tells the employer that they have a limitation—a physical or mental condition related to, arising out of, or affected by pregnancy, childbirth, or a related medical condition—and that they need an adjustment or change in their working conditions due to the limitation the employer should engage in the “interactive process” with the employee or applicant.

The “interactive process” means simply that the employer and employee communicate, whether by talking or some other way, about the known limitation and the adjustment or change needed at work.  The employer should respond promptly to accommodation requests. If it does not cause an undue hardship to the employer’s business, the employer generally must provide a reasonable accommodation—either what the employee or applicant requests or another effective accommodation.

Though due to the nature of pregnancy the employee’s condition will eventually become obvious, managers should keep the employee’s medical condition or accommodation confidential. 

The EEOC outlined four accommodations that are almost always reasonable under the PWFA. They are:

• Allowing an employee to carry water and drink, as needed, in the employee’s work area.

• Allowing an employee additional restroom breaks.

• Allowing an employee whose work requires standing to sit and whose work requires sitting to stand.

• Allowing an employee breaks to eat and drink, as needed.

The EEOC also listed several other accommodations that may be reasonable, such as:

• A stool to sit on while working.

• Time off for health care appointments.

• Temporary reassignment.

• Temporary suspension of certain job duties.

• Remote work.

• Time off to recover from childbirth or a miscarriage.

The digital age has ushered in unprecedented opportunities for global collaboration and remote work, but it has also opened doors for a cyberthreat: fraudulent Information Technology (IT) workers.  Specifically, the FBI reports that the regime in North Korea appears to be training and deploying agents to infiltrate legitimate companies as freelance or remote workers with the intention of data theft, cyber espionage, gaining access to sensitive information, and stealing intellectual property or financial assets.

The fraudulent IT workers often use fake or stolen names, falsified or stolen documents, fake websites, and misleading IP addresses to pose as U.S. citizens or citizens of other non-sanctioned countries.  The IT workers also use both witting and unwitting individuals from non-sanctioned countries to gain fraudulent employment and access to U.S. company networks.

Recent Cases

The FBI uncovered a fraudulent IT worker scam which had cost the victim company over $500,000 before arrests were made.   The company had incurred those costs to audit and secure the devices, systems, and networks after the IT workers were discovered.  The cost does not include the hefty salaries paid the workers.

U.S. based facilitators enable fraudulent activity such as accepting shipments of company laptops, enabling remote desktop connections, reshipment of U.S. company laptops to overseas and creation of U.S.-based front businesses purporting to offer short-term technical contract workers.   Per a Justice Department press release on August 8, 2024, the DOJ charged a Nashville, Tennessee resident of running a “laptop farm” at his Nashville residences between approximately July 2022 and August 2023.  The victim companies shipped laptops addressed to “Andrew M.” (a stolen identity) to the Nashville residence and the suspect logged on to the laptops, downloaded and installed unauthorized remote desktop applications to allow unauthorized access for North Korean IT workers. 

On October 17, 2023, the U.S. seized 17 website domains used by Democratic People's Republic of Korea (DPRK) information technology (IT) workers in a scheme to defraud U.S. and foreign businesses and evade sanctions.  (U.S. Department of Justice).

In another case, IT workers employed as developers by a U.S. company fraudulently charged the U.S. company’s payment account and stole over $50,000.  The workers carried out the thefts in 30 small installments over a matter of months. The victim company was not aware the developers were North Korean or of the ongoing theft activity due to the slight amounts.

If you are a business that has fallen victim to a North Korean IT worker scheme or suspect that you or your business have been approached by a North Korean IT worker, the FBI recommends report it to the FBI's Internet Crime Complaint Center (IC3) at www.IC3.gov immediately.

The U.S. Department of State, the U.S. Department of the Treasury, and the Federal Bureau of Investigation (FBI) have issued an advisory for the international community, the private sector, and the public.  IT workers target freelance contracts through various online platforms from employers located in wealthier nations, including those in North America, Europe, and East Asia.   IT workers use IT industry-specific freelance contracting platforms and social media to obtain development contracts then collect payments for work through digital payment platforms and virtual currency exchanges. 

IT workers present themselves as being from non-sanctioned countries (South Korean, Chinese, Japanese, Eastern Europe) or as U.S.-based teleworkers.  The IT workers may initially engage in non-malicious low level IT work however they can easily use their privileged access to company information and networks to engage in malicious cyber intrusions.

Due Diligence When Selecting a Remote Freelance IT Worker

The FBI recommends that “If using third party staffing firms or outsourcing companies, request documentation of their background check processes. If this cannot be readily provided by a company, assume it did not conduct the background check and conduct your own.  If using a staffing company or third-party software developers for IT work, conduct due diligence checks on the individuals the company provides to you for work.”

Fraudulent IT workers have sophisticated methods to hide their identify and geographic location.  Per the FBI advisory:

• IT workers deliberately conceal their identities using non-Korean names as aliases.

• IT workers deliberately conceal their locations and nationality online using virtual private networks (VPNs), virtual private servers (VPSs), or utilized third-country IP addresses to appear as though they are connecting to the internet from inconspicuous locations. 

• IT workers generally rely on the anonymity of telework arrangements and may insist on communications through text-based chat instead of video calls.

• IT workers often use stolen identify documents to setup fake online profiles and accounts or produce counterfeit documents and forged signatures.  The IT worker just adds their photo to the forged document which could be a driver’s license, passport, work visa or utility statement.

• IT workers may also falsify past statements of work agreements, invoices, client communication documentation, and other documents used to screen them for freelancing platforms. These falsified documents may have minimal contact details to deter verification.

• IT workers who obtain freelance positions with an unwitting company have also been known to subsequently recommend to the company the freelance employment of additional IT workers.

• IT workers who do extensive bidding on projects, and a low number of accepted project bids.

To mitigate the risk of hiring remote freelance IT workers, companies should contact former clients listed on invoices / work agreements as shown in the worker’s past portfolio.  Contact information for the former client should be derived from public business databases and not the contact information provided by the IT worker.  The company can reject low-quality images submitted by the worker to provide verification of identity as this may be a sign of forgery.  The company can require submission of a video verifying identity or conduct a video interview to verify identity.

Due Diligence When Interviewing a Remote Freelance IT Worker

Here are a few common warning signs to look for when hiring per an article from SHRM:

• Reluctance to appear on camera  or an unwillingness to engage in video calls for project check-ins.  Insist on video communication whenever possible to establish a visual connection and verify identity.

• Suspicious behavior during coding tests and interviews. Watch for excessive pauses, eye movements that suggest reading from a script which can indicate a lack of genuine expertise.

• Discrepancies between online profiles and work portfolios or a lack of an online presence.

• Be wary of repeated requests for prepayment.

• Language preferences for a country that is not where the individual claims to be from.

Due Diligence When Managing a Remote Freelance IT Worker

If the IT worker has passed due diligence and is working a project, these are some areas that should raise concern per the FBI advisory:

• Requests to communicate with clients and potential clients on a separate platform other than the original freelance platform website where the client found the IT worker.

• If the employer proposes to send documents or work-related equipment such as a laptop to a developer and the developer requests that items be sent to an unknown address. 

• Requesting payment for contracts without meeting production benchmarks or check-in meetings.

• Inability to conduct business during required business hours.

• Incorrect or changing contact information, specifically phone numbers and emails.

• Inability to be reached in a timely manner, especially through “instant” communication methods.

• Threats to release proprietary source codes if additional payments are not made.