We recently represented a business in an appeal of a government agency assessment exceeding $1 million. By the end of the process, the assessment was reduced to $0. While we’re proud of our work on the case, the successful result did not turn on our advocacy alone, but on the fact that the business had prioritized compliance well before the agency action ever arose. This included always being mindful of what the law required, and taking meaningful steps each year, and after each interaction with the agency, to align its practices, policies, contracts, and other legal documentation with applicable law. Indeed, as the appeal closed, the government specifically recognized that the assessment was in error because the client had truly made compliance an operational priority.
That experience reflects something we see repeatedly in our practice: businesses that treat compliance as an ongoing operational function—rather than a reactive exercise—are far better positioned when issues arise.
As we’re starting this new year, we urge you to take some time to step back and assess your practices to ensure key compliance fundamentals are in place. Below is our checklist of issues every business owner should consider addressing early in the year.
1. Pay Practices, Payroll, and Timekeeping.
Wage-and-hour issues remain one of the most frequent triggers for agency action and private claims.
Business owners should confirm:
- Employees are paid for all hours worked, including training, meetings, and required administrative time
- Overtime is calculated correctly, including where bonuses or incentive pay are involved
- Payroll records and timekeeping systems are accurate and consistently used
Small payroll errors, repeated over time, can quickly become significant liabilities. In 2025 alone, we assisted multiple clients with wage claims. One consistent lesson from those matters is that disputes over compensation should be avoided whenever possible. If there is a compensation dispute, resolve it quickly, as these disputes can escalate quickly into agency complaints and investigations.
2. Policies, Handbooks, and Day-to-Day Practices.
Many of you have worked with us to prepare compliant and up-to-date policies and handbooks. But policies that look good on paper but that aren’t followed in practice can create more risk than having no policy at all.
At the start of the year, you should review:
- Employee handbooks and standalone policies
- Whether policies reflect how the business actually operates
- Whether managers understand and apply those policies consistently
A common trigger for employment disputes and distrust of an employer is an employer who does not follow their employment policies.
3. Legal Changes Taking Effect This Year.
Each year brings new legal requirements at the federal, state, and local level.
Business owners should ensure they are aware of and complying with:
- New wage, salary, and exemption thresholds
- Updated leave, accommodation, and retaliation protections
- New notice, posting, or policy requirements
Failing to account for changes that take effect on January 1—or later in the year—is a common and avoidable compliance gap.
4. Leave, Accommodations, and Retaliation Risk.
Over the years, we’ve seen many employers get tripped up by failing to comply with their duties to accommodate employees under various leave laws. Indeed, many enforcement actions focus less on the underlying complaint and more on how the employer responded.
Businesses should evaluate:
- How leave and accommodation requests are received and documented
- Whether managers know when to escalate issues
- Whether performance or discipline decisions are well-documented and defensible
Legal claims often arise from process failures rather than intent.
5. Written Agreements and Compensation Structures.
Written agreements are extremely helpful—but only insofar as they reflect reality, and only if the drafters are thoughtful about content and ensuring that inclusions or omissions don’t come back to bite you.
Consider reviewing:
- Employment agreements and offer letters
- Commission, bonus, and incentive plans
- Independent contractor agreements and consulting arrangements
Agreements that are outdated or inconsistent with current practices, or that include or exclude certain content, can often hurt more than they help.
6. Worker Classification (Employees vs. Independent Contractors).
In the age of gig workers, worker misclassification remains an area of heightened enforcement.
At a minimum, businesses should assess:
- Whether contractor relationships remain defensible under current law
- Whether the level of control and economic dependence has changed over time
- Whether contracts align with how work is actually performed
This reassessment is recommended because what was true and correct when you started your business may no longer be true or correct now, which can lead to findings that you are misclassifying independent contractors as employees.
8. Audit Readiness and Recordkeeping.
It’s not alarmist to say that, for many businesses, audits are not a matter of if, but when. And most businesses do not know they are being audited until they receive formal notice.
Basic preparedness for audits includes:
- Understanding your record-keeping obligations
- Knowing where key records are maintained
- Identifying who will respond to agency inquiries
- Understanding areas of heightened risk and correcting them before an auditor comes knocking
Had our client above not prepared themselves to be audited, their pockets today would be a million dollars—or more—lighter. And unnecessarily so.
After all we’ve seen over the years, we cannot more strongly urge our clients to be the businesses that address compliance issues early—before they become costly problems.
We hope you and your families had a happy holiday season, and we wish you all the best in the new year!