What Is Compliance?: Legal & Business Definitions & Noncompliance

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Compliance is the state of conforming to applicable laws. There are many ways to apply the compliance definition, such as compliance with industry regulations in the business world or compliance with laws in the realm of civil and criminal law. Other ways compliance can be applied and understood include compliance with social norms and cultural practices and compliance with orders in a hierarchical setting, like the military.

Noncompliance and Compliance Definitions

A simple way to understand the compliance definition is to understand its opposite, noncompliance. Noncompliance is the failure to meet imposed laws or standards, sometimes due to explicit violations of these laws or standards. In other cases, noncompliance is due to a failure to meet a specified threshold or to update practices to meet current demands.

Not all instances of noncompliance are legal violations. For example, an accountant who does not meet the certification standards of the American Institute of Certified Public Accountants (AICPA) for personal financial specialists can still work as an accountant, but she cannot advertise herself as an AICPA-certified personal financial planner. In any instance, failure to meet the compliance definition for one’s circumstances is noncompliance.

Read More: Regulatory Compliance: Business Meaning, Enforcement & Noncompliance

Compliance Definition: Law

In discussions about the compliance definition, two distinct types of compliance come up: the compliance definition in law and the compliance definition in business. At the most basic level, compliance means the same thing in both categories – conformity with imposed requirements. But how compliance is performed and how noncompliance is punished vary significantly between these categories.

An internet search for the phrase "compliance definition law" might return information about what happens when an individual fails to comply with a court order, like a child support order or a subpoena. When an individual fails to comply with such an order, he is considered to be in contempt of court and may face consequences like fines, suspension of his professional license and in some cases, jail time. Failure to comply with the terms of a criminal sentence, like probation or parole, can result in the individual being sent to jail for violation of probation or being returned to jail for violation of parole.

Compliance Definition: Business

Another common context for discussing compliance is business. Many industries are required to comply with specific federal and state laws, and numerous federal and state-level agencies operate solely for the purpose of enforcing these laws. A few of these agencies are:

  • Occupational Safety and Health Administration (OSHA).
  • Equal Employment Opportunity Commission (EEOC).
  • Securities and Exchange Commission (SEC).
  • Federal Trade Commission (FTC).

An internet search for the phrase “compliance definition business” will return discussions of specific laws and the cases that led to the passing of these laws. One notable example is the federal Sarbanes-Oxley Act, which was passed in 2002 in response to numerous accounting scandals that occurred at the beginning of the 21st century, including the infamous Enron scandal. The regulations imposed on businesses are in place to protect individuals and groups who can suffer harm from noncompliance with these laws, such as employees, shareholders and consumers.

Compliance in Action

There are many consequences a company can face for noncompliance. Similarly, there are consequences individuals can face for noncompliance with legal orders, including:

  • Fines.
  • Restitution for victims.
  • Jail time.
  • Loss of a professional license.

In some instances, compliance is a passive act: All a company needs to do to be compliant is avoid violating regulations. In others, compliance requires a more active role, such as the continuing professional development requirement many states impose on cosmetologists and other professionals. For example, a cosmetologist can keep her professional license only if she remains compliant with state regulations for her industry, which include ongoing professional development.

Tips

  • Compliance is the state of a company or individual meeting all requirements imposed on them.