Running your retail business involves more than just great sales and customer service—it requires strict compliance with various industry laws and regulations.

As someone who's worked with countless retail businesses, I’ve seen firsthand how compliance issues can catch even the most well-meaning owners off guard. The consequences? They’re not pretty—fines, lawsuits, and a reputation that’s hard to rebuild.

That’s why I created this expertly curated round-up of the top 10 retail compliance risks you should avoid to run your business safely, legally, and worry-free.

10 Retail Compliance Risks to Avoid in Your Business

To help protect your business, here are The Retail Law Group’s top 10 retail compliance risks you should avoid:

#1 - Employment Law Violations

Retailers must comply with federal and state labor laws, including proper wage and hour practices, overtime payments, meal breaks, and employee classifications (exempt vs. non-exempt).

Misclassifying workers or failing to comply with wage laws can lead to costly lawsuits.

Exempt employees are typically salaried and not entitled to overtime pay under the Fair Labor Standards Act (FLSA). In contrast, non-exempt employees must be paid at least the federal minimum wage and are entitled to overtime pay for any hours worked over 40 in a work week.

As of 2024, the salary threshold for exempt employees is:

$35,568 per year (or $684 per week). Employees earning less than this amount are typically classified as non-exempt and eligible for overtime pay, regardless of their job duties.

Some states (including California and New York), have higher thresholds for exempt employees.

Simply paying an employee a salary does not make them exempt. To truly be considered exempt—and therefore not eligible for overtime pay—the employee’s job duties must primarily involve executive, administrative, or professional duties as defined by law.

Bottom line: Always consult an attorney skilled in employment law to ensure your retail business is compliant.

#2 - Data Privacy and Security Breaches

A 2023 study found that nearly 70% of retailers faced a ransomwear attack in 2023 and a similar study found that 20% of customers will stop buying from companies that have faced a security breach. Yikes!

Therefore, excellent retailers have to be committed to safeguarding sensitive customer information. Failing to protect personal data can lead to fines, legal action, and dreaded reputational damage.

Long-term brand damage can be even more devastating than the cyber attack itself. Consumers are becoming increasingly concerned with how their data is handled, and in an age of heightened awareness around privacy, trust is hard to rebuild once it's lost.

Bottom line: Retailers should prioritize investing in robust cybersecurity measures—including regular vulnerability assessments, employee training on phishing scams, and ensuring encryption of sensitive data. Employing a strong IT partner for your retail business will pay dividends.

#3 - ADA (Americans with Disabilities Act) Non-Compliance

You’d never want one of your customers to feel alienated or discriminated against. That’s why retailers must make sure that both their stores and websites (yes, websites must be compliant, too!) are accessible to people with disabilities.

Failure to comply with ADA guidelines can result in lawsuits and penalties, as well as alienating valuable members of your customer base.

ADA compliance in a physical retail space includes some of the following adjustments:

Accessible entrances—like ramps and automatic doors.
Aisles should be at least 36 inches to accommodate wheelchair access, and at least one 36 inch or lower check-out counter.
Clear signage and assistance for visually or hearing-impaired customers, such as tactile signage and visual or auditory alerts.
Accessible parking spaces located close to store entrances with clear signage.
Restrooms with accessible features, such as grab bars, wider stalls, and accessible sinks.
Accessible fitting rooms with enough space for wheelchair users and accessible hooks and benches.

Note that older properties will face different requirements depending on when the building was constructed.

Retail businesses selling products online are still required to be ADA-compliant. Businesses should implement features that make the site accessible to all users. This can include:

Alternative text descriptions for images and other media
Making all content navigable via the keyboard
Providing captions for videos with speech
Clear and consistent navigation throughout the site
High-contrast colors to improve readability
Large and legible font for all text

Retailers can conduct regular accessibility audits and follow the Web Content Accessibility Guidelines (WCAG) to make sure their site meets ADA standards.

Bottom line: make sure your business is accessible to and ADA compliant, whether that includes your brick and mortar, your digital shopping experience, or both.

#4 - Product Labeling and Advertising Errors

There’s nothing worse than making a new purchase only to discover you invested in something that isn’t quite what it seems.

Misleading product labels or false advertising can trigger lawsuits from customers and regulatory action by agencies like the FTC. Be sure that all product information is clear, accurate, and complies with applicable laws to avoid this risk.

Some examples of these types of errors include:

False “Made in the U.S. Claims:” If a product is labeled as "Made in the USA," but the parts or manufacturing come from other countries, the retailer could face legal action from the FTC for misleading claims about product origin. According to the FTC, “Made in the USA” means that “all or virtually all” of the product has been made in America.

Health and Safety Claims: Making unverified claims that a product is “FDA approved,” “non-toxic,” or has specific health benefits without sufficient scientific evidence can lead to penalties or lawsuits, particularly for food, cosmetics, and supplements.

Price Misrepresentation: Advertising products as “on sale or “discounted"” when they were never sold at the original price, or only for a short period, can trigger scrutiny under pricing laws and consumer protection regulations.

Bottom line: be honest about the products your retail business sells.

#5 - International Vendor and Supply Chain Issues

Retailers working with international vendors and suppliers need to go beyond just ensuring timely deliveries—they must also regularly audit their partners for compliance with ethical practices.

This includes verifying that all vendors follow labor laws, such as fair wages, reasonable working hours, and no child labor.

Safety standards are another key factor. Be sure that your products are sourced and manufactured in environments that prioritize worker safety and product quality.

Bottom line: Verifying ethical practices in your international supply chain protects your business from legal risks and strengthens your brand’s reputation for responsibility and integrity.

#6 - Intellectual Property Infringement

Being inspired or influenced by another company is one thing. But using another company’s logos, trademarks, or copyrighted materials without permission can lead to intellectual property disputes. These types of disputes are incredibly costly for retailers!

Bottom line: Retailers have to make sure they have the proper licenses and permissions to use any third-party materials in their marketing and product offerings.

#7 - Health and Safety Violations

Retailers are required to comply with health and safety regulations, including OSHA standards. This includes maintaining a safe environment for employees and customers by addressing hazards such as wet floors, trip and fall hazards, faulty equipment, and improper signage.

Even hazards caused by other customers, like spills or dropped items, can lead to devastatingly expensive lawsuits if someone is injured while on the premises. Liability can arise even if the retailer is unaware of the hazard.

So the excuse of “I didn’t know” won’t get you out of a legal pickle if something goes awry!

Bottom line: To reduce the risk, it's important to have clear rules in place for spotting and fixing any hazards. Employees should be well trained to recognize dangers and keep the store safe for everyone.

#8 - Failure to Collect and Remit Sales Tax

Retailers must stay on top of ever-changing state and local sales tax requirements, which can vary widely depending on where your business operates and where your customers are located.

This becomes even more complex for retailers with an online presence, as they may be responsible for collecting sales tax in multiple jurisdictions.

Failing to collect the correct amount of sales tax, or improperly remitting those taxes to the appropriate authorities, can lead to costly audits, hefty penalties, and even legal disputes.

Therefore, retailers need to ensure that their point-of-sale systems are updated to reflect current tax rates and that they have processes in place to accurately track, collect, and remit sales tax on every transaction.

Bottom line: Staying compliant with sales tax requirements helps you avoid costly penalties.

#9 - Non-Compliance with Environmental Regulations

Retailers, particularly those dealing in goods that involve hazardous materials or significant packaging, must follow environmental regulations. This includes proper disposal of waste, recycling, and reducing environmental impacts.

More and more customers are choosing to shop with brands that show they care about the environment. Shoppers today want to support businesses that take steps to reduce waste, use eco-friendly packaging, and minimize their environmental impact.

Bottom line: Retailers who prioritize sustainability not only stay compliant with regulations, but also build stronger customer loyalty and attract environmentally conscious consumers. Being transparent about your eco-friendly practices sets your brand apart in a competitive market.

#10 - Customer Return and Refund Policies

Retailers must have clear and transparent return and refund policies that comply with consumer protection laws, both to protect their business and to build trust with customers.

These policies should be easy to find and understand, whether they’re posted online or in-store. Ambiguity or overly restrictive terms can lead to customer dissatisfaction, complaints, or even legal action from consumer protection agencies.

It's important to ensure that your return policies are fair and reasonable—this includes setting clear timeframes for returns, explaining any conditions on returned items (such as original packaging or tags), and detailing how refunds or store credits will be issued.

Misleading or unfair policies can result in fines, damaged customer relationships, and negative reviews that harm your brand’s reputation.

Bottom line: Avoid legal risks and nurture customer loyalty by providing straightforward, customer-friendly return policies.

Get Retail Compliance Help with The Retail Law Group

Keeping up with the many laws and regulations in the retail industry is key to staying compliant, especially since rules often change. By tackling these common compliance risks, you can avoid expensive legal problems and strengthen their relationships with customers and vendors.

If your company needs assistance navigating retail compliance, The Retail Law Group is here to help. We specialize in providing legal guidance tailored to the needs of retail businesses. Book a consultation with us today and let’s keep your business on the path of compliance.

Top 10 Retail Compliance Risks to Avoid