It would be impossible in less than a whole treatise to provide a small business owner with a complete description of all the federal, state, and local laws, constitutional amendments, executive orders, administrative regulations, case law, and common law, etc., that affect employment issues. Even large companies and organizations, with full-time human resource personnel and in-house legal staffs, have to work diligently to remain current on all employment law developments, and most have relationships with specialized law firms to keep them current and compliant. Here is a summary of the Department of Labor laws (but keep in mind that there are also other federal and state-specific laws, and you should consult with legal counsel in your jurisdiction to make sure you are in compliance with all relevant laws and regulations).
On top of federal and state laws, there is also "common law," which can be used by an employee to file a lawsuit against an employer.
Just because you are a small business owner, you are not exempt (because of the number of employees you have) from meeting the legal requirements of most employment decisions.
IN EMPLOYMENT MATTERS, ASSUME THAT THE LAW COVERS YOU UNLESS YOU HAVE BEEN ADVISED OTHERWISE BY AN EMPLOYMENT LAWYER.
So, what is a small business owner to do, faced with the need to comply with all applicable laws and the reality of limited resources (people, money, time, expertise)?
There are things you can do to avoid getting into legal trouble in employment matters.
- Outsource your payroll function so that a third-party assumes responsibility for all laws related to taxes, tax payments, withholdings, paying minimum wage, making state and local employee reports, provision for overtime payments, etc.
- Get connected with a good employment or labor lawyer who knows you and your business.
- Do not discriminate in any employment decision (hiring, pay, benefits, promotion, work assignment, discipline, discharge, etc.), because of a person's race, color, religion, sex, gender, ethnicity, national origin, age, disability, pregnancy, marital status, veteran status, etc.
- Do not allow sexual harassment to occur in your workplace.
- Be careful about how you decide when an employee meets the exemption guidelines of the federal/state "exempt" worker classification under the Fair Labor Standards Act (FLSA).
- Provide workers' compensation coverage for all your employees who might suffer a work -related injury or illness.
- Provide a safe workplace and abide by all federal and state occupational health and safety act requirements.
- Make certain that the people you hire have the right to legally work in the United States pursuant to the Immigration Reform & Control Act.
Let's talk about each of these suggestions in more detail.
Outsourcing the basic payroll function is usually not costly, depending on the services and reports that you want. For basic services (print & distribute checks, keep tax records and calculate tax payments, provide year-end W2's), the cost ranges from $1.00 to $4.00 per check issued. You can always add other services if you have a requirement for them. Type "outsource payroll" in your search engine to get specific information and even online cost quotes.
Connect with a Good Lawyer
Your small business owners' local gatherings should be a good source for a recommendation for a local lawyer who specializes in labor and employment laws. You can also search online, but it is recommended that you get the name of an attorney from someone you trust and respect.
Follow Good HR Processes
Adopt basic HR policies and provide a copy of these policies to all your employees. If you do this, and then apply HR policies consistently, reasonably, and equitably to all your employees, you will have taken the first basic step in terms of complying with the myriad of labor and employment laws.
Do Not Discriminate in Any Employment Decision
Discrimination in employment is forbidden for a wide-range of "protected groups" (race, color, religion, sex, gender, ethnicity, national origin, age, disability, pregnancy, marital status, veteran status). Discrimination can be claimed for any treatment of an employee that "feels" different to that employee because of their protected group status, including employment actions like hiring, pay rates, benefits, promotions, work assignments, selection for over-time work, disciplinary actions, ratings on performance reviews, discharge, etc.
Do Not Allow Sexual Harassment
Make sure you have a written anti-harassment policy that is given to all employees with regular reminders to review it, and consult with legal counsel in your jurisdiction for specifics.
Make Certain Salaried Employees Are Exempt From Overtime Payments
The United Stated Department of Labor, Wage & Hour Division, enforces the Fair Labor Standards Act (FLSA), portions of which define which employees are to be paid for overtime in a work week (working more than 40 hours) and which are exempt from the overtime provisions of FLSA. The employee "types" that are exempt from overtime pay are categorized as executive, administrative, professional, computer, outside sales, and highly compensated employees who are paid on a "salaried basis."
It is important to make certain that you are familiar with the provisions of the FLSA and that the employees you are exempting from overtime payments meet the applicable regulatory requirements.
If you have any questions or are unsure about the exemption status of one of your employees, contact the U.S. Department of Labor, Wage & Hour Division, and ask for an "opinion letter" on the specific employee's exempt status.
Have Workers' Compensation Insurance
State workers' compensation laws ensure that an employee who is injured as a result of an accident on the job or who contracts a disease as a result of performing her or his job, will receive compensation and medical benefits.
EVERY STATE requires that employers purchase workers' compensation insurance or apply to be self-insured for this liability.
Not only for workers' compensation insurance purposes, but also for occupational health and safety compliance, it is very important that a report of injury be completed any time there is a workplace accident, injury, or illness.
State laws that govern the administration of workers' compensation and establish the payment levels for lost work time as well as medical treatment are all different, so it is highly recommended that you contact your state's workers' compensation office to request up-to-date requirements for the state(s) in which you have employees working.
Some states have very stiff penalties for not being self-insured (in accordance with each state's requirements), or for not purchasing and having a current and in-force workers' compensation insurance policy.
Have a Safe Workplace
Maintaining a safe workplace and work environment is a fundamental, good business practice. Again, in most states, all employers are covered by Occupational Safety and Health legislation in addition to the Federal Occupational Safety & Health Act (OSHA). The Federal OSHA defines a covered employer as any "person employed in a business affecting commerce who has employees."
OSHA standards may require that employers adopt certain practices, means, methods, or processes reasonably necessary and appropriate to protect workers on the job. Employers must become familiar with the standards applicable to their establishments and eliminate hazards.
Compliance with standards may include implementing engineering controls to limit exposures to physical hazards and toxic substances, implementing administrative controls, as well as ensuring that employees have been provided with, have been effectively trained on, and use personal protective equipment when required for safety and health, where the above controls cannot be feasibly implemented.
OSHA regulations are very detailed and voluminous. As a small business owner, it is highly unlikely that you will have the resources in-house to know and understand the detail of what is required of you based on the nature of your business, unless you are a highly specialized firm dealing with a hazardous technology (i.e., providing services to the nuclear power industry that include testing samples of spent fuel rods).
Because you will have workers' compensation insurance, that insurance company will often have in-house expertise on Federal/State OSHA requirements for your business based on your business's "Standardized Industry Code" (SIC).
Make Certain the People You Hire Have a Legal Right to Work in the United States
The Department of Homeland Security is responsible for making certain that all persons employed by any employer in the United States have the legal right to work in the United States. To fulfill this part of their function, Homeland Security requires each employer to document that each new employee can show that they have such legal status.
As such, each employee, as a condition of employment, must complete something commonly referred to as a Form I-9. As an employer, each small business owner is responsible for making certain that each employee completes an I-9 no later than at the time of hire, and is responsible for examining the evidence of identity and employment authorization within three business days of the date employment begins.
The employer must record in a part of the I-9 form the document title, the issuing authority, the document number, the expiration date of such document (if any), and the date employment begins, and sign and date the certification to that effect. Employers must maintain a copy of the completed I-9 form in their business records, and it is strongly suggested that a photocopy of the original document(s) presented by the prospective employee be made and maintained with the completed I-9 form.
In addition, a majority of states now require employers to verify an employee's eligibility to work in the United States using an internet-based system called eVerify (www.uscis.gov/e-verify). The system compares the information from the Form I-9 to the data from the U.S. Homeland Security and Social Security Administration records to confirm employment eligibility.
Because the process, as well as the requirements, to complete the Form I-9 have changed, and will probably continue to change from time-to-time, copies of the I-9 forms and instructions may be downloaded from the U.S. Citizen and Immigration Services website: www.uscis.gov/forms or may be ordered by calling the USCIS at 800-464-4218.