What Small Business Owners Need to Know about Employment Laws
As a small business owner, understanding and complying with employment laws is crucial for your company's success and legal protection. While the legal landscape can seem daunting, having a basic grasp of key employment laws will help you avoid costly mistakes and create a fair, compliant workplace.
It costs employers about $75,000 to work with an employment lawyer to settle an employment discrimination claim and can easily exceed $125,000 if the case progresses to court. Those costs can have detrimental effects to your small business. Let's break down the essential employment laws you need to know.
Small Business Liability
Before we get into the ins and outs of employment law, keep in mind that enforcement depends on the number of employees your business employs. Be advised that your business may be subject to state and/or local employment discrimination laws not covered in this blog. Be sure to familiarize yourself with these regulations to ensure no compliance blind spots.
According to the EEOC (Equal Employment Opportunity Commission), the agency who regulates anti-discrimination laws, if you have:
1-14 employees: You must provide equal pay for equal work to men and women employees.
15-19 employees: In addition to the above, you are prohibited to discriminate based on race, color, religion, sex (including pregnancy, sexual orientation, or gender identity), national origin, disability and genetic information (including family medical history).
20 or more employees: In addition to the above, you are prohibited to discriminate based on age (40 or older).
Key Employment Laws
As we discuss key employment laws, understand that these laws are established at the federal level and are the minimum standard in the U.S. Again, there may be state or local laws regarding each regulation.
1. Fair Labor Standards Act (FLSA)
The FLSA establishes minimum wage, overtime pay, recordkeeping, and youth employment standards and is regulated by the U.S. Department of Labor (DOL).
As we discuss key employment laws, understand that these laws are established at the federal level and are the minimum standard in the U.S. Again, there may be state or local laws regarding each regulation.
Key points:
- Ensure you're paying at least the federal minimum wage (currently $7.25/hour).
- Pay non-exempt (hourly) employees overtime at 1.5x regular rate for hours worked over 40 in a workweek.
- Maintain accurate time and pay records.
- Follow restrictions on employing minors.
2. Equal Employment Opportunity (EEO) Laws
These laws prohibit discrimination based on protected characteristics and are regulated by the EEOC. Ensure your hiring, promotion, and termination practices don't discriminate against people from protected classes. The laws also prohibit retaliation against people who complain about discrimination, file a charge, or participate in an investigation or lawsuit.
Key laws to know:
- Title VII of the Civil Rights Act: Protects employees and job applicants from discrimination based on race, color, religion, sex, or national origin in relation to all employment decisions including recruitment, selection, termination, and other terms and conditions of employment.
- Age Discrimination in Employment Act (ADEA): Protects employees and job applicants 40 years of age and older from discrimination based on age in relation to hiring, promotion, termination, compensation, or other terms and conditions of employment.
- Americans with Disabilities Act (ADA): Protects employees and job applicants with disabilities from discrimination in employment, transportation, public accommodations, and access to government programs.
3. Family and Medical Leave Act (FMLA)
The FMLA provides job-protected leave to employees if you have 50 or more employees and is regulated by the DOL’s Wage and Hour Division (WHD).
Key points:
-Must provide qualified employees with up to 12 weeks of unpaid, job-protected leave per year for specific family and medical reasons.
-You must provide the employee their same or equivalent job once the employee returns to work after the leave.
-Must maintain group health benefits during leave.
-Also provides certain military family leave entitlements to care for a covered servicemember with a serious injury or illness.
4. Occupational Safety and Health Act (OSHA)
OSHA requires employers to provide a safe workplace free from recognized hazards and is enforced by the DOL. The main goal is for employers to provide employees a safe and healthy workplace free from hazards.
Key responsibilities:
- Provide safety training to employees and managers.
- Maintain accurate records of work-related injuries and illnesses.
- Display OSHA poster in a prominent location.
Suggested reading
5. Immigration Reform and Control Act (IRCA)
IRCA prohibits employers from hiring individuals unauthorized to work in the U.S. and is enforced by the Immigration and Naturalization Service (INS). To avoid compliance issues with this law, complete and retain Form I-9 for all employees to verify their identity and employment authorization within 3 business days of their start date.
6. National Labor Relations Act (NLRA)
The NLRA protects employees' rights to engage in collective bargaining and other concerted activities and enforced by the National Labor Relations Board. The NLRA does not apply to government workers, agricultural workers, and employers subject to the Railway Labor Act (interstate railroads and airlines).
Note: This applies even to non-unionized workforces.
Key points:
-Employers cannot infringe on employees’ rights to improve their wages and working conditions, with or without a union.
-Employees may use social media to address work-related issues and share information with co-workers.
-Employees cannot be fired, demoted, transferred, or retaliated against for engaging in these activities.
7. Workers' Compensation Laws
Workers’ compensation coverage provides benefits to employees for accidental job-related injury or accident. While these vary by state, most require employers to carry workers' compensation insurance to cover employees injured on the job. See a list of all state workers’ compensation offices here.
Key points:
-State laws that protect employees from loss of income and medical expenses due to work-related injuries, illnesses, accidents, or diseases.
-Workers’ compensation coverage is required for businesses in most states.
-Employees give up the right to sue your business in exchange for the assured benefits.
8. Affordable Care Act (ACA)
You must provide health insurance that meets certain standards or potentially face penalties if you have 50 or more full-time equivalent employees.
Key points:
-You may be eligible for the Small Business Health Care Tax Credit if you cover at least 50% of your full-time employee’s premium costs and have less than 25 full-time equivalent employees.
-If you offer health insurance, you must provide a Summary of Benefits and Coverage in a standard format.
-If the cost of health insurance for some of your employees exceeds a certain dollar amount, you may have to pay an excise tax beginning in 2020.
Compliance Tips
Create Clear Policies: Develop an employee handbook that outlines your policies and procedures. You can see more about how to compile an employee handbook in our previous blog post.
Keep Good Records: Maintain accurate personnel files, time records, and other employment-related documentation.
Classify Employees Correctly: Understand the difference between employees and independent contractors, and between exempt and non-exempt employees. See our previous blog post to avoid misclassification.
Be Consistent: Apply your policies uniformly to avoid claims of discrimination.
When in Doubt, Seek Help: Consider consulting with CPR or an employment lawyer for complex situations.
Conclusion
While this overview covers key areas, employment law is complex and ever-changing. Your obligations may change as your business grows. Regular review of your practices and staying informed about legal updates is crucial.
Remember, compliance isn't just about avoiding penalties—it's about creating a fair, safe, and productive workplace that attracts and retains great employees. You're laying a strong foundation for your business's long-term success by understanding and following employment laws.
Disclaimer: The information provided on this website does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only. Information on this website may not constitute the most up-to-date legal or other information.
