Safeguard Your Small Business: Essential Employment Laws to Know

"You should start a business - you'll have fun!"

Using your product or service to solve problems or showcase your unique talent is the fun side of being a small business owner.

But there's more to running a small business than just providing a great customer experience. Effective asset management is crucial for maintaining operational efficiency and financial health. Additionally, there are labor laws and government regulations that cover everything from workplace safety to employee rights that every small business owner must know and follow.

Failure to comply with these regulations can be very expensive. Not only can you be fined by the government, but you also expose your small business to costly litigation. Properly managing employee information is crucial to avoid these risks. The last thing a small business owner wants is to have their business shut down because they failed to handle employee data correctly or comply with labor law regulations.

Keep your small business compliant

While labor laws and government regulations may seem like a nuisance - who wants to follow yet another regulation? - these laws and regulations exist for a reason. It used to be OK in this country to put young children to work in factories, to require employees to work six days a week with no time off, and to discriminate against someone based on their race or gender.

Labor laws were enacted to change these dangerous and harmful practices and to protect the health and safety of American workers. They also protect your interests. As long as you follow the laws and regulations, you can run your business any way you want.

5 Categories of Employment Laws and Regulations

The U.S. Department of Labor administers and enforces more than 180 different federal laws that address employment issues, with the most common falling into five categories:

1. Hiring Practices and Anti-Discrimination Laws
2. Worker Classification and Wage Laws
3. Occupational Safety and Health Regulations
4. Employee Rights and Protections
5. Compliance and Risk Management

1.Hiring Practices and Anti-Discrimination Laws

As a small business owner, you want to surround yourself with people who are committed to your company and share your vision. However, when hiring talent, it's important to know the employment laws that apply to hiring employees so you don't say or do anything during interviews that could get you in trouble.

Many of the employment laws that govern hiring practices also contain anti-discrimination elements that affect all workplace interactions.

Equal Employment Opportunity Laws

Equal Employment Opportunity (EEO) laws prohibit discrimination against an applicant or employee based on:

• Race
• Religion
• Gender (including gender identity and sexual orientation)
• National origin
• Age
• Disability
• Genetics

EEO laws also protect certain veterans and pregnant women.

These laws apply to the hiring, firing, promotion and training of your team members. They also apply to harassment, wages and benefits. Because these laws can be difficult to understand, IceHrm offers some tips on promoting employees and protecting the rights of pregnant workers.

In short, it is illegal to hire, fire or promote someone based on the categories above. It is also illegal to set wages and benefits for employees based on these categories.

Americans with Disabilities Act

Another anti-discrimination law that is important to know about is the Americans with Disabilities Act (ADA). You cannot discriminate against a person with a disability and you must also provide reasonable accommodations for people with disabilities to enable them to perform their duties.

What about background checks?

During the hiring process, you can run a background check on potential applicants. There is no law that prohibits you from doing this, but there are laws that protect the applicant. You must first get permission to run a background check, which applicants can refuse. If they refuse, you don't have to hire them.

IceHrm offers a checklist you can follow if you want to run a criminal background check during the hiring process.

2.Worker Classification Laws and Wages

Under EEO laws, it is illegal to set wages based on the protected categories above. It is also important to know the Fair Labor Standards Act (FLSA), which governs employee classification.

H3: Non-Exempt vs. Exempt Employee Classification

Worker classification laws govern requirements related to wages. There are two types of employee classification - exempt and non-exempt employees.

• Exempt employees typically receive an annual salary for their services. They are exempt from federal minimum wage and overtime pay regulations, but must meet other requirements to be considered exempt. This includes receiving a fixed salary of at least $684 per week, regardless of the quality or quantity of their work.
• Non-exempt employees are typically paid on an hourly basis. You must be paid at least the federal minimum wage or the state minimum wage, if it is higher. Non-exempt employees are also entitled to overtime pay of 1 ½ times their hourly rate for any work over 40 hours per week.

It's important for non-exempt employees to accurately record the amount of time worked each week. IceHrm's online timesheets can help you stay compliant with time tracking.

Contract Workers and Freelancers

As you grow your team, you may consider hiring independent contractors or freelancers. These workers are vendors like any other supplier you do business with.

Therefore, you don't have to comply with labor laws because they aren't your employees, but rather suppliers. Still, you must follow EEO laws when awarding contracts. There are also tax laws to consider, most notably issuing a 1099 for any payment to a contract worker or freelancer that exceeds $600 in the calendar year.

3.Workplace Safety and Health Regulations

As a small business owner, you are responsible for keeping your team safe on the job. Most workplace safety and health laws and regulations fall under the Occupational Safety and Health Administration (OSHA) standards, which include:

• Recording serious work-related injuries and illnesses. As a small business owner, you must record any injuries or illnesses that occur while your employees are on the job. Injuries or illnesses include deaths, loss of consciousness, broken bones or teeth, and needle sticks for people in medical professions. Records must be kept for 10 years.
• Reporting serious injuries. OSHA requires business owners to report any death or hospitalization due to a work-related injury within eight hours of the incident.
• Identifying hazardous materials. Businesses must conduct regular inspections to identify and assess the risk of potential hazardous materials.
• Employee training and safety programs. OSHA requires business owners to train employees who face hazards on the job.

4.Employee Rights and Protection Laws

Many laws regarding employee rights fall under EEO laws. These include the right not to be harassed or discriminated against when it comes to the protected categories mentioned above. Employees also have the right to equal pay for equal work, to receive reasonable accommodations for medical conditions or religious beliefs, and to keep their medical information confidential. Other laws regarding employee rights include:

Family and Medical Leave Act

The Family and Medical Leave Act (FMLA) authorizes employees to take up to 12 weeks of unpaid leave for certain reasons, including the birth or adoption of a child, treatment or recovery from a serious illness, and caring for a sick relative.

FMLA has special rules, and only small business owners that employ 50 or more employees are required to comply with FMLA requirements.

Whistleblower Protection Laws

As a small business owner, whistleblower protection laws make it illegal to retaliate against an employee who files a complaint with government agencies such as OSHA, the Wage and Hour Division, and the Office of Federal Contract Compliance Programs.

Non-Compete and Non-Disclosure Agreements

Non-compete agreements can be a crucial element in the relationship with your team members, especially professionals. A non-compete agreement is a contractual clause between a company (employer) and an employee that prohibits the employee from working for a competing employer or starting a competing business within a specific geographic area and for a specific period of time after employment ends.

If you want to agree to non-compete agreements with your team, we recommend that you hire an employment lawyer.

5.Compliance and Risk Management Requirements

As a small business owner, you should educate your employees about your policies, procedures, and expectations. Your employees should also know their rights and protections under state and federal law.

This information should be summarized in a written document such as an employee handbook. While employee handbooks are not required by law, they are a simple and effective way to convey important information. They are also great for sharing information required by the laws described in this article and help you stay compliant.

To minimize the risk of employment law violations, you should regularly train your team on the various employment laws. Your HR team should stay up to date on all government laws and regulations.

If in doubt, seek legal advice and professional help. Not knowing or understanding the law is no excuse in the eyes of government regulators!

Understanding and adhering to employment laws is crucial for the success and longevity of your small business. IceHrm can help you manage compliance, from hiring practices to wage regulations and safety standards. Regularly train your team and seek professional advice when necessary to ensure your business stays on the right side of the law.