Starting a business is an exciting milestone that may open up doors to independence and financial freedom.
However, to ensure you don’t get into the wrong side of the law, you need to understand all the legalities related to your business.
Labor laws protect employee rights and regulate the relationship between the government, staff, workers’ unions, and the employer.
When hiring employees, ensure you are familiar with the federal and state laws that regulate how you treat them.
Doing so protects you from lawsuits that may cost your business money in the form of damages and penalties, jeopardizing its growth. Below are crucial labor laws that all small business owners should know.
1. Holidays and Vacations
As a small business owner, one of your business objectives is to grow your revenue while minimizing costs.
Therefore, you need to take advantage of all cost-saving avenues you get. While you may allow your employees time off during federal holidays, you are under no obligation by federal law to give private employees time off or offer holiday pay.
You also don’t have to pay them more for working during holidays. However, this does not mean you should always make them work on holidays.
To avoid being too generous or overworking your employees, consider giving them time off on major holidays, such as Labor Day.
Besides holidays, if you are not under a collective bargaining agreement or a government employer, you are under no obligation to offer paid vacations to your staff.
Although it is advisable to give your employees vacation benefits, the law has no minimum requirements or guidelines regarding vacations. Note that you can choose the employees to offer vacation time and who not to, depending on whether they are permanent or part-time employees.
However, you may not discriminate based on protected characteristics such as age, race, gender, or religion.
If your business has a vacation policy, carefully consider whether to use a “use it or lose it” policy.
Since laws equate earned vacation to earned wages, you may not force your staff to relinquish a vacation if they don’t use it before the year ends or decide to quit.
Since employees may forego vacations for a considerable amount of time to get more paid vacation time, some state laws have limitations for accrued vacation time.
To help you create the best policy for your business, check with your state laws and consult an employment lawyer so you can make the right decision for your business.
2. Fair Labor Standards Act (FLSA) and Overtime
The Fair Labor Standards Act (FLSA) requires employers to pay their covered employees’ overtime for working more than 40 hours a week at a rate 1.5 times more than regular hourly rates.
Although it looks straightforward, most small businesses get in trouble for violating the FLSA. One of the most common culprits is the misclassification of employees.
The first step to complying with this law is deciding which employees are exempt or non-exempt for overtime pay.
For employees to be exempt from overtime, they must at least have a salary of over $23,600 annually, be salaried or on a consistent hourly schedule complete with a steady paycheck, or hold a professional, administrative or supervisory position.
Since hiring independent contractors can sometimes mean they qualify for overtime depending on your working agreement, you may run into problems.
To help you make informed decisions and correctly classify your employees, the more control you exercise over them, the more they qualify for overtime pay.
Also, note that helpful employees who volunteer for extra hours while helping the business may be entitled to overtime pay.
Although they may not demand payment immediately, not paying them overtime wages may create more problems.
Other than employee classification, ensure you keep track of worked hours and implement proper timekeeping.
Doing so gives you evidence for when employees claim overtime pay. Some employers intentionally misclassify their staff to avoid paying overtime.
However, the law considers various factors to gauge whether they deserve the payment. Some of the deciding factors include employee contribution to the business, your degree of control on employee work activities, behavioral and financial factors, and your type of relationship with the worker.
3. Family and Medical Leave Act (FMLA) and Sick Leave
According to The Family and Medical Leave Act, your employees have a right to take some time off work to attend to medical needs.
The law requires employers with more than 50 employees to allow up to 12 weeks of unpaid leave annually without the risk of job loss to qualifying employees.
Employees who need to care for sick or injured service members can take up to 26 workweeks unpaid leave in a year. Some of the reasons to offer an unpaid leave include:
- Birth and childcare of employee’s baby
- Caring for a sick immediate family member such as a spouse, parent, or child suffering from a critical medical condition
- Caring for an adopted child
- If the employee cannot perform their duties due to sickness
- Any covered predicament affecting an employee’s child, spouse, or parent.
As a small business owner, you need to understand all about the FMLA law, including qualifying factors for the leave, the benefits that the law provides, and eligible employers and employees.
While you may not deny or interfere with the right to sick leave, you can request documentation from the employee to show they qualify for it.
You don’t have to pay the employees while they are on sick leave unless your state’s regulations require you to.
California, for example, requires employers to offer 1 hour of paid sick leave for every 30 work hours.
With this in mind, ensure you check your state’s specific laws to avoid issuing the wrong leaves or getting into legal problems. It also prevents employees from taking advantage of the law.
4. National Labor Relations Act (NLRA)
Whether or not your small business employs unionized workers, you are subject to the NLRA. The law allows employees to unionize, bargain collectively, and participate in concerted activities to achieve mutual goals such as protection and benefits.
However, there are exceptions to who the law covers in the private sector. Some of the private-sector employees exempt from the NLRA protection include managers, supervisors, confidential employees like accountants, and employer’s family members.
Farmworkers and domestic workers or employees in other industries that don’t affect interstate commerce are also exempt from NLRA.
It is against the law for employers to influence their employees against joining unions. Also, employers should not use manipulative tactics such as threats and coercion to sway union election results.
If your employees vote to join a union, you have an obligation to enter into collective bargaining with the association in matters of work terms and conditions. The union represents the members or bargaining unit.
As an employer or small business owner, you may get into legal trouble for limiting your employees’ rights as per the NLRA.
Most employers have a social media policy regulating what their employees can post on platforms like Facebook and Twitter.
Although such policies help prevent employees from putting the company in jeopardy with their opinions or remarks, ensure that it does not go against the NLRA.
5. Occupational Health and Safety
According to the Occupational Safety and Health Act (OSHA), employers with one or more employees should ensure their workplaces are free of hazards that can physically harm or cause the death of employees.
The law also requires you to report any accident that leads to hospitalization or death of an employee, maintain a record of your compliance efforts, and have posters hanging at the workplace notifying employees of their OSHA rights.
OSHA also has specific industry standards such as construction, agriculture, oil and gas, maritime, and health care.
Being a small business owner, you need to ensure that your employees’ working environment is safe to avoid legal problems during inspections.
OSHA inspectors don’t have to issue a notice before visiting your premises, making it necessary to keep your workplace compliant at all times.
However, you can accompany them as they conduct the inspection, choose a representative. Subject to unsafe working conditions, OSHA may impose penalties on your business.
It may also set additional standards for you to follow. Although your employees can file complaints with OSHA if you violate workplace safety standards, they may not sue you directly.
During an inspection, to be on the safe side, ensure you have a visible OSHA-compliant poster on your premises where employees can easily see it.
Be sure to include all the necessary information on the poster by checking with your state’s economic department.
Also, make any hazardous substances in your business identifiable to your staff, even those you think may not be dangerous.
On the same note, train your employees to handle injuries or accidents in case of exposure to hazardous substances.
Lastly, always ensure that your employees know what to do in case of a fire, including getting to emergency exits and using fire equipment. Fortunately, OSHA offers consultation programs for employers to help you stay compliant.
As a small business owner, you should also be aware of state laws specific to your area of operations in addition to federal law.
Some state laws may be superior to federal law and more restrictive. For example, if your state law has a higher minimum wage requirement than federal law, you will have to adhere to state laws.
If you need clarification or more information about the laws that apply to your business, always consult an employment lawyer.