As a small business, it is always important to know about employment law before hiring your first employee. You may save yourself from spending thousands of dollars on lawyers and settling. We asked a number of employment law experts what they think is the most important details that can be missed among small businesses and startups? This is what they had to say:
“Due Diligence: Often times businesses will not conduct an adequate interview, follow up with reference checks, or otherwise engage in other hiring due diligence before making a hiring decision. This can lead to unpleasant surprises and potential liability down the road for such claims as negligent hiring. Entrepreneurs and new businesses really need to approach the hiring process in a manner similar to starting a new business – with a plan.”
“The most common mistakes I see small employers make are misclassifying employees as independent contractors; assuming that anyone who is salaried is exempt from overtime; badly drawn or overbroad non-compete agreements; and failing to have handbooks that are given to every employee. These are mistakes that even big employers make, but new employers make assumptions about employment laws that are wrong – sometimes to catastrophic effect. My best advice is to consult with an employer-side employment lawyer to get your policies and procedures in place and make sure you’re doing it right.”
“The FLSA and similar state law require paying employees minimum wage and overtime even for the smallest employers. Very dangerous area for small businesses. Penalties are stiff and you are responsible for other side’s attorneys fees. Restaurant owners should not mistakenly believe that tips make up for underpaying staff.”
“Have a written employment manual – so that you control what your policies are, rather than have them later discerned (possibly by a court) based on a sampling of your practices. Remember that even though your manual will say that it does not create an employment contract (which all good ones do), it basically does constitute a contract because if you violate your own policy, that can be considered employment discrimination. Thus, write into it discretion, when needed, and make sure the rules are something you can meet as an employer.”
“Whether you will offer benefits. There are costs and tax benefits for doing so. The benefits must be equal across the board. And speaking of equality and fairness, every employee needs to be treated equally and fairly and the policies implemented in a fair manner. Some employers may have biases, but in the employment context, if they are made known, you will open yourself up for lawsuits.”
“One of the most important details that any startup misses is that practically all businesses, with very limited exceptions, are liable for unemployment and workers compensation. That is, almost all businesses are subject to some type of unemployment and workers compensation tax. With unemployment compensation, the tax is directly levied by the government. With workers compensation, the tax is usually levied in the form of insurance premiums. Most startups don’t factor these taxes into their operating expenses. Consequently, when they’re hit with their first claims, or when approached by vendors trying to sell them insurance or some sort of claims processing service, the owner becomes overwhelmed and confused.”
“Failing to get workers compensation insurance. Any injury to an employee on the job, even a small soft tissue injury can involve huge costs. Insurance companies have ways of controlling the costs, but a small start up business lacks the time and expertise.”
“All U.S. employers must complete and retain a Form I-9 for each individual they hire for employment in the United States. This includes citizens and noncitizens. On the form, the employer must examine the employment eligibility and identity document(s) an employee presents to determine whether the document(s) reasonably appear to be genuine and relate to the individual and record the document information on the Form I-9. This must be done within three business days of hire. Penalties for not completing the forms properly can range from $110 per violation, up to a maximum of $1,100 per violation. Firms who show a pattern of hiring unauthorized workers are liable for criminal penalties of as much as $3,000 per employee and may be subject to six months in prison.”
It sounds as if making assumptions is not the best way to start a business. Find out more about all the facts and details on employment law before starting a business. Who better to get advice from than real lawyers and experts? Find them on the related links to their name.
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