Pop quiz: Which employees are entitled to overtime and which are not? What workplace benefits are required and which are perks? The answers to these type of questions are of course important, vital even to the success of your business, but many small business owners do not know the answers. So let’s see what is and is not essential, legally speaking, in the workplace.
Here are five workplace laws that every small business owner needs to know:
1. Employee or independent contractor? Especially these days, with the nature of work shifting and more and more employees being converted into independent contractors, the question arises: What is the difference?
Independent contractors and employees are in fact very different legal animals and woe to the business that labels an employee a contractor when they really are not. The penalties can be severe. Now, why would an employer try and do that? The reason of course is money; it costs much less to hire an independent contractor – you don’t have to pay benefits, or workman’s comp, or social security, etc.
But, that said, given that employers cannot control independent contractors as they do regular staff, bosses sometimes think the solution is to hire people, treat them like employees, but label them independent contractors. That way, the thinking goes, they get to boss them around but pay them less.
But even though an employer may try and get away with that, it’s illegal, and as indicated, the penalties are severe. So how do you know if that worker is an employee or an independent contractor? Independent contractors
- Set their own pay
- Make their own schedule
- Decide when and where to work
- May work for several businesses
- Are truly independent
If your staff member can’t do all of the above, he or she is probably an employee, no matter what you call them.
2. Overtime or not? Some employees are exempt from overtime pay requirements and others are not exempt. “Non-exempt employees” must be paid at least the minimum wage when working 40 hours a week or less, and time and a half for work over 40 hours.
So, what is an “exempt employee”? Basically, exempt employees hold managerial, executive, administrative, professional or outside sales positions. They usually get a salary in weekly, bi-weekly, or monthly payments. Therefore, if you have an employee paid by the hour, she is entitled to overtime, even if you label her management.
Here are three more critical employment laws any employer needs to know:
3. Benefits: Did you know that you are not legally required to offer any benefits at all, such as sick leave, health insurance, and so forth? You probably want to of course as that helps attract great employees, but you are not required to. All you are legally required to do as an employer is
- Pay at least the minimum wage
- Withhold and match social security (FICA)
- Pay unemployment taxes
- Provide workman’s compensation insurance and
- Pay non-exempt employees overtime if necessary
4. No discrimination: When hiring, promoting, or firing, it is illegal to discriminate on the basis of race, color, religion, sex, or national origin. Therefore, even when interviewing people for a job, questions that touch on those subjects should be avoided, as the answers should be irrelevant to your hiring decision. Even a genuinely curious question like “so, where does your family come from?” can be taken wrong and become the basis of a lawsuit and so should be avoided.
In addition, depending upon the circumstances, other issues that cannot be discriminated against can include age, sexual orientation, marital status, or disabilities.
5. Protection of proprietary information: It is not true that everything that happens at work is proprietary and confidential – just look at Facebook. So in order to keep your confidential work trade secrets actually secret, and to ensure that employees do not have any legal claims to the things they create while at work (content, etc.) there are several documents you may want to have employees sign:
- Trade Secret agreement: A trade secret is essentially any secret that is vital to the functioning of your business. Have employees sign a contract that acknowledges that they understand what issues and data you consider proprietary and confidential.
- Work-for-hire: When employees create things in the course of working for you (blog posts for instance), you own them. But even so, you may want to have employees sign a work-for-hire contract, stating that they understand and agree that you own whatever they create at work.
- Non-disclosure agreements: An NDA is simply an agreement that says employees may learn confidential information while working for you but they cannot share it without your approval.
Bottom line: Knowing what is and is not legally expected of you, and how to protect yourself, is critical.
