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February 1, 2022

Employing People & 3 Legal Basics Every Business Owner Should Know

Post By:
Valerie Barnhart, Esq
In-House Contributor
Barnhart Law Firm
Guest Contributor:

When it comes to employing people, there are many rules, suggestions, opinions, and thoughts that come with that responsibility. It can be hard to know what you have to comply with and when. For many business owners, employment law can seem overwhelming. Whether you have 2 employees or 100, below are some employment law basics for the employer-employee relationship.

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1. Who Are Your “Employees?”

I have seen many cases of business owners classifying certain individuals as independent contractors who are, in reality, employees. Classifying individuals as independent contractors can result in significant savings to the business, including not having to pay employer taxes, employment benefits, or overtime compensation. Sometimes, the workers even agree to be paid as a 1099 or an independent contractor. However, while it can be advantageous to the business, in many of these situations the workers are in fact employees. Simply referring to a worker as an independent contractor does not make it so. Nor does it prohibit the worker (or the Department of Labor or Internal Revenue Service) from challenging the classification. Misclassification can result in exposure in the way of lawsuits, audits, and governmental investigations, which may result in penalties. Because of this, it is important to carefully consider a number of factors before classifying a worker as an independent contractor.  

2. Minimum Wage and Overtime.

The Fair Labor Standards Act (also called the “FLSA”) is a federal law that establishes minimum wage, overtime pay, and recordkeeping requirements for covered employees (whether they are part-time or full-time). Note that most states also have laws that deal with employee wages and some may be more stringent. One common issue that arises for covered employers under the FLSA is failure to pay required overtime for any hours worked by an employee in excess of 40 hours in a given work week. Sometimes this is intentional, and sometimes it is because the employer is simply unaware of the FLSA’s requirements. Examples of these situations include paying a non-exempt employee salary or paying an employee his or her regular hourly rate for overtime hours (instead of 1.5 times the hourly rate). Violation of the FLSA can result in hefty monetary consequences including liability for the wages owed, liquidated damages and attorney’s fees. 

3. Anti-Discrimination.

Many states are “at-will” employment states. What does this mean? It means that any employee can quit a job at any time and for any reason. It also means an employee can be terminated for no reason or any reason—so long as it is not an unlawful reason. There are a number of federal laws that prohibit discrimination based on protected categories. Title VII of the Civil Rights Act of 1964 makes it unlawful for a private employer with 15 or more employees to discriminate in all facets of the employment relationship on the basis of race, color, religion, national origin or sex. The Age Discrimination in Employment Act is another federal law that applies to employers who have 20 or more employees and prohibits discrimination against employees 40 years old or older on the basis of age in hiring, promotion, discharge, compensation, or terms, conditions or privileges of employment.

If you have employees, it is in your best interest to research local, state, and federal employment laws to better understand what you can and cannot do as an employer. It’s also helpful to have an advisor in your corner who can offer valuable guidance as you navigate the business waters as an employer. I’m happy to help answer any questions or concerns you may have!

**This article is provided for informational purposes only and is not legal advice.