Owning and operating a small business is not easy, especially when it comes time to hire employees. Hiring the right people is critical – but equally important is understanding the state and federal labor laws which apply to your situation. If you do not fully understand the employment and labor laws, you could open yourself up to a lawsuit or drawn-out legal battle – nothing that a small business entrepreneur wants to deal with! To help you out, we have assembled some of the important labor laws that every small business owner should know about.
Federal Labor Laws
Overtime and The Fair Labor Standards Act (FLSA):
This law deals with the classification of all employees as either exempt or non-exempt, and requires you pay non-exempt employees overtime when applicable. Which employees are eligible for overtime and which are not?
- The employee must make more than $684 per week to be considered exempt from overtime pay.
- The employee must be salaried or on a consistent schedule with an unchanging paycheck to be exempt from overtime pay.
- If the employee has a managerial, administrative or a position which requires a degree, they are exempt from overtime pay.
However, this can get complicated. For instance, many small businesses hire independent contractors or freelance professionals. These people may or may not be qualified for overtime, typically depending on how much control the business owner has over their day to day schedule.
Keeping I-9 Forms
Every business owner must keep an up to date I-9 form for each employee. This document verifies the legal citizenship of the employee (or immigration status). A form for each employee should be kept on file and retained for 7 years after their employment ends.
While this may seem a rather benign law, the penalties for noncompliance with this law can be painful – especially as your company grows. Keep in mind, independent
contractors are not required to fill out an I-9. Learn more about I-9 Forms here.
The Fair Credit Reporting Act (FCRA)
The Fair Credit Reporting Act (FCRA) prevents employers from doing credit checks on their employees without meeting a number of requirements, including obtaining their written permission. Employers should disclose why they want the report, as well as provide a copy of the report should the individual not be hired; so they can verify the accuracy of the data that cost them the job.
The Family and Medical Leave Act (FMLA)
The Family and Medical Leave Act (FMLA) is one of the most complex – and therefore misunderstood – labor laws. FMLA requires employers to give eligible employees a total of 12 weeks of unpaid time off during a 12 month period, under the following circumstances:
- The birth of the employee’s baby.
- Caring for a newly adopted child or foster child.
- Care for an immediate family member who is ill or injured.
- The employee is personally experiencing serious illness or injury.
Employee Retirement Income Security Act (ERISA)
The ERISA contains regulations for employers who offer retirement, pension or welfare benefits plans for their employees. Tracking payroll and providing appropriate paperwork is crucial, but can often be easily handled with the right payroll software. The law is complex, and it is recommended that you seek out advice from a HR professional or legal expert to help you remain compliant with federal labor laws.
If you are a Louisville area small business owner and would like to make sure that your business is compliant with all labor laws, call People HR Solutions today. We can help.
