When you run a small business, managing employees is a time-consuming part of your job. From schedules to vacation time, there's a lot to think about when it comes to dealing with human resources within your business. Among the many concerns you face daily is employee satisfaction.
Common sense tells you that engaged employees are more productive, so you strive to keep the peace. But in the midst of making everyone happy, you may be doing things that could land you in court or cost you in penalties. Even the most innocent-looking office policies can cause problems. Take a look below for five legal issues to be aware of when dealing with small business HR.
1. Exemptions
An "exempt" employee is paid a predetermined amount of money, regardless of hours worked. According to federal and state laws, salaried employees are sometimes exempt from mandatory breaks and overtime pay. This classification is often easier for employers to manage since there are no timesheets to track, meal breaks to deal with, or overtime to pay.
The problem with this arises when some disgruntled nonexempt employees are misclassified as exempt, and sue their former employers for overtime they were not paid. In order to prevent this from happening to you, check with the Department of Labor, as well as your own state labor office, and learn about what qualifies employees as exempt. Or consult an expert in human resources or an employment law attorney.
2. Independent Contractor vs. Employee
There's more to hiring someone under the term "independent contractor" than simply not providing the new employee with benefits. This tricky subject can quickly get you into trouble with the IRS or lead to disgruntled workers. Sure, Sally Mae is more than happy to work as an independent contractor--until an accident happens and she doesn't qualify for worker's comp. If the case goes to court and the employee is found to have been incorrectly classified as an independent contractor, you may be forced to pay the worker's comp benefits, unpaid overtime, penalties and more.
- Advertises his or her services,
- Works for more than one client,
- Sends client an invoice for work completed,
- Keeps his or her own records,
- Sets his or her own hours and terms.
- Is responsible for his or her own business gains or losses
3. Flexibility With Schedules
You think you're being nice by giving employees a bit of freedom with their schedules, and they likely thank you for it. But this kind of flexibility often comes with a whole set of problems. For example, if you allow employees to work longer days but fewer of them each week, you may be breaking overtime laws.
Some states only allow workers to be on the job for a certain number of hours each day without incurring overtime, so the best way to counter this issue is to familiarize yourself with your state's specific requirements. Otherwise, you may be held responsible for lost overtime pay.
4. "Use It or Lose It" Vacation Time
Many employers seek HR solutions for small business that include a policy stating that if paid vacation time isn't used within a year, the employee loses it. This is an effective policy for saving employers money, but may actually break the law in your state.
Some states require all earned but unused vacation time to be paid upon termination of the working relationship. So before enforcing the "use it or lose it" rule, find out what the legal requirements are in your area.
5. Harassment and Discrimination Training
Not all states mandate harassment and discrimination training (although some, like California, do), but training your first-line supervisors on what to do in certain situations can save you from lawsuits. If you're not sure what to do or where to start with this training, check with the EEOC (Equal Employment Opportunities Commission) for resources. Also, consider human resources management solutions outside your office.
HR for small business can be overwhelming at times. Knowing what the law says about everyday activities is crucial to your success. To make sure you're in compliance and to eliminate the risk of repercussions, reach out to an HR solutions professional today to learn more about safeguarding your business from legal troubles today.
Margaret Jacoby, SPHR, is the founder and president of MJ Management Solutions, a human resources consulting firm that provides small businesses with a wide range of virtual and onsite HR solutions to meet their immediate and long-term needs. From ensuring legal compliance to writing customized employee handbooks to conducting sexual harassment training, businesses depend on our expertise and cost-effective human resources services to help them thrive. This article first appeared on the MJ Management Solutions blog.