What Laws Apply to My Small Business? 5 Important Points

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As a small business owner you need to stay informed of a variety of federal laws, but don't forget state laws which can be more restrictive than the federal laws. For example, the federal Minimum Wage is $7.25 per hour, but many states and some cities enacted much higher minimum wage levels. The golden rule in cases where the federal, state, or local laws collide is that the rule that is most beneficial to the employee will prevail.

While there are many laws that apply to businesses of all sizes, others are based on the number of employees you have. As a small business owner, it's hard to keep up with these changing laws--especially if your business is going through a rapid growth and hiring phase. But while you're hiring top performing staff, make sure to verify you're in compliance with the law. If you are not, you risk the business you have worked so hard to build. You not only protect your company but your employees as well. If you are fined significantly, you may not be able to retain employees.

1. Who Counts as an Employee?
If your payroll varies weekly, the regulatory bodies will consider your employee count during the 20 weeks with the highest staff levels in each calendar year. Employees who work only one or two days during a week count as an employee for that week. Temporary employees count even if you use an employment agency. Regardless of citizenship status, employees are covered by all federal anti-discrimination laws. Good news - Independent Contractors do not count.

If you are a small employer affiliated with a larger enterprise and share payroll, management, or other significant relationships, the employees of all related companies will count toward your employee tally for compliance purposes.

2. What Laws Apply to All Businesses?
Regardless of the size of your business (1+), some laws apply to everyone:
  • Child labor laws
  • Employee safety - OSHA
  • Immigration Reform and Control Act - Form I-9
  • Independent contractor rules by the IRS
  • Military service leave
  • Display of appropriate notices and posters
  • Privacy
  • Fair Labor Standards Act - FLSA
  • Workers' compensation

As you can see, there are plenty of laws you have to follow. But based on how many employees you have (or add), additional laws may be applicable to your business. It's best to check on local laws through your state's department of employment of labor or your state and local Chambers of Commerce.

3. Following the Law is Critical
While you may think some of the laws required are minor, the last thing you want to do is ignore them. From providing leave for employees' children's school activities to providing your staff with a safe working environment, all applicable laws are critical.

  • ADA Amendments Act - 15 Employees The ADA Amendments Act (ADAAA) does not apply unless your company has fifteen or more employees. But that doesn't mean your business cannot be ADA-compliant. If you have customers using wheel chairs or other assistive devices entering your place of business, you still want to accommodate them.
  • Pregnancy Discrimination Act - 15 employees The Pregnancy Discrimination Act (PDA) prohibits discrimination on the basis of pregnancy, childbirth and other related medical issues. If you have five or more employees, California requires you to provide Pregnancy Disability Leave to any expectant mothers working for you. This does not just include the legally mandated time-off. It could also include additional disability leave for complicated pregnancies.
  • ADEA - 20 Employees The Age Discrimination in Employment Act (ADEA) prohibits employers from discriminating against people age 40 or older in hiring, firing, layoffs, wages and benefits.
  • COBRA - 20 employees The Consolidated Omnibus Budget Reconciliation Act (COBRA) gives workers and their families who lose their health benefits the right to choose to continue group health benefits provided by their group health plan for limited periods of time under certain circumstances such as voluntary or involuntary job loss, reduction in the hours worked, transition between jobs, death, divorce, and other life events. Qualified individuals may be required to pay the entire premium for coverage up to 102 percent of the cost to the plan.
  • FMLA - 50 Employees The Family Medical Leave Act (FMLA) grants job-protected unpaid leave to certain workers in companies with at least 50 employees who work within 75 miles of the work site. Be careful here - if you have fewer than 50 employees and want to offer the same type of benefits to your employees, you will be required to follow the FMLA to the letter even though you are not required to provide the leave. Several states have enacted laws similar to the FMLA that may apply employers with fewer than 50 employees.

4. Thoroughly Evaluate State and Federal Laws
Make sure you perform a thorough evaluation of state and federal laws before you open your doors, and each time you add more staff to the payroll. That way you can ensure you're in compliance and you minimize your small business' risk of fines or lawsuits down the road. You also create a great work environment for your employees, one they want to be in.

5. Get Assistance Before It's Too Late
Employment laws can be difficult to understand. Certain changes in your small business trigger new required compliance with laws, so you need to stay on top of them as you grow. MJ Management Solutions can provide HR Solutions to see whether you're currently in compliance, as well as educate you on the applicable laws as your business grows. Schedule an appointment to speak with a human resources consultant 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.

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