All too often, employees think being the boss is a cushy job. True, the boss gets to call the shots, but there are a lot of rules and regulations employers need to consider in making decisions.
If you recall, last month we talked a little about having the right tools for your business. One of the topics discussed was having the right personnel.
This month, we are going to talk about how to treat your employees – according to the law – and how to protect yourself from potential lawsuits. If this sounds boring, you may be right if your livelihood doesn’t depend on it. But if you are a small-business owner with at least one employee, read on.
One of the hottest areas of law these days is employment law. It seems impossible not to violate some governmental regulation at some time. Take for example the U.S. Department of Labor’s recent ruling that would have made employers liable for injuries sustained by employees – working at home. That may seem to be a ridiculous ruling to most of us, but it was issued – then retracted quickly. Nevertheless, there are numerous federal, state and local employment laws that employers must abide by.
Most of us can’t afford a full-time human resources department, so here’s a list of some of the major federal statutes you should know about. You should know that many of the federal employment laws are applicable only if you employ a certain number of people. Therefore, we have broken our list down by the number of employees it takes before you are subject to the regulations.
Laws effective if you have one or more employees (i.e., laws affecting all employers)
Equal Pay Act
– This act prohibits wage and salary discrimination on the basis of an employee’s sex. For a general discussion of this law, you can go to Prairielaw.com or the United States Equal Employment Opportunity Commission’s website.
Employee Retirement Income Security Act – ERISA
protects health and retirement benefits by requiring employers to adhere to minimum funding, vesting, and fiduciary standards. It also requires periodic information reporting on certain employer-sponsored health, welfare and retirement plans. For more information, you can go to Freeadvice.com for a general discussion of this law.
Occupational Safety and Health Act – OSHA
is a federal law that requires employers to adhere to certain minimum safety practices for employees. It provides regulations and standards that are enforced by the Occupational Safety & Health Administration. Generally, OSHA has the power to investigate employee complaints and inspect job sites, monitor compliance with any orders, and levy fines for violations of regulations.
– This is a state-administered, federally sponsored program to provide assistance to most employees who lose their jobs involuntarily. The funding mechanism for the program is taxes levied on employers based on employee pay. You can find a good discussion of unemployment compensation laws at the Legal Information Institute’s website.
– Workers’ Compensation laws are state laws that require employers to cover employees’ costs due to job-related injuries. Those costs include lost wages and medical and rehabilitation costs. Also, survivors of workers killed on the job will often receive death benefits. A good resource for workers’ compensation information is WorkersCompensation.com.
Law effective if you have two or more employees
If you have two or more employees, in addition to the previous laws, you are also subject to the Fair Labor Standards Act (FLSA)
. This act, also known as the Wage and Hour Law, establishes minimum wages for most workers, child labor laws, payroll recordkeeping requirements and rules regarding overtime pay. The U.S. Department of Labor Employment Standards Administration has a good discussion of the FLSA at its website.
Law effective if you have four or more employees
Employers with four or more employees are also subject to the Immigration Reform and Control Act
. The IRCA
establishes documentation required to verify the identity and eligibility for employment of every employee hired. Failure to follow the documentation guidelines of the IRCA can result in stiff penalties.
Laws effective if you have fifteen or more employees
Americans with Disabilities Act
– The ADA
prohibits employers from discriminating against disabled employees. The law requires employers to use reasonable means to accommodate the needs of these employees.
For more information, you can go to the EEOC’s Federal Laws Prohibiting Job Discrimination: Questions And Answers website.
Equal Employment Opportunity
– The EEO law prohibits employers from discriminating against employees on the basis of race, color, creed, sex, age, national origin or (within reason) physical disability. For further information, you can go to the EEOC’s Federal Laws Prohibiting Job Discrimination: Questions And Answers website.
Pregnancy Disability Act
– The PDA is a piece of civil rights legislation that requires employers to treat pregnancy as a disability and provide the same consideration to pregnant employees that others with a disabling condition might receive. About.com has a good general discussion of this area.
Laws effective if you have twenty or more employees
If you have 20 or more employees, the following laws apply in addition to all of the preceding laws.
Age Discrimination in Employment Act
– The ADEA prohibits discrimination in employment practices against employees who are more than 40 years old. The EEOC’s Federal Laws Prohibiting Job Discrimination: Questions And Answers website provides some general information about the ADEA.
Consolidated Omnibus Budget Reconciliation Act – COBRA
requires employers to give terminated employees access to the employer’s group healthcare plan for a period of time after employment terminates. The employee must be informed of his or her rights under COBRA, which include continuance of health coverage if the former employee pays the full premium rate rather than a subsidized rate. The U.S. Department of Labor has a booklet on COBRA requirements at www.dol.gov/dol/pwba/public/pubs/cobra99.pdf
Laws effective if you have fifty or more employees
If you are lucky enough to need 50 or more employees, you will be subject to the Family and Medical Leave Act
. The FMLA
provides employees up to 12 weeks of unpaid leave for the following reasons: child care, to take care of seriously ill relatives, or for a serious health condition preventing job performance. Generally, the FMLA provides for the restoration of the employee to the same or an equivalent position upon the return to work. The U.S. Department of Labor’s Compliance Guide with respect to the FMLA can be found at
There are many more laws throughout the United States dealing with employment practices and the preceding are just a few. For a more in-depth study of the laws affecting you in your state, we suggest you contact your state’s department of labor.
What’s an employer to do?
Now that we’ve given you the bird’s eye view of the major employment laws, what do you do to ensure compliance with the laws?
This article helps you with the first step – determining which laws apply to you. The next step is to decide whether you need a personnel manual to govern your operations and, if so, what to include. As a general rule, using a personnel guide is a good idea. It formalizes the expectations of the employer and employee and can be of help if you ever need to take action in terminating or disciplining an employee. One might argue that using a personnel guide will lock you into policies you don’t want, but the simple fact is you establish policies all the time, even if you don’t put them into writing. Every personnel action you take potentially sets a precedent that will create a policy – whether you want it or not.
A second point to consider is the need to obtain employment practices insurance. As we stated earlier, the numerous laws in effect these days almost require you to have a full-time employee to ensure compliance. Even if you are perfect, the wrong word said to the wrong employee can get you sued. Good employment practices insurance may prevent significant losses if a disgruntled employee sues you. Check with your insurance agent to see if this type of coverage is right for you.
The third and most important thing an employer can do is the simplest. Treat your employees as people. Remember that most personnel problems can be resolved satisfactorily if there is a perception of mutual respect on both sides. Even better, a happy employee is likely to be more productive. Not all problems can be handled in this manner, but most can. A consistent policy with all employees won’t necessarily prevent litigation, but it will go a long way in preventing large jury awards.
Being an employer has great rewards and a few pitfalls. If you have any thoughts or questions on your current practices, let us know. We’ll be glad to help you with those troublesome problems that keep you awake at night.