How to Avoid the Most Common Employment Law Mistakes Small Businesses Make

Running a small business is all about attending to the details — especially when it comes to your employees. Even if you only have a few people on your staff, it’s vital that you stay abreast of changes in employment law and the rules regarding how you manage and compensate them. Even if you accidentally misinterpret a rule or don’t realize that it applies to you, the consequences can be severe, even to the point in which you are forced out of business.

The best way to avoid making these costly employment law mistakes is to hire an expert, or support your HR team in expanding their law knowledge; for example, by earning an online employment law degree. Even having someone with in-depth knowledge in your corner, it’s useful if you know the rules and how to avoid some of the most common mistakes.

Mistake #1: Misclassifying Employees

Employee misclassification generally arises from a desire to save money, time or both. Often, businesses will classify employees as exempt and pay them a salary regardless of how many hours they work because they do not want to pay overtime wages or deal with managing breaks and timesheets. However, because exempt employees aren’t entitled to specific break periods, and may work more than 40 hours, issues can arise when employees aren’t given adequate time for breaks and meals. The distinction between these types of employees is often fuzzy, but if you make the wrong decision, it could be detrimental to your business.

Another common classification problem arises when you hire individuals as independent contractors.  In today’s gig economy, it’s common for companies to hire people to work on a temporary or contract basis. Some businesses also classify workers as independent contractors in an effort to avoid regulations regarding benefits. However, for someone to be considered an independent contractor, there are strict rules that must be followed in regard to when and how they work, the equipment they use and how they are paid. Misclassifying employees as independent contractors can lead to significant fines and other consequences, so it’s best to consult with an expert when determining worker classifications.

Mistake #2: Mishandling Employee Leave

First things first: You can let an employee go for issues like poor job performance, chronic absences and abusing vacation or sick time policies. What you cannot fire an employee for is taking leave for medical issues covered under the Family Medical Leave Act (FMLA), for military service or to vote or serve on a jury. Even if the worker’s absence affects productivity, you are legally required to keep him or her on staff. Should an employee need FMLA, you can require the use of saved up vacation or sick leave before the FMLA kicks in, and you do not have to pay an employee on FMLA leave, but you cannot fire that person. Again, because the rules are complex, consulting with an HR or employment law expert prevents running afoul of the law.

Mistake #3: Making the Wrong Rules

As a businessowner, you want to protect the company’s image — and that includes monitoring what’s happening on social media. However, in recent years, the issue of what employers can and cannot do when it comes to establishing social media policies has become a hot button issue. The National Labor Relations Board has even gotten in on the act, establishing clear guidelines for employers regarding what can and cannot be prohibited in terms of social media. Essentially, employers cannot prohibit employees from posting online if it’s considered activity designed for “mutual aid and protection” for employees. What this looks like in real life is complicated, so employers need to be careful when drafting social media policies to avoid overstepping the laws and seek guidance from an expert.

Other rules that employers need to be careful of when developing employee policies are those regarding lunch and break times, the number of hours that employees can work and non-compete agreements. In the case of the last item, the enforceability of such agreements is often in question, and in some states they are prohibited entirely. It’s important to know the laws and adhere to them to avoid costly lawsuits.

Employment law is complex and becoming more-so all the time. As your business grows, it’s important to understand which rules affect your business and to take care to follow them to the letter. When you do, you’ll protect both your business and your employees from costly problems in the future.

Author: Eddy

Eddy is the editorial columnist in Business Fundas, and oversees partner relationships. He posts articles by others on various topics related to strategy, marketing, supply chain, technology management, social media, e-business, finance, economics and operations management. The articles posted are copyrighted under a Creative Commons unported license 4.0. To contact him, please direct your emails to editor.webposts@gmail.com