Do you know small businesses in the U.S. face over 180 federal employment regulations enforced by the US Department of Labor (DOL)? These laws govern approximately 10 million establishments and 150 million employees,
The extensive nature of these regulations, along with state and local ones, can potentially make it hard for small business owners to comply with. Following these rules is essential to avoid legal trouble, criminal prosecution, fines, and even business closures.
Small business owners need to know about federal and state employment laws. These laws cover things like minimum wage, overtime, employee benefits, and workplace discrimination. Not following these laws can put your business at risk and distract you from what makes your business successful.
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This article covers the key federal and state employment laws small business owners need to know. We’ll also give tips on how to ensure your company follows these laws.
The Maze of Federal Employment Regulations
The federal employment laws enforce fairness and the protection of your employees. Hence, small business owners must adhere to these statutes to be compliant.
- Fair Labor Standards Act (FLSA): Also known as “the Wage and Hour Law,” sets rules for minimum wage, overtime pay, child labor practices, and the keeping of employee records. Under the FLSA, it’s important to know if your employees are exempt or non-exempt.
- Family and Medical Leave Act (FMLA): Allows eligible employees to take up to 12 weeks of unpaid leave to care for family or personal medical reasons. This regulation protects their job and offers health benefits.
- Americans with Disabilities Act (ADA): Forbids discrimination against potential or actual workers with disabilities. You must make reasonable changes for employees with disabilities if possible, without extreme difficulties to your business.
- Occupational Safety and Health Act (OSHA): OSHA makes sure workplaces are safe and healthy, requiring you to keep a safe work area for your team.
- Equal Pay Act (EPA): Requires equal pay for men and women in the same position.
- Title VII of the Civil Rights Act of 1964: Prohibits discrimination or harassment based on race, color, sex, age, nationality, genetic information, or retaliation for reporting discrimination or harassment. It also enforces equality in the workplace.
- Migrant and Seasonal Agricultural Worker Protection Act (MSPA): Gives migrant workers rights and resources regardless of immigration status.
- Age Discrimination in Employment Act of 1967: This regulation protects employees and applicants over 40 from any discrimination based on age.
- Employee Retirement Income Security Act of 1974 (ERISA): This governs employee benefit plans, including group health plans, provided by private sector employers, employee organizations (such as unions), or both, to employees and their families.
- The Health Insurance Portability and Accountability Act (HIPAA): This allows for special enrollment following specific life or work events and prevents discrimination against employees and their dependents due to their health status.
This is by no means an exhaustive list of all available federal labor laws, but is instead a pointer to what every small business owner should know. As your small business grows and employs more people, the regulations that you need to adhere to will likely increase. For example, the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) is a law that grants certain employees, retirees, and family members the right to temporarily continue their group health plan coverage at group rates when coverage is lost due to specific qualifying events. This provision is only made for employers that have employed 20 or more employees in the preceding year.
The list goes on. That is why you should stay up-to-date and be proactive because these regulations are changing.
State Employment Regulations
States also have their employment laws that do not conflict with or override federal laws. Some of the laws they promulgate are stricter, and they cover minimum wage requirements, workers’ compensation, unemployment laws, wage garnishment, payment of accrued vacation upon termination, record keeping, drug and alcohol regulations, payroll taxes, leaves of absence, and more.
For example, the federal minimum wage is $7.25 per hour. However, the District of Columbia set its own at $17 per hour, while California is set at $16 per hour and their fast food workers earn $20 per hour as their minimum wage. Like they say, different strokes for different folks.
The fact that your business and/or employees (in the case of remote work or where an organization has multiple locations) are situated in any state is reason enough to familiarize yourself with the laws that apply so you do not compromise your business standing.
Challenges and Compliance Strategies for Small Businesses
It goes without saying that many small business often struggle to comply with all the relevant federal and state laws that apply to them. Also, jurisdiction-specific requirements can potentially complicate adherence to these legal standards.
Compliance Strategies
- Training: Have regular employee training on legal requirements and company policies.
- Supervision: Maintain a balanced level of oversight to ensure compliance without stifling autonomy.
- Internal Policies: Develop clear, employee-centered policies to guide daily operations.
- Legal Advice: Seek consistent and clear legal guidance from a business lawyer near you in your city to handle conflicting information.
- Resource Management: Efficiently manage resources, even when using volunteers or family members.
- Profit Goals: Balance the need to turn a profit with maintaining legal compliance.
Conclusion
These regulations apply to most businesses, irrespective of their size. They also apply regardless of the corporate structure under which the business operates—a corporation, sole proprietor, or even if the owner created an LLC for the business.
As a small business owner, understanding all relevant federal and state employment laws is vitally important. These laws shape how you hire, what benefits you offer, and more. This article has looked at how these laws affect small businesses, and why your small business must stay compliant so that your reputation, growth and success are not threatened.