4 Labor Laws Small Business Owners Need to Know About

Labor law small business owners need to know

Many labor laws -- like the new advanced-notice scheduling law that’s gone into effect in Oregon -- don’t apply to local businesses. Still, if you’re just starting out, you may not realize that you’re suddenly responsible for following a whole new set of laws. Here are four you need to know about.

Fair Labor Standards Act (FLSA)

The Fair Labor Standards Act (FLSA) is a federal law which establishes the minimum wage, overtime pay eligibility, recordkeeping, and child labor standards affecting full-time and part-time workers in the private sector and in federal, state, and local governments. Here are a few of the most common things you need to know.

Rules about wages:

  • The Federal Minimum Wage has not increased since 2009 when Congress set it at $7.25. Many studies show that the federal minimum wage-- even for a full-time employee-- is simply not enough to live on, so many states (and even some cities) have set a minimum wage law of their own. In these cases, the employee is entitled to the higher minimum wage. You can explore how the laws differ, and when minimum wage increases go into effect across the country, with EPI’s Minimum Wage Tracker.

  • If customers at your business are able to leave tips for your employees, there are some other rules you’ll need to consider. First, you (and other managers) generally can’t share in those tips. Second, some states have a lower tipped minimum wage. If that’s the case, you’re allowed to pay your employees a lower minimum wage and allow tips to make up the difference -- but you have to be sure that their total hourly pay (including tips) meets or exceeds your state’s minimum wage.

  • Nonexempt employees must receive overtime pay for hours worked over 40 in a single week at a rate of one and one-half times the regular rate of pay. Overtime pay is not required for work on weekends or holidays unless overtime is worked on these days.

  • You can keep labor costs under control -- and avoid overtime costs altogether -- by carefully planning your shift schedules. Some unscheduled overtime might be unavoidable, but if you find yourself consistently paying overtime, it might be time to look into hiring a part-time employee to fill in.

Rules about recordkeeping:

  • Recordkeeping requirements under the FLSA require you to keep certain records for a minimum period of time, even if the employee no longer works for you. For instance, timecards need to be kept for 2 years. You want to make sure these are stored safely and somewhere you will always be able to access these. Cloud-based storage is a good option to ensure that they’re easy to access and safe from physical destruction. Homebase, for example, keeps all your time card records up to 4 years, including information on any edits that were made to the time cards and by whom, which is especially helpful if a former employee files a complaint.

  • Keeping old employee time cards may seem minor, but the first offense can result in a substantial fine, with subsequent violations potentially resulting in jail time (and plenty of bad press for your business).

Eligibility for Employment and ICE Raids

ICE Raids are increasing with the executive order signed by President Trump that tripled the number of ICE officers. There are tools online that can help you verify your employee's identity and make sure they are eligible for employment at your workplace. Here are a couple of things you want to make sure you have to protect your business.

  • Get your I-9s in order now for existing employees and any new hires. Federal law requires that every employer that hires an individual for employment in the U.S. must complete an I-9 Form. This will help verify your employee's identity and employment authorization.

  • Set up a policy to verify documentation within the first three days of a new employee’s start date. E-verify is a web-based system they allow you to confirm the eligibility of your employees to work in the United States. The system will electronically match information from the employee provided on the I-9 with records for the Social Security Administration (SSA) and the Department of Homeland Security (DHS).

OSHA / Workplace Safety and Health

OSHA is The Occupational Safety and Health Administration. OSHA is in place to make sure that employers work environments are kept safe for workers. This applies to any business that has one or more employees excluding independent contractors and freelancers. Here are some things you need to know when it comes to OSHA and if they ever show up for a visit.

  • You must have an OSHA-compliant poster hanging in a visible spot for your employees. This could be a break room or another common spot where employees may see this regularly. You can visit this OSHA Posters page for the regulations on what information must be included on the poster. There are other posters you’ll be required to display as well, so check with your state’s business administration (often called the “economic development department”).

  • If you have hazardous substances in your workplace -- even substances you may not think are hazardous -- you need to make sure that these are identifiable. You will also want to make sure that you have training for your employees on how to treat injuries in case your employees are exposed to these substances.

  • In case of a fire, all your employees should know exactly what to do. This includes finding the closest fire exit as well as how to use the fire equipment on location to potentially stop the fire before it gets out of control.

No notice is required for an OSHA inspector to show up to your place of business, but if you ever find yourself with a surprise inspection, you do have the right to accompany the inspector or have a representative be present during the inspection. Take as many pictures as possible of the areas in questions all document all improvements made.

OSHA offers a free on-site consultation program with consultants from state agencies or universities that will work with employers and provide advice to ensure you are in compliance with OSHA regulations.

Workers’ Compensation

Last but not least, Workers’ Compensation insurance. Rules for “workers’ comp” vary wildly by state, but carrying insurance is generally a requirement of even the smallest businesses. In most states, any employer with even one employee has to have coverage; in other states, the minimum may range from two to five employees.

If you don’t have workers’ compensation insurance and one of your employees is hurt on the job, they could sue you in civil court, and the damages could put you out of business.

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