Knowing Employment Laws is Vital to Business Success
In all the excitement of running a business and seeing big ideas become a reality, it’s easy for a business owner to lose sight of things that are crucial to keeping the business running, including staying up-to-date on employment laws. Exciting? Probably not to the average business owner, but necessary, nonetheless. After all, the best defense is a good offense.
Employment law represents a variety of potential risks that businesses can encounter during the life cycle of an employee, from the hiring process through the time employment ends. Not knowing about these issues can put a business at risk for lawsuits that can be quite costly, but keeping track of compliance issues can take a business owner’s focus away from what counts-developing and retaining customers.
Understanding the Basics
Any business with employees has to comply with many federal and state laws. The first step in compliance is understanding, which can be a daunting task. In addition, many states laws are similar to (but still different from) federal laws, and may require more in order for the employer to remain compliant. Listed below are just a few key federal employment laws, but there are many more that are not listed:
- The Family Medical Leave Act (FMLA) regulates and ensures that employees’ benefits and positions are protected while they are on leave for qualifying events (such as the birth of a child). To comply with this law, documentation and confidentiality are essential, and the paperwork involved can be a challenge for a small business.
- The Fair Labor Standards Act (FLSA)outlines classification of employee status. In other words, this is the law that sets the minimum wage and regulates overtime pay, record-keeping and child labor laws.
- The Immigration and Nationality Act (INA) requires employers to verify their employees’ work eligibility by submitting a completed I-9 Form for each employee, regardless of nationality or citizenship. In addition, employees are required to provide the appropriate documents to confirm their identity and employment eligibility. If a company fails to comply, it is in violation of federal immigration laws. The terrorist attacks of September 11, 2001, brought about increased regulation in employment law with respect to hiring practices, immigration and the additional responsibilities that businesses must share to ensure compliance.
What Noncompliance Can Cost
The cost of not protecting your company is far greater than the cost of taking measures before a problem arises. The 2004 Small Business Economy: Report to the President, from the Office of Advocacy of the Small Business Administration, said that in 2001, firms with fewer than 20 employees paid nearly 60 percent more to comply with federal regulations than their larger counterparts with more than 500 employees. The cost disadvantage is largely driven by compliance with environmental and tax-related paperwork.
Consider these facts:
- Noncompliance with FLSA regulations may cost the employer two years’ back pay and liquidated damages. If the violation is determined to be willful, the fine can be as much as three years in back pay. In some states, daily noncompliance fines may apply as well.
- In 2003, companies paid out $236.2 million to the Equal Employment Opportunity Commission (EEOC) to settle charges of some kind of discrimination. (Compare this with 1993, when companies paid $126.8 million to settle charges.) Access to Employers Practices Liability Insurance (EPLI) can help protect businesses in cases involving discrimination, wrongful termination, sexual harassment or workplace torts.
Partnerships Can Help
Because of the time involved in keeping track of new issues and regulations regarding employment law, many employers outsource their human resources duties to a Professional Employer Organization (PEO). A PEO can help to improve a client’s compliance with employment regulations and assist the client by providing a team of HR professionals who keep abreast of employment laws and provide day-to-day guidance on HR-related challenges.
This enables business owners to focus on the productivity and profitability of their business without the distractions of complicated human resources tasks. Comprehensive PEOs offer services, solutions and training that cover issues such as discrimination, sexual harassment, monitoring workplace safety, conducting employee reviews, wage and hour concerns, disciplinary actions, manager training and employment terminations to help you avoid problems in these areas. Removing all risk from managing a business may be impossible, but reducing risk associated with the employment relationship is not-especially when partnering with a leading PEO like Oasis.