Running a business as the sole employee can be stressful but requires lesser legal issues.
Unfortunately, as your business grows, you will need to hire more hands. As much as this is a sign of progress for your company, it can get you and your business in trouble if done wrong.
Some business owners are unaware of this and usually realize their mistakes after being served by the court.
According to a employment lawyer, Jason Erlich, understanding and abiding by the employment law in your area can save you from many legal suits.
Below are some of the common mistakes business owners make that can lead to employment legal problems.
Misclassifying employees
Misclassification refers to a wrong designation of an employee. It usually classifies an employee as an independent contractor or freelancer, either by mistake or intentionally.
Employees, by law, are entitled to wages or salaries. Contractors, on the other hand, are fully paid upon completion of a project, and they decide on what to work on.
Contractors are not entitled to employee benefits such as health insurance, medical leave, and paid vacation.
The law is against misclassification because it often results in tax evasion, depriving employees of their benefits and breaching their rights.
A study revealed that about 30 percent of US employers might be misclassifying their workers, resulting in billions in lost taxes.
If found guilty of this offense, you may be fined up to $1,000 per misclassified employee and risk jail time of up to one year.
In addition, the judge may order you to pay all wage differences, including benefits, to each misclassified employee. The tax authorities will demand you pay the tax owed on income and payroll taxes for the period of misclassification.
Always regularly check your payroll to ensure every employee is correctly classified.
Ignoring anti-discrimination policies
Title VII of the Civil Rights Act of 1964 prohibited employers from discriminating against employees and job applicants because of their race, color, religion, sex, and national origin.
As a small business, you may see no need for this, but it is essential to have anti-harassment and anti-discrimination policies once you have fifteen or more employees.
Always discuss your anti-discrimination policies with employees and job applicants. You may also have copies distributed to your workers. This is vital in case an employee files a complaint against your company.
During an investigation, the Equal Employment Opportunity Commission (EEOC) will consider the presence or absence of your company’s anti-discrimination policies.
Being careless with the content of the employee handbook
Although not mandatory, an employee handbook can save your business from losing a legal suit if an employee sues you.
It should contain all information about your company, including performance metrics, an overview of benefits provided to each employee, and how to lodge a complaint officially.
Ensure your employees confirm they understand the handbook’s content and ensure everyone has a copy, if possible.
You must be careful with your choice of language and vocabulary when preparing the handbook. Some courts and employees may interpret the handbook as a contract.
Include language that signifies the company reserves the right to terminate an employee for reasons not stated in the handbook or for no reason at all. Also include certain actions that may be taken and might not be as specified in the handbook.
Failing to respond to employees’ complaints properly
Harassment and discrimination complaints from employees should never be ignored. Document the filed complaint and processes are taken to remedy it.
It is a violation of the law to terminate an employee or punish them in other ways, such as denying them a promotion for filing a harassment or discrimination complaint.
Complaints about workplace settings should also be resolved, such as providing an accommodating environment for qualified employees with disabilities.
Improper interviews
Interviews are part of the process of selecting the best candidates for openings in your company. Even though it is an avenue of getting to know the personalities and abilities of the potential candidates, it should be done in accordance with the law.
At the end of the interview, you should be able to state why a candidate is not hired. This does not necessarily mandate you communicate the same to the employee.
Document all interviews, including the questions and responses from the interviewee.
Desist from asking about their age, race, marital status, children, religion, health status, political affiliation, or preferred sports team.
Asking any of these might indicate an intention to discriminate against them because of their answers, and this violates US employment policies/practices.
