Updated: Aug 2022
As a business grows, the web of laws and regulations to which it is subject becomes increasingly complex. Human resources laws governing the employer-employee relationship comprise a significant part of this regulatory burden. While larger corporations generally have HR departments and teams of attorneys ensuring that they avoid infractions, small businesses often lack these resources and therefore run the risk of unintentionally violating the law.
However, the cost of failing to comply with HR laws is substantial for businesses of all sizes: employers may face state and federal penalties and leave themselves vulnerable to litigation.
While this list is not exhaustive, here are some steps that businesses should take in order to remain compliant with HR laws and required procedures:
- Familiarize yourself with state and federal labor laws to ensure that your business practices do not violate employees’ rights. Examples of federal laws include the Family and Medical Leave Act (FMLA), which grants eligible employees the right to take unpaid leave for family or medical reasons, and the National Labor Relations Act (NLRA), which protects workers’ rights to collective bargaining and governs other aspects of labor relations. In addition, the Affordable Care Act (ACA) imposes various requirements on employers regarding healthcare coverage. Businesses that fail to comply with the ACA face substantial financial penalties, so an understanding of the requirements is critical for employers.
- Conduct the recruitment process lawfully. Human resources laws begin regulating the employer-employee relationship before a new worker is even hired. Federal, state, and local laws prohibit employers from asking for information that would reveal certain protected characteristics of an applicant, such as his or her race, religion, marital status, disabilities, age, gender, or ethnicity. By reviewing application forms and carefully planning interview questions in advance, businesses may minimize the risk of erroneously asking for prohibited information.
- Verify the employment status of all potential hires to ensure that they are legally residing in the United States. This may be done via an I-9, or the Employee Eligibility Verification Form. When confirming eligibility, employers may only request forms of documentation that are specified on the I-9; asking for other documents may subject the employer to liability for discrimination. Businesses must keep the I-9 on file for either three years after the date the employee was hired or one year after his or her employment ended, whichever is later. This form, along with any other records that contain confidential employee information, should be stored in a secure location where they can only be accessed by those with a compelling reason for doing so.
- Post the requisite workplace notices. State and federal laws require several notices detailing labor laws to be posted at businesses. These may be obtained at no cost from the U.S. Department of Labor or state agencies. For more information, visit https://www.sba.gov/content/workplace-posters.
- Properly report new hires. Under federal law, all employers must report that they have hired a new worker to their designated state agencies within twenty days of the date of hire.
- Ensure that your business is complying with laws governing employee pay. While the federal minimum wage is currently $7.25 per hour, it is important to verify rates under local laws as many cities, counties, and states have established their own minimum hourly amounts. In addition, research state laws regarding overtime pay to make sure that you understand which employees must receive it and at what point.
- Train managers on how to avoid and handle situations involving harassment and discrimination. A few states, such as California, Maine, and Connecticut, require employers to provide such training, while many other states recommend it. Harassment and discrimination training helps reduce the risk of lawsuits, potentially saving businesses substantial investments of time and money.
- Publish an employee handbook that is circulated to all employees. A handbook provides a clear set of rules, expectations, and guidelines for employees and serves as a point of reference should a dispute occur.