EDITOR'S NOTE: The following article was published by the National Federation of Independent Business (NFIB).
As a business owner, you want to do right by your employees. But, if you sometimes find yourself scratching your head over how to follow the letter of the law as accurately as possible, well, you’re hardly alone. “Compliance with labor laws isn’t necessarily intuitive,” says Karen Harned, Executive Director of NFIB’s Small Business Legal Center. “It can be hard for a small business owner to keep up.”
From Family and Medical Act Leave laws to rules concerning independent contractors, here’s a look at some areas that most often trip up small business owners.
The National Labor Relations Act (NLRA) is often associated with unionized employees, so many small business owners don’t realize that their employees are protected by the NLRA even if they aren’t part of a union. The law applies to all private employers with two or more employees. That’s critical, because it limits what employers are permitted to say to these employees.
“For example, if two or more employees are talking about wages or anything regarding work conditions, you can’t shut that conversation down,” says Harned.
The law prohibits employers from interfering with employees who want to form or join a union, to bargain collectively through representatives of their own choosing, and to engage in activities related to collective bargaining or mutual aid or protection.
Simply recognizing which activities are protected by the law—even if your workplace isn’t unionized—is perhaps the most important way to stay compliant with the NLRA. “You need to watch your language if you want to communicate that you want to be union-free,” says Harned. “You cannot threaten or coerce your employees.” If an employer wants to speak with employees about this topic, she suggests finding an experienced labor-relations lawyer to help.
Employers also should know the rules regarding solicitation. “You can’t selectively enforce no-solicitation laws,” says Harned. For example, if an employer bans posting non-work related material on bulletin boards, that means unions can’t post information. But it also means employees can’t post about yard sales or community fundraisers.
The Family and Medical Leave Act (FMLA) requires private-sector employers with 50 or more employees to grant eligible workers up to 12 weeks of job-protected, unpaid leave for certain family and medical reasons during a 12-month period. The 50-employee requirement means many NFIB members won’t need to worry about it, says Harned, but for those who do fall into that category, diligent record-keeping is key.
The most common issue with meeting FMLA laws is inaccurate accounting of time, Harned says. “Record keeping is very laborious and it’s easy for a business owner to get tripped up,” she says. “You should be following up with your employee to ensure you’re triggering the law at the right time—don’t just rely on self-reporting.”
Relying on self-reporting could lead to offering too much FMLA time or not enough.
The question of who is an independent contractor versus an employee may seem straightforward. However, in practice, differentiating between the two can be complicated, especially when state and federal laws with different requirements come into play.
One major difference is how the two types of workers are taxed, since companies don’t withhold taxes for independent contractors. Also, business owners have a right to control how and when employees do their work, but don’t have the same rights over independent contractors.
Used properly, the classification of independent contractors can save a business money in benefits, insurance, and taxes. However, misclassification—whether deliberate or not—can cost businesses serious cash. The reason? Misclassifying workers might put employers in violation of the Fair Labor Standards Act (FLSA).
This law requires employers to pay overtime to employees working more than 40 hours a week at a rate of one and a half times those worker’s regular rates. Ineligible employees must fall clearly under certain exemptions.
“This is a huge issue today, especially with the rise of the gig economy,” Harned says. But even industries such as construction that have long histories often run into FLSA-related trouble. That’s because employers in this industry may not have robust record-keeping procedures in place and are likely to repeatedly use the same workers for the majority of the year without classifying them properly as employees. Employers who are concerned about misclassification should consult NFIB’s Guide to Independent Contractors.
Labor laws are complicated, and the more that apply, the harder it is for small business owners to make sure they are compliant. Aside from making a concerted effort to learn the laws, Harned says a good rule of thumb for small business owners who want to stay on the right side of the law is to focus on keeping accurate and up-to-date records. “These laws can be incredibly complex, but good record-keeping will help every time,” she says.