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11 Employment Laws Every Business Should Know

— June 27, 2022

Misclassifying workers as independent contractors instead of as employees can damage your company. You can be hit with penalties, back taxes, and fees. ~ Scott Lieberman, Touchdown Money

What is the most important employment law every business should know?

To help your business operate within required employment laws, we asked legal professionals and business leaders this question for their best advice. From Workmen’s Compensation Laws to the Occupational Safety and Health Act, there are several employment laws that are considered important for every business.

Here are 11 employment laws every business should know:

  • Workmen’s Compensation Laws
  • Social Media Rights
  • Employee Benefits Laws
  • The Family and Medical Leave Act
  • The Fair Labor Standards Act
  • The Fair Credit Reporting Act
  • The Equal Pay Act
  • The National Labor Relations Act
  • Title VII of The Civil Rights Act
  • The IRS 20-Factor Test
  • The Occupational Safety and Health Act

Worker’s Compensation Laws

The most important law every business should know is workman’s compensation laws. Each state has its version and there are several loopholes within the law that employees use to sue for workman’s compensation. Businesses should understand these loopholes so they can close them off in an employment contract. For instance, every business should require an immediate drug test if there is an accident at work. You could be on the hook for the accident if a drug test isn’t done even if you suspect there was drug use. A drug test after every accident would protect you in some situations.

Baruch Labunski, Rank Secure

Social Media Rights

The National Labor Relations Act has caused issues with how companies handle their employees’ social media activities and is why it is a must that management understands section 7 of the NRLA. Businesses have had to walk a tightrope when it comes to social media, as the activities of their employees on these platforms can sometimes blur the lines between freedom of speech and libel.

Employees do have the right to their private lives and as long as they are not using the company name, slandering fellow employees, or sharing proprietary information in their posts, having policies that restrict their freedom of speech in company guidelines will not be upheld. Therefore it is critical that businesses thoroughly study section 7 of the NRLA as it is imperative that companies understand what their rights and restrictions are in relation to their employees’ social media activities

Adelle Archer, Eterneva

Employee Benefits Laws

These are a set of laws that cover employee access to benefits in the workplace. Three of the most common laws this includes are the Affordable Care Act (ACA), Health Insurance Portability and Accountability Act (HIPAA), and the Consolidated Omnibus Budget Reconciliation Act (COBRA). Make sure to familiarize yourself with not only the acronyms but what these laws entail, what they cover and provide, and what you’re responsible for providing as an employer.

Mark Pierce, Cloud Peak Law Group

The Family and Medical Leave Act

Baby in a bathtub
Baby in a bathtub; image courtesy of Scozzy via Pixabay,

Any employer with more than 50 employees must adhere to the Family and Medical Leave Act (FMLA). This act requires that employers allow their qualifying employees to go on hiatus under certain circumstances. Qualifying employees must have worked a minimum of 1,250 hours prior to the leave, and have been employed for at least 12 months. These circumstances enable employees to take unpaid leave if they adopt or have a child, need to care for a family member, are diagnosed with a major health issue, or have a situation regarding military service. If an employer violates FMLA, an employee can file a lawsuit within two years of the violation.

David Aylor, David Aylor Law Offices

The Fair Labor Standards Act

One of the most crucial employment laws every business needs to know is the Fair Labor Standards Act (FLSA). The FLSA is the nation’s core wage law and needs to be followed strictly to avoid heavy fines. Under the FLSA, anyone who works more than forty hours in a week must be paid time-and-a-half for their overtime. The FLSA also dictates the federal minimum wage and hours teenagers can work.

Phillip Akhzar, Arka

The Fair Credit Reporting Act

I would assume most business owners know and apply the FLSA, Equal Pay Act, and Occupational Health and Safety Act. However, if you are a small business owner and running a background check on a prospective or current employee, the Fair Credit Reporting Act regulates the scope and usage of such reports.

According to this Act, you are required to get written permission from the potential or current employee before obtaining background reports. In case such a report incites action on the business owner’s side, they are legally required to provide the (potential) employee with a copy of said report and FCRA rights description. Furthermore, the employee must be given the right to dispute the report within 60 days.

Ruben Gamez, SignWell

The Equal Pay Act

The Equal Pay Act (EPA) protects both men and women from wage discrimination based on sex. Companies don’t have to pay employees performing equal work the same total amount, only at the same rate of pay for the same jobs. There are also considerations for pay based on aspects other than sex like seniority, merit, and job quality. Caveats like this mean that businesses have some amount of leeway under the EPA but that only makes it more obvious that companies who violate this act are truly behaving in an unethical manner.

Soumya Mohan, Poised

The National Labor Relations Act

Businesses should be aware of a few different employment laws, but one of the most important is the National Labor Relations Act (NLRA). The NLRA protects employees’ rights to organize and bargain collectively, and it also prohibits employers from interfering with those activities. This law is important for businesses to know because it ensures that employees can exercise their right to unionize without fear of retribution from their employer.

Any business that tries to prevent its employees from unionizing or engaging in other protected activities could be subject to penalties under the NLRA. With that said, it’s still important for businesses to consult with an experienced labor attorney before taking any action that could potentially violate the NLRA.

Asako Ito, Divine Lashes

Title VII of The Civil Rights Act

I think the most likely area where organizations might slip up is discrimination. So it’s important to keep Title VII in mind, especially when advertising for a position. Employers often have an image of the kind of person they would like to employ for a position – and this goes beyond suitable qualifications. We often look for people who seem like they will be a good fit for our company culture and in doing so, we may convey the message that we are discriminating. It is very easy to slip up unintentionally when you have a fixed idea of the sex, age, race, and culture person you would like to employ. Discrimination includes age, disability, and pregnant women too. 

The Civil Rights Act is crucial for giving all workers fair opportunity but it’s also the one law that can really trip you up if you appear to be discriminating in your choice of employees or in which employees get promotions or salary increases.

Eran Galperin, Gymdesk

The IRS 20-Factor Test

Misclassifying workers as independent contractors instead of as employees can damage your company. You can be hit with penalties, back taxes, and fees.

Familiarize yourself with the IRS 20-Factor Test, California’s ABC Test, and the FLSA Economic Realities Test. These tests will help you stay compliant with employment laws. In short, you can’t require certain employee-like behaviors from independent contractors.

Scott Lieberman, Touchdown Money

The Occupational Safety and Health Act

The most important employment law businesses need to know is The Occupational Safety and Health Act. To summarize, the OSH act requires employers to maintain a safe workplace that’s free from hazards that can cause death or serious harm to employees. The OSH ACT also requires employers to inform their workers that they have the right to ask for training or an OSHA inspection. Employers must also explain how employees can report any safety concerns they have.

The OSH Act covers businesses that affect interstate commerce, which is most businesses. So if you own a business or run an HR department, make sure you stay up to date with any changes to the OSH ACT. Especially when it comes to the rights of employees who are returning to in-person work after the pandemic.

Eric Pines, Pines Federal

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