Several laws exist that govern how anybusiness should operate – from how it should handle taxes, safeguard intellectual property, manage finances, and most importantly, treat and relate with employees.
Every start-up knows how daring it is to hire even one employee, either on a contract or full-time. Employment law is broad, and it covers nearly everything you can think of within and beyond the workplace.
As an entrepreneur, complying with the law means paying keen attention to every decision you are about to make and seeking help from legal experts, where necessary. Integrity and ingenuity are key success factors of entrepreneurship.
Knowing the rules of the game helps startups stay ahead of the pack. While the employment law landscape isn’t as complicated, several laws are enforced at the federal, state, and local government levels, which can be confusing, conflicting, or difficult to interpret.
To help you with this, we’ve rounded up some of the key employment laws that every entrepreneur should know.
Federal, State, and Local Employment Laws
At the federal level, there are laws protecting employees from discrimination and harassment and those that determine minimum wage and overtime. Some ensure workplace safety and employees’ rights to family and medical leave, etc.
We’ve highlighted all the eight federal employment laws below:
Fair Labor Standards Act (FLSA): This law ensures employees are paid a minimum wage of $7.25 per hour as well as overtime for nonexempt employees, i.e. if they exceed 40 working hours per week.
Family and Medical Leave Act (FMLA): Under this law, employees are entitled to job-protected leave for medical or family reasons. This law only applies to businesses or companies with 50 or more employees. NB: For start-ups with less than 50 employees, it’s advisable to check the respective state laws governing family and medical leave. Some states have family and medical leave laws that apply to any employer regardless of the company/business size.
Civil Rights Acts of 1964: Title VII of this Act prohibits workplace discrimination based on color, sex, race, religion, sexual orientation, parental status, etc. However, it applies to employers with fifteen or more employees.
Immigration Reform and Control Act (IRCA): This law prohibits any employer from discriminating against job applicants or candidates based on immigration status.
Age Discrimination in Employment Act (ADEA): Under this law, employers cannot discriminate against employees or candidates aged 40 or above. It’s therefore illegal for a company to deny promotion to an otherwise qualifying employee or refuse to hire a candidate because he/she is “older,” i.e., 40 years and above.
National Labor Relations Act (NLRA): Under this Act, all workers, including non-unionized employees, have the right to engage and collectively bargain in concerted activities concerning pay, working conditions, etc., without facing retaliation from the employer.
Genetic Information Nondiscrimination Act (GINA): Title two of GINA prohibits discrimination of employees or job applicants based on their medical/genetic information. This makes it illegal for the employer to use any medical records or genetic test results to make hiring, promotion, or firing decisions.
Occupational Safety and Health Act (OSHA): This Act contains laws that require the employer to provide safe and healthy working conditions for employees. Depending on the nature of the job and the respective industry, the employer may be required to provide personal protective equipment as well as compliance training.
Every entrepreneur must understand the basics of the above eight federal laws to ensure compliance and avoid attracting lawsuits and penalties which could sink the company into bankruptcy. Most of these laws also have state-equivalent laws. For instance, the minimum wage in Texas is $7.25 an hour, while some states like Washington have a minimum wage of $13.69 for all companies regardless of size.
Common laws governing employment matters are established and enforced by courts, and these laws can influence decision-making for any company. It’s therefore prudent to always work with the best employment lawyers when making critical decisions that could conflict with any employment law – whether established by the federal, state, or local government. State and local government laws are often stricter and more binding; hence, you should pay keen attention to your local jurisdiction.
Employee Handbook and Company Policies
Besides the federal, state, and local government laws, the employer should have an employee handbook containing valuable information such as company values, culture, and mission statements. This handbook should be well-drafted, such that it sets realistic expectations on what the company and the employees expect from each other. The handbook should also contain directions on when and how the employees can receive notices from the employer.
On the other hand, a company policy is a reference manual for supervisors and managers that helps them undertake their day-to-day duties. The company should draft its policy to give guidelines and due processes to follow before an employee is demoted or fired.
Concerning the above laws, entrepreneurs should take a closer look at each Act to understand when and how each rule applies to their company. For instance, they should know how to classify their employees, either as a full-time or independent contractor, exempt or nonexempt.
Similarly, they should be aware of the contract rights governing the employment terms and conditions. For example, every entrepreneur should know how and when the employment-at-will doctrine, collective bargaining agreement, or individual employment contract applies. If keeping up with all these laws and rights seems overwhelming, working with an employment lawyer is your best bet.