Major employment laws small business owners need to know

There are over 20 federal laws that regulate relations between employers and employees. They cover everything from the right to unionize to using polygraph tests.

Over 20 is a lot of laws for a small business owner to have to worry about. Fortunately, most of these laws only apply to businesses with at least 15 employees. Many of them require even more than 15 employees—20 or even 50.

But there are a handful of federal employment laws that apply to all businesses, however small. Here are six employment laws that you need to know about if you have even one employee.

1. Fair Labor Standards Act

The Fair Labor Standards Act (FLSA) is the main federal law that regulates employee pay. It establishes a national minimum wage and overtime standards for covered employees.

Employers covered by the law

Your business is subject to the FLSA if:

• You take in $500,000 or more in total annual sales, or
• You’re engaged in interstate commerce

This set of regulations cover nearly all workplaces. Almost all businesses engage in interstate commerce one way or another.

What the law requires

The FLSA imposes several requirements on employers.

Minimum wage: The FLSA sets the minimum wage for all covered employees. The federal minimum wage is currently $7.25 per hour. However, many states and cities require a higher minimum wage. If your state or city is one of these, you must pay the higher wage.

You can pay a lower minimum wage to employees who receive tips, younger workers, and some other workers.

The FLSA also requires you to keep records of wages and hours for employees.

Overtime pay: The FLSA also requires that covered employees get paid time-and-a-half for overtime if they work more than 40 hours per week.

But, many types of workers are exempt from the FLSA overtime requirements. Exemptions include:

• Executives who manage two or more employees within a business or a department, and who can hire, fire, and promote employees
• Administrative employees who perform specialized or technical work related to management or general business operation
• Professional employees who perform original and creative work or work requiring advanced knowledge acquired through specialized study—for example, engineers and accountants
• Outside salespeople, and
• Computer system analysts and programmers

Child labor: The FLSA also limits the type of work children under age 18 may perform. For example, they are not allowed to do hazardous work, such as mining or certain types of driving.

Who enforces the law?

The United States Department of Labor (www.dol.gov) enforces the FLSA. In accordance with the regulations, the DOL can impose civil penalties on employers who don’t comply with the FLSA. It can also sue them in court. Moreover, employees can also sue their employers in court for violations.

Where to go for more information

For a detailed guide to the FLSA’s requirements, refer to Elaws—Fair Labor Standards Act Advisor (www.dol.gov/elaws/flsa.htm).

2. National Labor Relations Act

The National Labor Relations Act (NLRA) gives most employees the right to unionize.

Employers covered by the law

The NLRA applies to all private employers whose operations affect interstate commerce—including almost all private employers. The NLRA applies even to nonunion companies.

However, not all private sector employees get protection from the NLRA. Exempt employees include:

• Managers and supervisors
• Confidential employees—such as company accountants
• Farmworkers
• Members of an employer’s family
• Most domestic workers, and workers in certain industries—such as the railroad industry—subject to other labor laws.

What the law requires

The NLRA prohibits employers from unfairly influencing their workers’ decision to join or form a union. Employers may not use threats or other coercive tactics to influence the outcome of a union election. The law also establishes procedures for determining whether a particular union should have the right to represent a group of workers.

The NLRA also prohibits unfair labor practices by employers and unions. For example, an employer can’t ban union discussions in the workplace. Nor may an employer discriminate or retaliate against employees who seek to form a union.

If employees vote to join a union, the NLRA requires the employer and union to engage in collective bargaining. In other words, it means the union negotiates wages, work hours, and other terms and conditions of worker employment on behalf of the bargaining unit it represents.

Who enforces the law?

The National Labor Relations Board (NLRB) administers the law and interprets its provisions. The NLRB conducts union elections and enforces the NLRA’s rules of conduct, determining whether employers have engaged in unfair labor practices. Individual employees and unions may file complaints with the NLRB. But they may not sue employers in court for NLRA violations.

Where to go for more information

For a comprehensive guide to the NLRA, refer to Basic Guide to the National Labor Relations Act.

3. Immigration Reform and Control Act

The Immigration Reform and Control Act of 1986 (IRCA) requires all employers to verify that their employees are legally authorized to work in the United States. The IRCA also prohibits employers from discriminating against employees based on citizenship status or national origin.

Employers covered by the law

The Immigration Reform and Control Act verification and recordkeeping provisions apply to all employers, no matter how small.

The IRCA anti-discrimination provisions apply only to private employers with four or more employees.

What the law requires

The IRCA prohibits employers from knowingly hiring an illegal alien. Nor may an employee continue to employ a person after discovering he or she is an unauthorized alien.

Verification: All employers must verify that their employees are either:

• U.S. citizens or nationals, or
• Legal aliens authorized to work in the U.S.

To do so, you must examine documents establishing the worker’s identity and work authorization. Examples include passports, permanent resident cards, driver’s licenses, and Social Security cards. You must do this within three days of hiring an employee.

Recordkeeping: After examining documents verifying work authorization, you must complete Form I-9 for each employee you hire. You need not file the form with any government agency. But you must keep it for three years and make it available for inspection by federal agencies.

Anti-discrimination: Employers may not discriminate against employers based on their citizenship status or national origin unless federal law specifically allows them to do so. Employers who discriminate can get investigated by the Office of the Special Counsel for Immigration-Related Unfair Employment Practices (OSC) or the Equal Employment Opportunity Commission and face fines and lawsuits.

Who enforces the law?

The United States Citizenship and Immigration Services (USCIS) and Immigration and Customs Enforcement (ICE) enforce the IRCA. Both are part of the Department of Homeland Security.

Employers who knowingly hire an unauthorized alien can get fined. In severe cases, employers can get criminally prosecuted.

Where to go for more information

For a comprehensive manual on completing and storing I-9 forms, refer to Handbook for Employers M-274.

4. Occupational Health and Safety Act

The Occupational Safety and Health Act (OSH Act ) requires employers to keep their workplaces safe and free from recognized hazards that are likely to cause death or serious harm to employees.

Employers covered by the law

The OSH Act applies to businesses that affect interstate commerce, which includes most businesses.

What the law requires

Employers must provide work and a place of employment free of recognized hazards. These are conditions that are causing or are likely to cause death or serious physical injury to employees.

Employers must:

• Report accidents resulting in death or hospitalization of employees
• Post information in the workplace informing employees of their rights under the OSH Act
• Keep records of their efforts to comply with the law

Who enforces the law?

The federal Occupational Safety and Health Administration, or OSHA, carries out the OSH Act. OSHA is a unit of the Department of Labor. However, in some states, an OSHA-approved state agency enforces it.

The primary way in which OSHA enforces the OSH Act is through on-site inspections. OSHA may inspect a workplace at random or because it has received a complaint of unsafe conditions.

OSHA can impose substantial penalties for legal violations and can set additional workplace standards.

Employees can complain to OSHA about safety hazards and violations. Employees cannot sue their employers directly for violations of the OSH Act.

Where to go for more information

For a concise summary of employer responsibilities under the OSH Act, refer to Employer Responsibilities (www.osha.gov/as/opa/worker/employer-responsibility.html).

5. Equal Pay Act

The Equal Pay Act (EPA) protects both men and women from wage discrimination based on sex.

Employers covered by the law

The Equal Pay Act applies to all business engaged in interstate commerce. Essentially, it includes most businesses. Even if a company is not involved in interstate commerce, the EPA rules apply if it earns over $500,000 in gross sales.

What the law requires

The EPA requires that employers give equal pay (and benefits) to men and women for doing:

• Equal work
• In substantially similar jobs

However, you don’t have to pay employees performing equal work the same total amount. You only need to pay them at the same rate of pay.

Moreover, you can pay workers of one sex at a higher rate than workers of the opposite sex for doing equal work only if the difference is based on one of these factors:

• Seniority
• Merit
• Quantity or quality of production, or
• Any factor other than sex

Who enforces the law?

The Equal Employment Opportunity Commission (EEOC) enforces the EPA. The EEOC has the power to investigate complaints made by employees, negotiate with employers, and bring lawsuits against employers to stop discriminatory practices. Employees can file lawsuits against their employers alleging EPA violations.

Where to go for more information

For more information about equal pay, refer to Facts About Equal Pay and Compensation Discrimination.

6. Fair Credit Reporting Act

The Fair Credit Reporting Act (FCRA) limits the ways employers can use credit reports and other background reports for job applicants or current employees.

Employers covered by the law

The FCRA applies to all private employers, regardless of size. It also applies to government employers.

What the law requires

The FCRA requires that all businesses do the following before they obtain credit reports and similar background reports and use the information they contain to make personnel decisions.

Before obtaining a report: A business must get a job applicant or current employee’s written permission ahead of time.

Before taking adverse action: Before moving forward with any adverse action (such as denying, suspending, reassigning, or terminating the person) based in whole or in part on a report, the business must provide the job applicant or employee with a copy of the report and a description of the rights granted by the FCRA.

After taking adverse action: Once a business decides to take adverse action, it must give the job applicant or current employee notice of the right to dispute the accuracy or completeness of the report, and to get an additional free report from the company by requesting it within 60 days.

Who enforces the law?

The Consumer Financial Protection Bureau (www.consumerfinance.gov) enforces the FCRA. Individuals can also file lawsuits in federal court against businesses that violate its terms. The states and several other federal agencies and departments also have the power to enforce this law.

Where to go for more information

For more details, see Using Consumer Reports: What Employers Need to Know.

State and local employment laws

The federal government isn’t the only government entity that enforces employment laws. The 50 states have employment laws specific to them. In some cases, these are more restrictive than federal law. If that’s the situation, you must follow your state law. For example, if your state has a minimum wage higher than the federal minimum, you must pay the higher wage.

For more information on your state’s requirements, check out the website of your state labor department. You can find a link and other resources, at https://www.dol.gov/general/topic/stateresources.

You should also check your county or city government website to see if it imposes requirements on employees. For example, some cities have required employers within city boundaries to pay a minimum wage higher than the state and federal minimums.