Owning a small business has its challenges not only from a bottom line standpoint, but also making sure to abide by the laws both federally and by the individual state. Employee laws are tweaked from time to time federally to ensure protection of workers creating a fair workplace. While there are exemptions to several laws depending on the size of the business, these guidelines will provide a basis to getting started.


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Wage laws

Wages are important to a business especially when it comes to hiring employees that will practice the values the company holds. Invest in them, and they will invest in the business. Federal minimum wage is currently set at $7.25 for non-tipped workers, but most states mandate higher, and those laws expand what’s already currently set. Under the U.S. Fair Labor Standards Act (FLSA), the law requires minimum wage be paid if the business has $500,000 or more in sales, however, keep in mind state law may expand on that practice. Employees still have an advantage if interstate commerce is conducted and courts have opened the door even wider, even handling goods moving into the state may override the provision. Though a business may not meet those requirements, state and local laws are to be followed. Overtime is set at time and a half for working more than 40 hours.

Meal and rest breaks

Meal and rest breaks rules are set by the FLSA, but are not required by federal law. However, most states do require breaks and meals to be had. Rest breaks are paid and typically short. Meals are 30 minutes or longer and are not paid. If any work is performed, even simply answering a phone call or checking email, that employee must be compensated. Bathroom breaks are much different as the Occupational Safety and Health Administration states that employees must have access to toilet facilities, and to create a certain schedule for such breaks would be against the law. The Americans with Disabilities Act covers employees with a health condition that requires more frequent breaks, ensuring reasonable accommodations, for instance in the event an employee has diabetes. Communication is crucial in health concerns.

Proper classification

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When it comes to classifying employees, it’s a must they be paid for their title. Exempt employees often hold executive authority and are usually paid salary, which include white-collar workers. These employees are typically in management or above, and minimum wage laws do not apply. It is important to not use exempt classification to avoid paying any overtime. This also goes for independent contractors, those who create their own hours, work on their time and are responsible for their own gains.

The IRS and Department of Labor are targeting businesses who misclassify employees to avoid paying overtime, payroll taxes and other expenses. The rate is currently 6.2 percent for employees to pay in and 6.2 percent for employers to pay on the worker’s behalf. The IRS uses a point system to determine how the employee is classified, using behavioral and financial factors as well as the relationship with the worker. It should also be noted that some salaried workers are eligible for overtime pay, rules must be met in a specific order and if an improper classification is made, an employee may legally sue.

Leave of absence

Another area that can be murky is a leave of absence. Employers must allow up to 12 weeks of unpaid leave for certain circumstances, including attending to a serious health condition, caring for a family member, adoption or giving birth under the Family and Medical Leave Act (FMLA). An employee may not be fired or demoted under these conditions and fulfill criteria for these rules to apply, including duration of employment.

These are just a few basics when hiring employees, but there are many more areas to cover, including sexual harassment, disabilities, giving loans to help an employee regarding repayment, healthcare laws, as well as regulations under the Equal Employment Opportunity law (EEOC). The U.S. Small Business Administration website offers information on laws and guidelines.


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This article was written by Chase Hunt for CBS Small Business Pulse.