Common Employment Law Mistakes Small Businesses Make

Posted on March 6, 2017 by Rick Rossignol

Common Employment Law Mistakes Small Businesses Make


As a small business owner, you may not always prioritize the finer points of employment law, instead of focusing on profitability, marketing, and branding, and building a reliable customer base. Small business owners are stretched thin! Perhaps you believe focusing on legalities will damage your relationship with employees, create a harsh working environment, and prevent you from focusing on your primary business objectives. On the contrary, understanding and adhering to federal and state employment laws will allow you to manage your staff compassionately and responsibly, facilitating a worry-free atmosphere of mutual respect and heightened productivity.

Because of limited resources and a necessary preoccupation with growing your company, you may be unaware you’re committing some common employer blunders:

  • Classifying non-exempt employees as exempt: Non-exempt employees are entitled to overtime pay or one and one-half times their regular rate when working more than 40 hours per week. Exempt employees are generally white-collar or administrative professionals paid a salary, eliminating the employer’s obligation to track hours and pay overtime regardless of hours worked. If you own a small business or startup, your financial and calendar resources may be limited, tempting you to save time and money by classifying employees as exempt without appropriate justification. This is a recipe for a very expensive disaster. Sooner or later, an employee may suit against you to recover unpaid wages.
  • Not training management on discrimination and harassment policy: California requires businesses with 50 or more employees to provide management at least 2 hours of harassment and discrimination training every 2 years. While businesses with fewer than 50 employees are not mandated to provide ongoing education, developing a keen awareness of harassment and discrimination liabilities among supervising staff can protect your company from financially devastating lawsuits.
  • Providing loans to employees and deducting payments from checks: If you want to lift an employee out of financial hardship by providing a loan, have them sign a promissory note formulated under the legal counsel and make repayments directly to you. It is illegal to implement paycheck deductions not specified by federal or state mandates. Legal deductions are limited to: federal and state taxes, Social Security, state disability insurance, benefits such as a 401k and flexible spending account, child support, and wage garnishments. It’s okay to be charitable and sometimes it makes sense to develop a close-knit working team. However, do so within the scope of your legal obligations.
  • Not observing lunch breaks: If an employee works more than five hours in a given day, they are entitled to a 30-minute uninterrupted, unpaid lunch break. Breaks can occur any time before the five-hour mark, after which you would be in violation of California employment laws. You should observe this requirement regardless of whether the employee desires to break.

These are just a few of the many common mistakes you (or your employees) might be unknowingly committing. Insulate your business from legal repercussions by hiring an experienced human resources consultant like RTR Consulting to navigate the nuances of compliance codes mandated by federal and state governments. We can work closely with your team to develop an HR strategy tailored to the unique challenges of small businesses or growing startups at a cost-savings compared to an in-house Human Resources department. We combine our expertise in complex employment law with your company’s vision to develop a human resources approach that will allow your business to flourish.


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