FOR SMALL BUSINESS OWNERS
HIRING EMPLOYEES
Business Owners may want to pay particular attention to Federal Anti-Discrimination Laws when hiring new employees. Employers should also be knowledgeable about some privacy issues that have been discussed by our North Carolina courts.
Federal Anti-Discrimination laws generally apply to employers that have fifteen or more regularly employed workers.
A business that employees less than fifteen employees doesn't necessarily have a license to discriminate , but, is exempted from the reporting and record-keeping requirements of the federal anti-discrimination laws. However, there may be state laws that apply to smaller businesses’ hiring and termination policies, and, employers who want their employees and their clients or customers to see them as fair and ethical will follow anti-discrimination guidelines in their hiring and termination practices.
Disabilities:
- You should not ask about health and/or physical impairments, unless
an impairment is obvious and it is related to a bona fide occupational qualification;
- You can only consider an applicant’s disability if it makes him or her unable to perform an essential function of the job.
- You may refuse to hire someone solely because of that person’s
current drug or alcohol use; you may not discriminate against someone who has been successfully rehabilitated from past abuse of alcohol or drugs.
Immigrants:
An employer may not ask if an applicant is an “illegal alien.” An employer may ask all applicants whether they are legally entitled to work in the United States on a full-time basis.
An employer may not knowingly hire an unauthorized alien.
Age, Race, Sex, or National Origin:
An employer may not ask for information about these topics (including date of birth) on an employment application or in a job interview.
WAGES AND BENEFITS
Requirements regarding wages come from two sources: The Fair Labor Standards Act, which is enforced by the U.S. Department of Labor , and/or the North Carolina Wage and Hour Act, which is enforced by the North Carolina Department of Labor.
Overtime Pay Rules
In April of 2004, the U.S. Department of Labor revised the rules under the Fair Labor Standards Act regarding when an employee must be paid overtime pay for work in excess of forty hours per week.
New Minimum Salary Requirement for “Exempt” Employees:
An employee who earns less than $23,660 annually, or, $455 per week must be paid at an overtime rate for work in excess of forty hours per week, regardless of that employee’s job title. (Employees who are paid on a commission are an exception).
New Permissible Deductions:
An employer may deduct a full day’s pay from a salaried employee’s wages for: full day absences due to illness or injury if there is a sick pay/disability plan in place or if the employee takes unpaid leave under the Family Medical Leave Act (FMLA).
- Employers can deduct partial-day absences for hours taken as intermittent or reduced FMLA leave.
- An employer may make pay deductions for penalties imposed when salaried employees violate major safety rules.
- Employer’s do not have to pay for an entire week’s salary during the employees first or last week’s of employment (if less than a full week is actually worked).
New Safe Harbors
Usually, if an employer makes improper deductions from an employee’s paycheck, the overtime exemptions can be lost. However, to reduce the risk an employer can:
- establish and clearly communicate a policy prohibiting improper deductions;
- reimburse employees for improper deductions; and,
- be sure that good faith efforts to comply with the Fair Labor Standards Act are made.
EMPLOYMENT CONTRACTS
An employment contract is an agreement between the employer and the employee which sets forth some or all of the terms of the employment relationship. A contract may include any of the following:
- the length of the employment relationship (for example: one year, two years, indefinitely, or, a particular length of time with automatic renewal periods)
- the employee’s responsibilities;
- the wage and benefits provided by the employer;
- grounds for termination
- the amount of notice the employer or employee is required to give the other to end the contract;
- limitations on the employee’s ability to compete with the employer’s business once the employee leaves the business;
- limitations on how information acquired in the business (trade secrets) may be used by the employee, including information on customers or vendors;
- the employer’s ownership of the employee’s work product (for instance, if the employee creates movie scripts, writes books, or, invents machinery);
- a promise for repayment of training or relocation costs;
- a method for resolving disputes between you.
Non-compete Agreements
- Most agreements regarding the employee’s ability to take another job or engage in a competitive business ask the employee to agree, ahead of time, not to accept competitive employment or start a competitive business for a fixed period of time within a fixed geographic region.
- Agreements may also limit whether the employee can solicit a business’ customers during a fixed period of time;
- Agreements may also limit whether the leaving employee may solicit other employees to leave the business and work with the leaving employee.
- In general a valid noncompetition agreement in North Carolina will have to be reasonable in terms of the time and geographic area, and, will have to be based on valid consideration (something in return for the employee’s promise not to compete).
TERMINATION
Federal Anti-Discrimination laws generally apply to employers that have fifteen or more regularly employed workers.
A business that employees less than fifteen employees doesn't necessarily have a license to discriminate, but, is exempted from the reporting and record-keeping requirements of the federal anti-discrimination laws. However, there may be state laws that apply to smaller businesses’ hiring and termination policies, and, employers who want their publics to see them as a fair and ethical employer will follow anti-discrimination guidelines in their hiring and termination practices.
As a general rule, it is a good idea to:
- provide employees with a handbook that outlines the business’ expectations regarding performance, absences, use of vacation time, ethics rules that apply to the particular business, and, examples of unacceptable personal conduct. A handbook should clearly state that it is provided to employees for guidance and should not be interpreted as a contract of employment.
- conduct regular and candid reviews of performance;
- provide written warnings for unsatisfactory performance;
Even though an employee, in most instances, may be terminated “at will,” documenting legitimate reasons for termination may provide a defense against wrongful termination or discrimination charges and may support the denial of unemployment benefits when appropriate.
INDEPENDENT CONTRACTORS
Whether a worker is an independent contractor or an employee can depend on a number of factors as well as which government agency is looking at the worker’s classification. It is important to know how to properly classify employees in order to avoid fines, unanticipated tax payments, or, liability for injury where the employer failed to provide proper insurance coverage.
In general, an independent contractor is a worker who contracts to do work according to his or her own judgment and method, without being subject to the employer except as to the results of the work.
A worker is more likely to be classified as an independent contractor if he or she:
- is engaged in an independent business, calling, or occupation;
- is independently using special skill, knowledge, or training in the execution of the work;
- is doing a specified piece of work at a fixed price or for a lump sum or upon a quantitative basis;
- is not subject to discharge because he or she adopts one method of doing the work rather than another;
- is not in the regular employ of the other contracting party;
- is free to use such assistants as he or she may think proper;
- has full control over such assistants; and
- selects his own time.
A work situation doesn’t necessarily have to contain all of the above factors in order for the worker to be classified as an independent contractor. Courts and agencies will look at the particular circumstances of the working relationship. A business owner or employer who is uncertain as to how to classify a worker should seek the advice of an attorney before making important decisions regarding payroll and workers compensation insurance.
LEAVE POLICIES
The Family Medical Leave Act applies to employers who regularly employ fifty employees within a seventy-five mile radius. An employee is subject to the protections of the Family Medical Leave Act if he or she has worked for twelve consecutive months and has worked more than 1250 hours during that twelve month period.
Leave may be taken all at once or on an intermittent basis (for instance, for several hours a week for ongoing medical treatment).
An employee may use leave for a serious illness of the employee or a family member, or, for the birth or adoption of a child.
An employer must keep the employee’s job, or a comparable position, for twelve weeks.
An employer can require that an employee use short term disability leave or workers’ compensation disability benefits at the same time as Family Medical Leave. An employer must give notice to the employee that Family Medical Leave is being exhausted at the same time as other leave benefits.
Even small business owners who are not subject to the provisions of the Family Medical Leave Act should ensure that similarly-situated employees are treated comparably with respect to leave. For instance, a woman who requests time off following childbirth or for a pregnancy-related medical complication should be treated comparably to any other employee recovering from a medical procedure or illness.
