Most business owners are not employment law experts. They learn their rights and responsibilities in regard to hiring, employing, paying, and firing people from a variety of sources. This often leads to crucial gaps in their understanding of which laws apply to them, what those laws dictate they can and cannot do, and the potential legal ramifications of failing to comply with them.


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Here are the 10  most common employer legal errors:

1. Illegal Hiring Practices

Many businesses may worry about employment and discrimination laws in regard to current employees. However, employers must also adhere to a number of laws during the application and hiring process. For instance, they cannot discriminate against applicants based on race or sex during this process. If an applicant was discriminated against or harassed, whether or not they were hired, the business could face an administrative complaint or lawsuit.

“The biggest issue is making sure that an employer trains its interview staff, so that you can avoid being in hot water with the EEOC,” says Ann E. Evanko, an employment law attorney and the president and managing member of Hurwitz & Fine. “There are a lot of companies, and I actually represent a number of them, that rely do it on an ad hoc basis. So, they might have someone in a particular department interviewing for a particular position and what they really need to do is train their interviewers, make sure their interview questions are consistent, and if you’re interviewing 10 people, that asking literally the same questions of each.” 

Evanko also suggests you take a look at the language in your job advertisements. Putting a cap on the years of experience required could set you up for an age discrimination claim. “Every employer needs to review their job application on an ongoing basis, but certainly once a year to make sure that the phrasing of the job application questions is consistent with the EEOC, or whatever the state counterpart is.”

2. Misclassifying Employees

There are employees and then there are independent contractors. Employers’ responsibilities toward these two classifications are different. Employers are entitled to many employment benefits that independent contractors are not, such as minimum wage, unemployment benefits, and workers’ compensation insurance. One of the most significant differences is that employers must withhold and pay taxes on their employees and not on independent contractors who are responsible for their own self-employment taxes. Misclassifying employees as contractors to reduce a business’s responsibilities or for financial gain is illegal.

3. Violating Labor Laws

The Fair Labor Standards Act (FLSA) creates many federal labor laws. Employers need to know which provisions of the FLSA apply to them and their employees. Employers also need to know when their state’s labor laws create additional employee rights, which is not uncommon. Many states labor laws expand upon federal rights.

4. Not Determining Who Is Entitled to Overtime

Federal and state laws determine which types of employees are entitled to overtime pay and at what rate. Whether or not a worker is entitled to overtime compensation can be a complex analysis. Typically, employees who receive an hourly wage are entitled to overtime when they work more than 40 hours per week unless they are exempt under the FLSA. Wrongfully denying overtime pay when it is due or paying too low of a rate leads to legal consequences.

5. Calculating Hours and Wages Improperly

Employers must be sure they calculate their employees’ hours in adherence with state and federal law and that they pay overtime properly, when necessary. They must also pay at least minimum wage, which varies by state. The federal government has a minimum wage $7.25, and many states have enacted higher rates, including up to $12.50 per hour. Additionally, some cities enact their own minimum wage, like Seattle, which is gradually raising its minimum wage to $15.00 per hour. An employer must pay the highest minimum wage that applies.

6. Not Having an Employee Handbook

An employee handbook outlines the employer and employees’ rights and responsibilities, including basic information like proper time tracking, lunch and break policies, sick leave and vacation policies. It should prohibit discrimination and harassment. It may dive into social media and electronics policies. The handbook is necessary to establish what is generally required of all workers and which issues can lead to disciplinary actions or dismissals. If a business is starting on a handbook for the first time, or its handbook needs significant changes, it should hire an employment attorney.

7. Not Understanding At-Will Employment Terminations

At-will employment does not mean employers can fire employees at any time, for any reason. There are many legal limitations based on federal and state laws. Employers who do not understand these limitations and fit their termination procedures within them face wrongful discharge claims.

8. Wrongfully Terminating Employees

If a dismissal is based on an illegal reason, like discrimination, or it violates a specific employee contract, then the employer could be sued or face an administrative complaint. Employers always need to review their rights before letting an employee go. The risk of being accused of a wrongful termination is also why employers should document employees’ performances and disciplinary actions.

9. Not Preventing or Penalizing Discrimination

Title VII of the Civil Rights Act protects employees from discrimination related to their race, color, religion, sex, or national origin. Many state laws expand these protections and include characteristics like gender and sexual orientation. Employers can get into a great deal of legal trouble if they do not take steps to prevent discrimination, recognize discrimination when it occurs, or penalize those perpetuating the discrimination. Preventing and recognizing discrimination can be difficult. It is often subtle and happens in relatively private situations. Business should work with an employment law attorney to understand what illegal discrimination may look like and how to prepare for a complaint.

“Everyone should have a policy against discrimination in the workplace,” Evanko says. “Then, the more you enforce it, the more the culture starts changing. As the culture changes, that is how you create and maintain a workplace that’s free of discriminatory conduct.”

10. Not Preventing or Penalizing Sexual Harassment

Sexual harassment is one of the most common forms of discrimination at work. Any one, of any gender, may commit sexual harassment, and any one can be a victim. While women are often the targets of sexual harassment by men, this is not always the case. Sexual harassment may be overt, such as sexual assault and groping. It can also be subtle and pervasive, and include looks, comments, and quid pro quo suggestions.

Employers who do not prevent sexual harassment or do not penalize those who perpetrate it can be sued.

Business Can Avoid These and Other Common Errors

Understanding and properly following all relevant employment laws can be difficult, particularly for new businesses with inexperienced owners and managers. Startups run by professionals who have not managed employees before should speak with an employment or labor law attorney from the very beginning. An employment lawyer enables a startup to recruit and bring on new employees without fear of making a significant rookie mistake.

Once it comes to any business’s attention that it is making a serious mistake, it should hire an employment attorney immediately. The best way to protect the business and mitigate any further errors is to have an attorney thoroughly review the situation and advise the business on how to correct the mistake.