Top 5 Things Every Business Owner Should Know When Hiring Employees

For many medium-to-small-sized companies, managing the myriad of federal and state compliance regulations is a top challenge. With limited resources, keeping up with the many changes that continue to impact the current business landscape is a daunting task.

​Here are five things that every business owner needs to understand when hiring employees.

1. Federal and State Wage Requirements
 
The minimum wage rate (or pay floor) is the lowest hourly rate of pay that can be provided to workers when hiring employees. The Fair Labor Standards Act (FLSA) sets the minimum wage for employees in both the private and public sectors. Under the FLSA, any non-exempt employee must be paid the minimum wage or higher.

Federal Minimum Wage
Currently (and since 2009), the federal minimum wage is $7.25 per hour. However, some states, counties, and cities have higher minimum wage rates, and employers in those localities are obligated to provide the higher rate. 

Minimum Wage for Federal Contract Workers
As of January 1, 2021, the minimum wage rate for employees performing work on or in connection with covered federal contracts was determined to be $10.95 per hour. Additionally, tipped employees performing work on or in connection with covered federal contracts must be paid a minimum cash wage of $7.65 per hour. 

Effective January 30, 2022, federal agencies will be required to incorporate a $15 minimum wage requirement for new contract solicitations. By March 30, 2022, this will apply to all agencies. Moreover, after 2022, the minimum wage for federal contractors will be inflation-adjusted. 
 
The minimum wage for contract workers who accept tips will gradually rise until it catches up to the minimum wage level for all federal contractors in January 2024. 

Exemptions From Minimum Wage
Employees not covered by the FLSA are exempt from federal minimum wage requirements. These include tipped employees such as restaurant servers. 

State Minimum Wage Rates
Currently, over 20 states and D.C. have a minimum wage rate higher than the federal minimum wage. However, the amount varies by state - you can see if this applies to your business by clicking on this link. 
 
2. Sick Time Off Regulations

Depending on where your business is located, when hiring employees you may be required to provide them with paid time off for when they – or, in some cases, close family members – are sick. Paid sick leave laws vary by state, county, and city, and some states don't have sick leave laws at all. 

There are currently no federal laws that require employers to provide paid sick leave. However, if your company must comply with the federal Family and Medical Leave Act (FMLA), your employees have the right to take sick leave without pay. 

3. Overtime Laws

Proposed changes to federal overtime rules could have a significant impact on your payroll. The Labor Department has finalized a planned expansion to the overtime regulations whereby all employees making under $47,476 per year will be entitled to overtime pay, i.e., time and a half for any hours over 40 per week. 

Prior to this proposed expansion, the threshold was set at $23,660, which allowed business owners to establish a managerial salary without being forced to pay overtime under the "white collar" exemption. 

4. Discrimination Issues

As a small business employer, when hiring employees you may have legal responsibilities under the federal employment anti-discrimination laws. For example, if you have a minimum of one employee, you fall under the law that requires you to provide equal pay for equal work to male and female employees. 

In addition, if you employ 15 to 19 people, you are covered by laws against discrimination based on the following: 

• Race
• National origin
• Skin color
• Religion
• Sex (including pregnancy, gender identity, and sexual orientation)
• Disability
• Genetic information (including family medical history)

If you have over 19 employees, you are also prohibited from discriminating based on age (40 or older). 

In addition to federal regulations, there may be state and/or local employment discrimination laws applicable to your business. 

5. Restrictive Covenants

A restrictive covenant is a promise included in an agreement or contract that restricts one of the involved parties from doing something. With respect to businesses, restrictive covenants often apply to employee contracts. Their purpose is to help protect business operations when an employee leaves the company. For example, a covenant can restrict the way a former employee can use sensitive company information. In a business context, there are three basic types of restrictive covenants: 

A non-compete agreement whereby one party agrees not to compete with another for a specific period of time and within a particular geographical area. 

A non-disclosure agreement whereby one party agrees not to disclose proprietary processes, business or trade secrets, or other information related to the business. 

A non-solicitation agreement whereby one party agrees not to solicit employees or customers/clients from the other. 

When Hiring Employees: Final Thoughts

You might well find all of the above off-putting and confusing. If you need legal advice on any aspect of law pertaining to your business, please don’t hesitate to speak to an attorney at Holmes Business Law. Pick up your phone and call 215-482-0285.