How Do I Keep My Business Out of Trouble

The number one question I get from small business clients is, “How do I keep my business out of trouble?”  The laws that pertain to the relationship between a business and its employees can be complex and overwhelming.  There are certain policies that have to be in place, there are laws to consider depending upon the number of employees you have, and there are some laws that provide for extraordinary penalties for noncompliance.

As a new business owner, there are a lot of things to consider:  What type of business do I want? How many employees do I need? Who am I going to use as my accountant?  Who do I use for payroll? Do I need an employee handbook? While all of these are important questions to be asking yourself, an important question you don’t want to forget should be, what are the laws as they pertain to my business as an employer?

An employer needs to have a basic understanding of both federal and state laws in order to help stay out of trouble.  An employer with, for example, 100 employees will have certain compliance requirements under the Family Medical Leave Act (FMLA), while a small business with only 3 employees is not held to such standards.  As another example, Massachusetts passed the Sick Leave Act requiring that all employers provide sick time for their employees, however whether or not that sick time needs to be paid depends on the magic number of 11 employees.

Lately, wage issues and sexual harassment seem to be in the forefront of employment law litigation.  Wage complaints are concerning because employers who are found in violation of the statute are required to pay triple damages, interest, and attorney’s fees to the employees who were not paid all wages due and owed to them.  Although large companies tend to have very tight payroll records, the small business (what I typically refer to as the “Mom and Pop Store”) are usually more lenient and do not require their employees to “clock in” or record their hours religiously.  This is an issue that opens a lot of them up to wage and hour violations. They feel they have a good relationship with their employees, everyone is “family,” and we can all take each other’s word for the number of hours worked. I have seen this approach damage a company time and time again.  There is an old saying, “Trust but verify.” The lesson behind this statement should still apply to every employer today. Trust in your employees is essential to build an atmosphere wherein morale and, therefore, productivity are high. However, employers should still keep very tight payroll records to protect themselves in the event the relationship goes sour with one of their employees.  Without those records, you will be hard pressed to rebut the overly estimated hours the disgruntled employee is alleging he/she earned.

Sexual harassment is another area that, in the wake of the “#me_too” movement, is still lingering.  The first step to preventing sexual harassment lawsuits is make sure you have a written policy in place, posted in a conspicuous area for employees to read, and indicating who the employee should reach out to in order to make/file a complaint of sexual harassment.  All employees should receive a copy of the sexual harassment policy, and sign that they did in fact receive it with the date it was given to them. Annual training sessions are another way to help your employees understand the purpose, scope, and significance of the policy.  If a complaint is made, the employer should immediately take steps to investigate the complaint. Keep in mind that some complaints are made in bad faith, and you will not be able to substantiate it after investigation. But is there something you can still do to ensure the two parties no longer have contact or to make sure there is always a third party to witness any interaction?  If the complaint is substantiated, you must take appropriate action. The reasonableness of that action will depend on a number of factors that, ultimately, is taken on a case-by-case basis.

Having a good employment lawyer to reach out to is a good way to help your business stay out of trouble.  An attorney can help you navigate the road as your business grows, and can provide you with the legal advice you need as you make decisions along the way.  However, none of us has a crystal ball to tell us what the future holds, and even when you do everything right there is no guarantee that you will avoid every pitfall that comes up.  That being said, having a good relationship with an employment lawyer will assist you in seeing those pitfalls as they approach, and help you prepare for them before they arrive. A consultation with an experienced employment attorney is a good place to start since, after all, the only person who truly has rights is the person who knows what those legal rights are.