So, your business is growing, and you've decided you need help.
No, not psychiatric help (although many entrepreneurs could certainly benefit from that kind of help, too). Help at work. Maybe you need a secretary. Or an assistant. Or a salesperson.Whatever your need, the decision to hire your first employee is a big one - and not just because of the positive implications of that decision for your business. The minute you become an employer - and that happens as soon as you hire even one employee - you become subject to an assortment of state and federal regulations designed to protect your employee.
And, some firmly believe, to complicate the life of the entrepreneur.
Gayanne K. Schmid, a Salt Lake-based attorney who specializes in employment law, indicates that many entrepreneurs are unaware of the legal responsibilities that accompany the hiring of even one employee.
For example, did you know that businesses engaging at least one employee are required to:
- Examine the employee's identification, verify the employee's right to work in the United States and complete and maintain a Form I-9 as outlined in the Immigration Reform and Control Act of 1986;
- Carry Workers Compensation Insurance to protect the employee if he or she is injured on the job;
- Withhold federal and state taxes from the employee's paycheck and match the employee's deductions for Social Security;
- Provide unemployment insurance in case the employee must be terminated;
- Comply with federal and state wage and hour requirements, such as paying the employee overtime for hours worked in excess of 40 per week and paying him or her the minimum wage of $5.15 per hour?
Sort of makes you long for the good old days of conscription and indentured servitude, doesn't it? Of course, I'm kidding about that. Mostly. These laws and regulations exist for the protection of employees and their families and were instituted for the common good.
Still, it's a challenge for the fledgling entrepreneur just starting out with a business to stay on top of all the various laws governing the work place. And as your business grows and more employees are hired, the regulatory maze becomes more complicated.
As soon as you hire your second employee, for example, the federal Equal Pay Act kicks in, requiring employers with gross sales of more than $5,000 to provide equal pay for equal work.
With 15 or more employees, you become subject to Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act of 1990, the Pregnancy Discrimination Act and other statutes that prohibit discrimination with regards to hiring, firing, promotions, compensation and benefits on the basis of age, sex, race, national origin, religion, disability, marital status or pregnancy.
I suppose that means that legally, you can do all sorts of discriminating if you have 12 or 13 employees. But I don't recommend it.
With 20 employees, the Consolidated Omnibus Budget Reconciliation Act of 1988 (COBRA) comes into effect, and employers must protect employees' rights to continued medical coverage after termination of employment. With 50 employees, the Family and Medical Leave Act of 1993 requires you to provide up to 12 weeks of unpaid leave for the birth, adoption of a child or serious medical condition of an employee or family member.
Oh, and if you have 50 or more employees, you are also required by the Rehabilitation Act of 1973 to have a written Affirmative Action program.
Sort of makes you want to stay small, doesn't it? Especially when you realize that we haven't even scratched the regulatory surface here. There are also a plethora of OSHA guidelines, state labor standards and practices and enough tax requirements to choke a CPA.
My recommendation? Spend an hour or two with an attorney who knows and understands the regulatory climate for entrepreneurs. I believe you'll find it to be time and money well-spent, especially if it can protect you from a much more expensive run-in with those charged with enforcing current laws.
Who knows? It might even help you avoid that other kind of professional help.