All About Compliance

One of the most challenging parts of running a business with employees is keeping on top of federal, state and local employment laws. Depending on where your business is located, you may have numerous local and state laws on top of the federal laws. Not complying with them can lead to legal issues, including employee lawsuits, back pay, and government agency fines. Here are some of the major employment laws that you should be aware of:

Wage and Hour Laws

The Fair Labor Standards Act (FLSA) establishes minimum wage, overtime pay, record keeping and child labor standards.

The FLSA divides employees into two groups, “non-exempt” and “exempt.” Non-exempt employees must be paid at least the minimum wage and overtime pay at time and on-half the regular rate of pay for all hours worked over 40 hours in a workweek. Note that a few states such as California have different overtime standards. Non-exempt employees are typically paid by the hour.

Some employees, however, are exempt from the FLSA. These are executive, administrative, professional and outside sales employee and certain computer employees. These employees are typically paid on a salary basis. In order to be exempt, they must meet certain detailed tests, and be paid no less than $684 per week (2020).

Misclassifying a non-exempt employee as exempt may result in an employee lawsuit and back pay award.

Independent Contractors

The definition of who is an employee has grown murky in the “freelancer” economy. In addition, there is no set law, so court decisions and Department of Labor directives set the parameters.

In general, a worker is an employee if they are economically dependent on the employer, who sets the terms and conditions of employment, and are closely supervised by the employer. In addition, they are generally paid by time worked rather than the outcome, and have a permanent or indefinite relationship with the employer.

A worker is an independent contractor if they have an independent business, freedom to work their own schedule and provide services for their own customers, and they are free from direct supervision, direction and control. The independent contractor is responsible for paying their own payroll taxes.

Misclassifying an employee as an independent contractor can result in the employer paying back taxes due and well as fines.

Discrimination and Harassment

Discrimination on the basis on any protected characteristic, such as race, ethnic origin, religion, national origin, age, sex, sexual orientation, and other categories as defined by law, is illegal in the workplace.

Workplace harassment is a form of employment discrimination. It consists of offensive, threatening, or abusive behaviors directed at a co-worker or a group of workers. Harassment includes verbal remarks, jokes, name calling or insults; physical touching or pushing; continual exclusion from work based activities; or interfering with another worker’s rights.

Sexual harassment is a type of discrimination. It is unwelcome sexual conduct in the workplace. There are two types, “quid pro quo” (condition of employment or employment decision) and “hostile environment” (creating an intimidating, hostile or offense work environment).

Every company needs to have a harassment policy as well as clear steps for employees to take if they feel they are being harassed or discriminated against. Management has the responsibility to take all such complaints seriously and investigate thoroughly.

Paid and Unpaid Leave

Paid Leave

Vacation, personal, holiday and sick leave are all paid leave. Generally, paid leave is at the discretion of the company. Some companies have grouped paid leave as “Paid Time Off,” or instituted unlimited PTO plans.

A number of cities and states have passed paid sick and family leave laws in recent years. If your employees work in these locales, you must be careful to follow paid sick leave laws.

Unpaid Leave

The Family and Medical Leave Act (FMLA) offers unpaid leave of up to 12 weeks to employees who have worked for the company for 12 months/1,250 hours. FMLA applies to employees who work in a work site where 50 or more employees are employed by the company within 75 miles of that office or work site. There are some state specific variations.

Reasons for the FMLA leave are birth of a child and in order to care for that child; placement of a child for adoption or foster care and to care for a newly placed child; to care for a spouse, child or parent with a serious health condition; the serious health condition of the employee; exigency leave for families of military personnel; and military caregiver leave.

FMLA is a complicated law with many provisions, and should be handled by an experienced professional.


Employment laws cover most aspects of the employer-employee relationship. Employers are responsible for following these laws, and failure to do so can lead to lawsuits and fines. It is an area where most employers struggle the most and where professional guidance is important.