As a small business owner, once you begin hiring employees or independent contractors, you are exposed to the laws that govern the employer-employee relationship. This page highlights some of the issues we regularly see in our employment law practice.
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At-Will vs. Contract Employment
As a preliminary matter, the small business owner must understand the meaning of an “at-will” employment relationship. When an employee is hired “at will” either party, the employer, or the employee, can end the relationship for any reason or for no reason. In other words, neither of you has committed to any specific term or time (months or years) to work with each other.
On the other hand, if you present an employee with an employment contract that promises employment for one year, then you will need good cause to fire him or her prior to the end of the year. And the employee will need good cause to quit prior to the end of the year. If either of you breaches this employment agreement, the other might be entitled to monetary damages, for example, the employee’s lost pay or the employer’s cost of finding another employee.
Although you and your employee do not have an employment contract for a specific term of employment, you may still require the employee to follow company policies. These requirements are in an employee handbook. The handbook might outline sick leave policy, internet use policy, dress code and so forth. The handbook does not create an employment contract, but it does establish employer guidelines or expectations of employee behavior. In fact, an employer should use the expectations outlined in the handbook to document any ongoing behavioral problems. Even though you would not need a reason to fire an at-will employee, if you did fire him because he was acting badly, using the Handbook to document “bad” behavior can be useful in subsequent hearings on unemployment compensation eligibility or in defending a discrimination lawsuit. The bottom line is you should use an employee handbook to set expectations and document problems as they arise to protect your business.
Federal and state employment laws prohibit employers from discriminating against applicants and employees based on race, sex, gender, age, religion, ethnicity, pregnancy, and disability in connection with employee hiring, firing, and promotions. Employers must know the proper questions to ask in job interviews, the proper criteria to use in promotions or terminations, and the employment atmosphere for a proper working environment. This area of the law is very complex. Discrimination laws are generally tilted in favor of the employee and are expensive to defend and settle. The best practice is to prevent it from happening by allowing us to do a business checkup and a continuous evaluation of your employment practices.
The same laws that prohibit discrimination prohibit an employer from retaliating against an employee for raising discrimination issues. In other words, an employer cannot demote or terminate an employee for bringing discrimination issues to the employer’s attention or for filing a formal complaint. Retaliation is so common that employees often sue their employer for discrimination and retaliation at the same time. We can help you prevent these lawsuits by evaluating your employment practices.
Wage and Hour Compliance
Small business owners must comply with a federal law called the Fair Labor Standards Act (FLSA). This federal law (and analogous state law) regulates minimum wage, overtime pay, and record-keeping requirements. The Department of Labor can audit you and impose penalties for violations and current or former employees can sue you if you are not or were not in compliance with the FLSA. You may be responsible for paying unpaid wages and reimbursing your employee’s attorneys’ fees. Wage and hour violations can result in costly legal penalties and damages. However, we can help you prevent this from happening with a little planning and a business check-up. Here are some issues we can help you with.
Whether you classify your workers as “employees” or “independent contractors” is relevant for complying with FLSA, tax laws, worker’s compensation laws, unemployment compensation laws, negligence laws, and others. For example, if your workers are “independent contractors” they are exempt from the FLSA’s rules. They are also exempt from employment payroll taxes, unemployment insurance, and in some cases worker’s compensation requirements.
It is tempting for an employer to want to classify his or her workers as “independent contractors” since you can avoid being subject to many laws and do not have to pay payroll taxes. Yet you do this at your own peril. To be an independent contractor is more than simply calling your worker one or having him or her sign a contract with the title “Independent Contractor.” The worker must truly be an “independent contractor.” Whether a worker is an independent contractor requires analyzing their behavior. Some factors include whether they must use their own tools (a truck, cleaning supplies, computers, office, etc.), pay for their own training, use their own office, control the methods and quality of their work product, pay their own expenses, and self-employment taxes. In fact, the IRS has over 20 factors it uses to determine if a worker is an “independent contractor” or an employee. If you misclassify a worker, you will be responsible for back taxes and penalties for violating worker’s compensation laws, FLSA, and so forth. We can help you with understanding whether you have classified your employees correctly through a business check-up.
Non-Compete, Non-Solicitation, and Confidentiality Agreements
When you hire an employee, or in exchange for continued employment, you may ask the employee to sign a non-compete agreement, which usually includes non-solicitation and confidentiality (non-disclosure) provisions. In Florida, by statute, non-compete agreements are enforceable if in writing, signed by the parties, and not too burdensome by time and geography. Generally, depending on the industry, you can ask your employee not to compete with your business for six months to two years after he or she leaves your employment. This means that he should not work for a direct competitor or open his own competing business in a geographic area where you do business. This could may be measured in miles, counties, states or the United States depending on the nature of your business. You can also require your former employee not to solicit your customers or not solicit your employees to leave and go work with them, Finally, you can require your current and former employees not to disclose confidential information to anyone outside of your company, including client lists, pricing methods and other trade secrets.
If your employee breaches any of these agreements, Florida law allows you to sue the employee and seek an injunction (a court order) to stop him or her from competing, soliciting, or disclosing confidential information. These lawsuits are often successful even if the injunction causes the employee financial hardship because he or she cannot work in a particular industry. To be successful, the agreements must be written carefully and comply with Florida employment law. We can assist you in preparing and enforcing these agreements, which will help protect your business from unfair competition and disclosure of confidential information.
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