Don't Cut Legal Corners When Starting Your Business
By Paula Brantner
Despite the difficult economy, a record number of new businesses are being created this year. When you're starting a new business from scratch, there are a few things to keep in mind that will help you create the foundation for a good workplace – and protect your organization from the costly litigation that could result from failure to comply with employment laws.
1. If you have employees, you need a payroll service. If you're only paying yourself, then maybe you can get by with QuickBooks or another basic accounting system. But once you begin to hire employees, you will save time and money (as well as the grief of worrying about whether your employees are being paid properly) by using a payroll service. Many banks and other service providers offer this service to their small business account holders, and the fees are a reasonable, giving this path an immediate payoff.
No one wants the IRS or Department of Labor at their doorstep, and not paying payroll taxes properly is a sure way to attract an agency's attention. Most payroll services will also help with related administrative tasks, like tracking sick and vacation leave, allowing you to focus your energy and attention on growing the business.
2. Adopt personnel policies. Then follow them. While many start entrepreneurial ventures seeking an informal and collegial environment, and desiring to move away from the bureaucratic practices of large corporations, one of the best ways to assure that your business resembles the workplace that you seek is to establish fundamental policies to guide how you operate. It's not hard to find a model set of personnel policies and adapt them to your business. They provide a basic shared understanding between the organization and the employees about they can expect from one another, and they underline your commitment to treat employees legally and fairly. They will also force you to think about the kind of workplace culture you wish to cultivate, and what expectations you have for your team.
The time you spend now, whether with a lawyer or HR professional, or even purchasing model policies for sale over the Internet, will directly correlate to the time saved later in preventing problems and dealing with employment issues fairly and efficiently.
3. The number of employees you have should not affect your policies. Although a number of workplace laws only apply to businesses with a certain number of employees, their intent is fair treatment of employees. For example, under Title VII of the federal Civil Rights Act, certain discrimination laws apply to employers with 15 or more employees. If you're smaller than that magic number, then you might be tempted not to worry, because the laws don't apply to you. Resist that temptation. If you're successful, you're going to keep hiring more employees, right?
If you start out not complying with employment laws, who's going to be paying attention – much less transforming your policies and procedures – when you hit that magic number? And you just might be wrong about the number. For example, the antidiscrimination laws in California apply to employers with five or more employees, except the law prohibiting sexual harassment, which kicks in with only one employee. Rather than running the risk getting it wrong, it's much safer to act as if employment laws apply to your business, regardless of its size.
4. Pay people what you've agreed to pay them, what the law requires and on time. The first commitment that an employer makes to an employee is to pay the employee at an agreed upon rate on a regular and predictable schedule. This is the first step in developing a trusting relationship with employees, and failure to do so damages your credibility as an employer.
While a full discussion of wage and hour issues is complex (more information is available here), you don't have to be an employment law expert to know that you need to pay your workers what you've agreed to pay them. Regulations around pay are a good example of laws tied to the number of employees, and it is wiser to comply with Fair Labor Standards Act rules now rather than waiting until the organization has grown to meet its requirements.
No one can guarantee that you won't face a lawsuit at some point. The law is complicated, and people make mistakes. Often no one can predict how the law will be applied in a particular situation until it presents itself. But unhappy employees are more likely to file lawsuits, and that's not something you want to deal with regardless of the merits.
Entrepreneurs who follow these basic principles from the beginning can help ensure fewer problems as their ventures grow and thrive, and are more likely to end up with satisfied and loyal employees who can make real contributions to the incremental and successful expansion of their business.
Paula Brantner, Executive Director of Workplace Fairness, has worked as an attorney in the area of employment discrimination and civil rights law for over 16 years. Workplace Fairness is a nonprofit organization that provides information, education and assistance to individual workers and their advocates nationwide and promotes public policies that advance employee rights.