Discover the Key to Compliance: 4 Employer Labor Law Risks to Avoid

1. Misclassification of workers (the contractor vs. employee question)

2. Wrongful (or seemingly wrongful) terminations

3. Improper employment contracts or agreements

4. Not ensuring a safe workplace

While most business owners and leaders have in-depth knowledge and expertise in their core business domains – whatever products or services they provide – in their role as employers they can lack the detailed and intricate knowledge of employment law that’s necessary for legal and regulatory compliance. In other words, unerring compliance requires a lot of dedicated time, effort, and knowledge that can distract leaders from the company’s core business. On the other hand, noncompliance can lead to penalties, litigation, loss of customers, and even – in extreme cases – being shut down or bankrupted .Fortunately, some of the most common compliance risks are also some of the most straightforward to address. Many organizations can tangibly reduce their risk of noncompliance by making sure they pay attention to these four areas of labor law.

1. Misclassification of workers (the contractor vs. employee question)

The legal relationship between an employer and the people who work for it can be more nuanced than it first appears. If you hire someone you treat as employee but classify and compensate as a contractor, you can get in big trouble with the IRS. That’s because the IRS loses out on certain taxes the business would otherwise be paying. The, the improper classification and use of workers can also potentially expose employers to legal liability. The IRS offers a series of tests that can be used to determine if an employee is an employee or a contractor.

2. Wrongful (or seemingly wrongful) terminations

Virtually the only thing harder than hiring an outstanding employee is firing a terrible one. The process of termination can be tedious because employers have to cover all their bases to protect themselves against accusations of wrongful termination, discrimination, and other forms of misconduct. First, make sure managers understand – or consult with legal or HR advisors who understand – what legally constitutes wrongful termination in the first place. Second, document everything associated with the termination, especially the legally defensible reasons why the employer deems the action necessary.

3. Improper employment contracts or agreements

A well-executed employment contract is a mutually beneficial device that protects the interests of both employer and employee and eliminates areas of potential miscommunication. However, it’s easy to run afoul of regulations governing employment contracts. Employers must absolutely have legal or HR advisers review and approve any potential employment agreement. Note that state and municipal law can also affect the legality of contracts. Further, employment contracts should be updated regularly to comply with the latest legislation. For example, what’s allowable and/or advisable in terms of non-compete clauses is currently an area of hot debate – and frequent updates.

4. Not ensuring a safe workplace

Many employers mistakenly believe they are immune to work injury claims if their business doesn’t typically involve manual labor or risky working conditions. Not so fast: that kind of false confidence can make employers negligent, which in turn can prompt legal action by an employee. To add insult to injury, if the employee isn’t used to manual labor, it’s even more likely they’ll hurt themselves on the rare occasions they have to undertake some. Unless an organization takes the necessary steps to ensure that the workplace is safe, it could face penalties and legal action from its employees.