Labor Laws for Small Business Owners: Everything You Need to Know

Many small business owners are expected to do everything themselves. Those duties include everything from hiring employees and running payroll to filing taxes and everything in between. While some aspects of running a business don’t need to be done perfectly, others—like complying with labor laws—must be done correctly.

Between various state and federal laws, there’s a lot for a small business owner to know about labor laws. This guide will help ease this burden so that you can protect your business and your staff. 

Which Departments Enforce Labor Laws? 

Part of the struggle to understand labor laws is knowing who enforces them. Unfortunately, multiple agencies enforce labor laws, from employee rights to health and safety laws. 

The Department of Labor (DOL)

The DOL administers and enforces over 180 federal laws.[1] These laws are intended to support and promote the welfare of U.S. job seekers, employees, and retirees. The DOL also:

  • Sets industry standards and laws for working conditions.
  • Safeguards health care and retirement benefits for employees.
  • Helps employees find jobs and employers find job applicants.
  • Performs research and publishes data on national economic measurements for wages and employment. 
  • Administers federal labor laws on overtime pay, minimum wage, and more. 
  • Administers national requirements for preventing employment discrimination.
  • Enforces the collection and distribution of unemployment insurance and other income support for employees and employers.

The DOL also enforces the standards set by the Fair Labor Standards Act (FLSA). This law outlines the majority of employment law standards regarding overtime, minimum wage, child labor, and more. If a business violates the FLSA’s guidelines, they may be subject to a wage and hour lawsuit.

Finally, the DOL and other agencies require employers to display labor law posters.[2] Posters must be accessible to all employees. Familiarizing yourself with DOL and FLSA regulations can be invaluable in protecting your business and employees. 

Occupational Safety and Health Administration (OSHA)

OSHA was created as a branch of the DOL to promote employee health and safety. OSHA sets standards on safe working conditions, access to bathroom facilities, chemical handling procedures, and more. They provide outreach on safe conditions, training, education, and assistance for both employees and employers.

U.S. Equal Employment Opportunity Commission (EEOC)

The EEOC enforces laws that make it illegal for employers to discriminate against job applicants or employees under a protected status. Protected statuses can be race, gender, religion, disability, etc.

The EEOC applies to the majority of employers with 15 or more employees. The laws also cover a variety of work situations, including hiring, firing, promotions, harassment, training, wages, and benefits. The EEOC hosts a resource center for small businesses with requirements, frequently asked questions, and tips for business owners. 

State vs. Federal Labor Laws 

For small business owners, there can be further confusion around labor regulations when state and federal laws conflict. Many cities and states across the nation have their own labor laws, while some states default to the federal standards.

Typically, states and cities create their own laws when lawmakers deem federal laws insufficient for their constituents. Often, these laws can address economic instability in the area, such as offering a higher minimum wage to address a higher cost of living. The DOL provides a list of state labor laws that businesses can use to research the laws in their area.[3] When federal laws conflict with state laws, the DOL instructs business owners to follow the law that provides the most benefit to employees. 

Common Federal Labor Laws 

Although labor laws are complex, all small business owners should familiarize themselves with the most common federal labor laws. Here’s a breakdown of some of those laws. 

Federal Laws on Employee Classifications

The FLSA does not apply to all employees. The DOL determines who the FLSA applies to through employee classifications. Employers classify employees as either exempt or nonexempt from provisions regarding overtime pay. Misclassification of employees can result in FLSA violations, so understanding their difference is important. 

  • Exempt employees typically make more than the overtime threshold of $35,568 per year ($684 per week). An employee’s job duties can help business owners determine which employees are exempt.[4]
  • Non-exempt employees typically fall below the overtime threshold and make an hourly wage.
  • 1099 contractors are hired for a defined period. Employees, on the other hand, are often hired to work permanently. There are other factors to consider, but in general, contractors do not qualify for FLSA coverage.

Federal Minimum Wage Laws

The federal minimum wage is $7.25 an hour and applies to all employees. Congress hasn’t raised the federal minimum wage since 2009. 

Federal Overtime Laws

Most non-exempt employees qualify for overtime pay when they work more than 40 hours in a week. Overtime pay is time-and-a-half of their typical pay rate. It’s also important to know how the FLSA defines hours worked. Work travel, rest breaks, on-call time, wait times, and more can all qualify as “hours worked.”

Federal Child Labor Laws

The FLSA outlines provisions on child labor, including the hours they should work, their rate of pay, their age limits, and their work environment.[5] These labor laws apply to children between the ages of 14 and 18 who are working in non-agricultural positions.

Children can be paid less than the federal minimum wage. The “youth minimum wage” is $4.25 per hour. They also have restrictions on hours when school is in session. You can find out more about child labor laws on the DOL’s child labor site, YouthRules.

Federal Meal and Rest Break Laws

Currently, no federal laws require employers to provide paid breaks to employees. Nor do they require business owners to provide adequate break time to nursing mothers. But the FLSA outlines guidelines on which breaks should be paid and unpaid.[6] Typically, rest breaks of five to 20 minutes are paid and meal breaks of 30 minutes or more are unpaid. The FLSA considers rest breaks to be “hours worked,” so employers should avoid forcing employees to clock out for these breaks.

OSHA regulates rules and laws on bathroom breaks.[7] Employers are required to provide workers with sanitary and accessible restrooms at all job sites. Employees should have access to these facilities unless they cannot abandon their position. In those circumstances, employers can require another employee to fill the position before the current employee leaves to use the restroom. 

Federal Time-Off and Leave Laws 

Currently, no federal laws guarantee leave benefits to employees. However, the federal Family and Medical Leave Act provides unpaid leave to some employees. This law allows some employees to take up to 12 weeks of unpaid job-protected leave to care for themselves or an injured or ill family member. This also includes unpaid parental leave for new parents. The law applies to businesses with 50 or more employees. And it applies to employees who have worked at least 1,250 hours in 12 months. 

5 Ways to Prepare Your Business for Labor Law Changes 

All of this information on labor laws is one thing, but laws can become outdated fast. How can employers keep up with ever-changing laws and court interpretations? Luckily, you have a few options available to you. 

1. Take the DIY Approach

A lot of small businesses work with limited budgets. If your business can’t afford to bring an HR professional on board, you can take the do-it-yourself approach.

Luckily, the internet has a lot of information on labor laws. If you have questions about labor laws, a quick Google search can help you find the answer. You can also create Google alerts that notify you when news of labor laws breaks.

There are a lot of free, reliable, online labor law resources, like Nolo, that regularly update when changes happen. If you’re unable to hire or outsource HR personnel, you can also find HR resources online. Check out HR news from the Society for Human Resource Management (SHRM) and FLSA tips and guidelines from the DOL.

2. Work With Your SBDC to Learn More About Labor Laws 

The Small Business Administration (SBA) partially funds Small Business Development Centers (SBDCs) across the U.S. SBDCs are staffed by volunteers and experts within your community, making them perfect places to find local labor law experts. They also can host group training courses if there’s a need in your community. There are nearly 1,000 SBDC chapters across the nation, and you can find your local chapter online. 

3. Work With a Labor Law Attorney or Expert

If you can afford it, labor law attorneys are a great small business investment. They understand the laws that will apply to your business and how your business can remain compliant.

Hiring an attorney can seem like an expensive move, but FLSA and wage and hour lawsuits can be even more costly. Asking for legal advice to prevent a future violation can save your business a lot of money.

4. Work With an Accountant or Bookkeeper

When it comes to financial matters related to laws, accountants and bookkeepers can help tremendously. Typically, bookkeeping services help maintain a business’s books or records. Accountants can do this and offer advisory services. There are some significant differences between bookkeepers and accountants, including their education and credentials. But both should have a strong foundation in understanding labor laws in your areas as they pertain to your business’s financial matters. 

Accountants and bookkeepers can ensure you’re running payroll correctly and paying the minimum wage and overtime pay to workers who qualify. Find a professional familiar with the accounting software you already use. That way, the onboarding process will be painless.

5. Hire or Outsource Your HR 

Lastly, small businesses with more flexibility in their budgets can look to hire or outsource their HR department. Human resources personnel are often just as knowledgeable on employment law as labor law attorneys. They’ll be able to help you research laws and take care of your employees by developing appropriate break, time off, and overtime policies. Additionally, when coupled with HR software, they can take other tasks, like finding job applicants, off your hands. That way, you can get back to running your business.

The Bottom Line

Small business owners are expected to do it all, but that doesn’t mean they have to. There are plenty of resources available to help you better understand labor laws so that you can protect yourself, your employees, and your business.

Article Sources:

  1. “Summary of the Major Laws of the Department of Labor
  2. “FirstStep Poster Advisor
  3. “State Labor Laws
  4. “It Takes Two: Exempt Employees Must Meet Both Salary and Duties Tests
  5. “Child Labor
  6. “Breaks and Meal Periods
  7. “Restrooms and Sanitation Requirements

Katie McBeth

Katie McBeth has written for various blogs across the web, covering small business management, marketing, and recruitment topics. Now, she writes as a member of the QuickBooks marketing team with a focus on powering prosperity for small businesses across the globe. When she’s not writing, she spends her time with her partner and five pets, hiking in the Pacific Northwest, and watching professional wrestling. 

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