Surprising Laws That May Apply to Your Small Business

These new laws could be applicable to small businesses. Are you complying with these rules?

  • There are laws that govern nearly all aspects of business, and some of them may be a surprise to you. From hiring to financial compensation small business managers have be cautious to avoid infringing on any regulations or laws.
  • Small-scale businesses could be breaking laws by not offering services such as workers’ compensation and family leave.
  • Keep up-to-date with the latest changes in regulations to safeguard your business and yourself when working alongside trusted experts like lawyers or HR executives.
  • The information in this article was written written for entrepreneurs with small businesses who want to be in compliance with state and federal laws.
  • Surprising Laws That May Apply to Your Small Business Being up-to-date with the constantly changing rules and regulations that are applicable to businesses can be a challenge. Small-sized business owners are typically well-aware of the rules and laws that affect their business. But, these regulations are continually being revised and, with the continual demands of running a business day-to-day it is easy to ignore them.

Small mistakes could have a huge impact on the small-scale business. Lawsuits and fines could be incurred in the event that applicable laws aren’t adhered to by business owners. In ignorance of the law doesn’t excuse the violators It is essential to be aware. Here are a few laws that tend to take small-scale business owners off guard.

1. The term “freelancer” can create confusion.

Small businesses often employ freelancers rather than full-time employees as it’s a more flexible and affordable method of outsource work. The way that your small business uses freelancers could need you to categorize them as employees instead of an individual contractor. In the event of a mistake, it could result in severe penalties by the federal government.

“I have consulted with many other small business owners over the years and have found that many of them do not realize there is a legal distinction between independent contractors and employees,” stated Lauren Milligan, career advancement coach and CEO of ResuMAYDAY. “Most were classifying and paying their people as independent contractors when, in actuality, they were making requirements of their people that would classify them as employees. When a business owner makes this mistake, they are exposing the company to fines, tax problems and labor violations.”

independent contractors have to meet a number of requirements Otherwise the freelancer has to become an employee. These are the primary requirements for the definition of an self-employed contractor:

  • The individual is in charge of what they work on and the way they finish it.
  • The payment, reimbursement and supply of materials is managed on the part of the user.
  • There aren’t any ongoing agreements for standard employee benefits for example, an insurance plan, pension plan and paid leave.

If a freelancer does not satisfy these requirements then they may need to be classified and compensated in the form of an employee. If they don’t, the business owner may be responsible for the employment tax for the worker, including Social Security and Medicare taxes. It’s also important to know that certain states, including California which has stricter rules regarding the classification of independent contractors.

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2. The laws governing sexual harassment become more precise.

In the aftermath of the #MeToo campaign numerous cities and states are enforcing the existing laws on sexual harassment. New York state, for instance, requires all companies that employ more than one employee to adhere to new guidelines for training.

“According to the amended labor law, any employer with an employee working in New York state must either adopt the state’s model sexual harassment prevention training or create their own version which meets or exceeds the state’s minimum standards,” said Tammy Tyler, senior compliance analyst at Paychex. “All employers must provide interactive anti-sexual harassment training for all employees regardless of classification – full-time, part-time, seasonal and temporary – by Oct. 1, 2019, and annually thereafter.”

New York is not the only one to strengthen the protections against sexual harassment at work. States like California, Connecticut, Maryland, Delaware, Colorado, Arizona, Tennessee, Vermont and Washington have all passed or are in the process of the adoption of laws regarding sexual harassment education and prevention at work.

3. Antitrust laws affect small-scale businesses as well.

Many people consider antitrust laws to be something that affects big corporations, or as rules which harken back to Theodore Roosevelt’s trust-busting government. But, these laws also affect small companies. When price fixing, collusion , or monopolization takes place the antitrust laws come into the equation. No matter how large or small the business that is responsible.

“Antitrust is an area of law that we normally associate with giant, Fortune 500 firms, but federal antitrust laws can and have affected small businesses,” stated Priyanka Prakash who is a senior team writer for Fundera and an attorney in the past. “Antitrust laws come into play when a business, no matter how large or small, fixes prices with competitors, uses unfair methods of competition or monopolizes the market. And the market can be defined as a very small geographic area, so small businesses can be affected.”

The law against antitrust includes both criminal and civil penalties as per the Sherman Act and are punishable with fines of up to $350,000, or three years in prison. Naturally, antitrust laws are not something to be played with.

4. Insurance for workers’ compensation could be legally required.

Small business owners often don’t recognize that in a lot of states workers compensation insurance is just the same requirement for workers as auto insurance for drivers. It’s sometimes illegal to carry it, but 26% of small-scale business run without it in a study of 900 owners of small businesses carried out by Manta.

In states where insurance for workers’ compensation is mandatory, the penalties could be quite severe in the event of a violation. For instance, in New York, for example in New York, the inability to secure workers coverage for every employee (including part-time employees) could lead to the payment of $2,000 per 10 days period of non-compliance, in addition to the cost of workers’ compensation which are incurred if an uninsured worker is injured while on the worksite.

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For New Jersey, failure to have workers insurance for compensation is punishable with the possibility of a fine up to $10,000 and up to years in jail. In Pennsylvania the penalties are even more severe, carrying the risk of a $15k cost and the possibility of seven years in jail.

If you consider that it’s not only your company’s profits at stake and your freedom, knowing the workers’ compensation laws of your state insurance laws is essential.

5. “Ban the box” laws are growing in popularity.

“Ban the box” refers to the practice of banning the checkboxes on application forms which requires applicants to reveal whether they’ve been found guilty of an offense that is a criminal offense. The reasoning behind this is that the box permits companies to make discrimination against those who have been found guilty of a crime and have had already served their sentence.

“Several states have banned the box from all private employers of any size, including Connecticut, Hawaii, Massachusetts, Minnesota, Oregon, Vermont and Washington,” explained Rebecca Weiser, compliance manager for Verified First. “Some states have banned the box for companies with four or more employees, including California, District of Columbia, Illinois, New Jersey and Rhode Island. There are also local ‘ban the box’ laws in a lot of major metropolitan areas.”

The penalties vary from jurisdiction to jurisdiction however, they generally oblige violators to pay a fine , and may even carry the risk of prison time. Massachusetts for instance, can impose fines up to $5,000 for a person who has violated the law and $50,000 for an entity. The law also states that violations can result in up to one year’s prison time.

6. Small-sized businesses might have to provide family leave.

Smaller businesses are not exempt from offering the employees with time off as per the Family and Medical Leave Act (FMLA).

Smaller companies with less than 50 employees might be required to offer the leave in accordance with state families leave policies. Presently, California, Colorado, Connecticut, Massachusetts, New Jersey, New York, Oregon, Rhode Island, Washington and the District of Columbia have their own medical and family leave laws.

It is a matter of the state’s laws, however generally speaking the law will be applicable to small companies that might not be covered under the FMLA. Most of them are job-protected holidays, which require an employer to let employees use their legally-approved leave and then return to their jobs or another equivalent position within the business.

7. Internships that are not paid are generally illegal.

Labor costs are an enormous cost for small-scale businesses. In many cases, small-sized businesses wish to increase their workforce, however, they do not have the resources to hire a new employee on your payroll. Unpaid internships sound like a great idea isn’t it?

But, the requirement for legally granting unpaid internships is more stringent than many business owners think. Internships that are unpaid are only legal in the case that they are an individual who is the “primary beneficiary” of the arrangement. The business owners should consult the primary beneficiary test to determine if the internship they are planning to provide meets those Department of Labor (DOL) standards for an internship that is not paid.

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If a business hires an intern who is not paid and it is later determined that the internship did not fulfill the primary test for beneficiaries, the company could be required to pay an internship with back pay at a minimum amount. The DOL may impose additional penalties if a company repeatedly or willfully breaches rules regarding internships that are not paid.

Tips to stay up to date with regulatory changes

The law is constantly being introduced, and existing laws are often changed or updated. Here are some tips to keep abreast of pertinent regulatory changes and ensure your business is fully compliant with the latest laws:

  • Keep in touch with counsel and regularly visit with lawyers. Understanding complex legal regulations and figuring out the way they apply to specific businesses isn’t an easy job. Small business owners must choose an attorney or a firm they trust and consult with them frequently to discuss any legal obligations for the company. Legal counsel can assist small companies meet regulations in the industry, know the tax laws and filing requirements, as well as give advice on labor law issues.
  • Employ a dedicated HR manager or hire an HR consultant. Small-sized businesses have a lot of work to do and, unfortunately, this frequently leads to the creation guidelines and HR policy getting ignored. HR managers can keep up-to-date with the latest changes in labor law and regulations and modify the company’s internal policies and training materials to reflect. If you’re not certain whether it’s the time to get an HR manager who is full-time then you may engage an HR consultant who will monitor changes in the law and revise your employee handbook every year.
  • Join local and state associations. Join local and state. One way to keep up-to-date is to be more active in your local community and within your within your industry. Join professional associations for your industry chambers of commerce in your area, local chambers and other organizations that cater to entrepreneurs in your industry or in your region. Numerous professional associations offer education for their members on the latest regulations and laws that affect small-sized businesses.

Be sure to stay up-to-date with regulatory changes

They’re not being the sole laws which frequently catch small-scale business owners off guard however, they are some of the most important ones to be aware of. If you’re unsure if your company is in compliance with the federal, state, or municipal laws, you must speak with an attorney. Engaging a professional to assist you in reviewing your business is always a cheaper alternative to causing trouble with the federal government.

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