As a small business owner, the government is involved in numerous aspects of your business, including hiring and firing employees. Not knowing and following labor laws and regulations can result in costly lawsuits and fines, reputational damage, and low morale in the workplace.
Whether you’re developing new policies or want to decrease your compliance risk, this article will outline some of the key legal considerations you must make to protect your business and ensure the fair treatment of employees.
Specific Laws to Know When Building Your Hiring or Firing Policies
The following labor laws and requirements are crucial for small business owners to be aware of when making employment decisions.
Anti-Discrimination Laws
The Equal Employment Opportunity Commission (EEOC), which generally applies to businesses with 15 or more employees, makes it clear that it is illegal to hire or fire employees based on race, color, religion, national origin, sex, age, disability, or genetic information. Sometimes, you can’t even ask about them in applications or interviews.
The EEOC is responsible for enforcing several anti-discrimination laws, including:
- Title VII of the Civil Rights Act (applies to 15 or more employees)
- Americans with Disabilities Act (applies to 15 or more employees)
- Age Discrimination in Employment Act (applies to 20 or more employees)
- Pregnancy Discrimination Act (applies to 15 or more employees)
It is also illegal to fire someone in retaliation for filing a discrimination complaint against your company.
Employment Contracts
Generally, you must follow the terms of your employment contracts when hiring and firing. For example, if you agree to hire someone for a specific period and want to end the contract early, you may let them go but be responsible for their remaining pay.
You also need to be careful about creating implied contracts, which are unwritten agreements created by your verbal statements or actions. These informal contracts can be legally binding and give employees additional rights you may not be aware of. Some situations that can create implied contracts include:
- Telling employees that their jobs are secure or they don’t need to worry about their employment situation
- Creating a reputation for not firing employees until they have a serious violation
- Listing disciplinary procedures in your handbook without stating that employment is “at-will”
These situations can create an expectation of continued employment that may be enforceable in court.
Family and Medical Leave Act (FMLA)
FMLA typically applies to businesses with 50 or more employees within a 75-mile radius.
FMLA guarantees that employees who meet specific eligibility criteria will have access to 12 weeks of unpaid leave to care for themselves or a loved one. You can generally fire employees while on FMLA leave for reasons unrelated to the leave, such as poor performance, misconduct, or financial hardship.
Your actions during this time are crucial. You must ensure an employee cannot misconstrue them as retaliation for taking FMLA leave, which is considered illegal.
State-Specific Employment Laws
The majority of U.S. states have at-will employment laws, which state that you can fire an employee at any time and for any reason. Still, your reasons must not be illegal or retaliatory, and you must act in good faith. At-will laws also don’t apply to employees under a signed contract.
States differ in their laws regarding a terminated employee’s final pay and whether you can have employees sign non-disclosure and non-compete agreements upon hiring or firing.
Privacy Laws
When firing an employee, you should know what details you can and can’t disclose to others, including medical information. Generally, employee consent is required to share sensitive information beyond job title, dates of employment, and performance reviews.
Additionally, you should have a concrete policy on retaining employee information after application or termination. This includes how long you will keep records and how you will safely delete and dispose of records.
Best Practices for Fair and Lawful Employment Actions
The following best practices can help you stay out of trouble with federal agencies, avoid lawsuits, and build a positive employer brand and workplace culture:
- Stay up to date to ensure compliance with the latest labor laws
- Ensure your staff has anti-bias training to help prevent discrimination
- Clearly outline policies and procedures in an employee handbook
- Document all compliance activities, including reasons for firing someone, FMLA compliance, and privacy and security practices
- Hire and fire based on provable, objective interview and performance management criteria
You should also consider getting legal and HR consultation to analyze your current practices and help ensure what you are doing is compliant.
Knowing the Law Reduces Your Risk
Reducing compliance risk helps small business owners protect what they have built and solidify a reputation as a fair employer. Knowing what the law says about your employment practices is key to achieving this goal.
If you need help developing compliant hiring and firing policies, our experts at Focus HR can provide the advice you need. Request a free consultation today and gain greater peace of mind in managing your workforce.
