Three Laws Every Employer Must Know
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Three Laws Every Employer Must Know

Q: I have an employee who is demanding overtime. I classify her as management and as such I say I don’t have to pay her overtime. Do I?


A: Let’s start with the issue at question. Your classification of the employee really is not the issue. Her job, duties, and status are.

For instance, plenty of employers classify employees as independent contractors, even though they are clearly employees. Now, why do they do that? The reason is that it costs much less to hire an independent contractor – you don’t have to pay benefits, or workman’s comp, or social security, etc. But, that said, bosses cannot control independent contractors as they do regular staff, so they think the solution is to hire, treat the person like an employee, but label them an independent contractor. That way, they get to boss them around and pay them less.

Welcome to the work world, circa 2010.

But even though an employer may try and get away with that, it’s illegal, and the penalties are severe. Here’s how to know if that worker really is an employee:

Independent contractors

  • Set their own pay
  • Make their own schedule
  • Decide when and where to work
  • May work for several businesses
  • Are truly independent

If your staff member can’t do all of the above, she is probably an employee, no matter what you call him.

By the same token, labeling someone “management” in order to get out of paying overtime is similarly slimy.

Here’s the deal: Some employees are exempt from overtime pay requirements and other are not exempt. “Non-exempt employees” must be paid at least the minimum wage when working 40 hours a week or less, and time and a half for work over 40 hours.

“Exempt employees” typically hold managerial, executive, administrative, professional or outside sales positions. They usually get a salary in equal weekly, bi-weekly, or monthly payments.

Therefore, if you have an employee paid by the hour, she is entitled to overtime, even if you label her management.

Here are three more critical employment laws any employer needs to know:

1. Benefits: You are not required to offer any benefits, such as sick leave, health insurance, etc. You probably want to though, as that helps attract great employees, but you are not required to.

All you are required to do is

  • Pay at least the minimum wage
  • Withhold and match social security (FICA)
  • Pay unemployment taxes
  • Provide workman’s compensation insurance and
  • Pay non-exempt employees overtime if necessary

2. Discrimination: When hiring, promoting, or firing, it is illegal to discriminate on the basis of race, color, religion, sex, or national origin. Therefore, even when interviewing people for a job, questions that touch on those subjects should be verboten as the answers should be irrelevant to your hiring decision. Even a genuinely curious question like “so, where does your family come from?” can be taken wrong and become the basis of a lawsuit and so should be avoided.

In addition, depending upon the circumstances, other issues that cannot be discriminated against can include age, sexual orientation, marital status, or disabilities.

3. Protection of proprietary information: In order to keep your confidential work trade secrets actually secret, there are several documents you may want to have employees sign:

  • Trade Secret agreement: A trade secret is essentially any secret that is vital to the functioning of your business. Have employees sign a contract that acknowledges the issues and data you consider proprietary and confidential.
  • Work-for-hire: When employees create things in the course of working for you (even blog posts for instance), you own them. But even so, you may want to have employees sign a work-for-hire contract, stating that they understand and agree that you own whatever they create at work.
  • Non-disclosure agreements: An NDA is simply an agreement that says the employee may learn confidential info while working for you and they agree that they cannot share it without your prior, written approval.

© 2010 Steven D. Strauss,