Here are 10 things you should know when hiring an employee:
1. Welcome to the thicket. Hiring an employee immediately subjects you and your business to federal, state, and even county and city laws (and penalties and lawsuits for violating them). So, explore whether independent contractors can meet your needs (but see No. 10).
2. Putting Junior to work. If it is your business, you don’t owe payroll taxes on wages paid to y our child under 18. However, extending family relationships to the workplace can create or exacerbate emotional discord.
3. Energetic and inexpensive. It’s fine for kids to help around the office, but there are legal limits on the type and amount of work teens can do. Laws for minors doing nonagricultural work are summarized in the Department of Labor’s Child Labor Bulletin 101 (go to dol.gov and search for “childlabor101”).
4. Don’t discriminate. When interviewing, hiring, and managing employees, federal law says you cannot discriminate based on certain characteristics. Your state laws or city ordinances may list additional categories.
5. What does “discriminate” mean, exactly? It includes basing an employment decision on stereotypes instead of facts and preferring (or excluding) an applicant specifically because of a protected characteristic – for example, not hiring a pregnant woman because you assume she’ll quit.
- Federal law prohibits discrimination based on: color, physical or mental disability, religion, ancestry or national origin, race, age, sex, pregnancy
- Other classes protected by certain cities, counties and states: gender identity (transsexualism), height or weight, HIV/AIDS, receipt of public assistance, marital status, sexual orientation, smoking
- ** All federal antidiscrimination laws make exceptions for very small businesses, but state and local laws may apply no matter how few employees you have. **
6. Checking up. Besides calling an applicant’s references, you may also run a background check. If a third party does the check, you must follow Fair Credit Reporting Act requirements, designed to protect the applicant’s privacy. See the Federal Trade Commission’s website at www.ftc.gov/os/statutes/fcrajump.htm.
7. Employment contract? You probably don’t want one unless you’re hiring for a high-level position. Don’t accidentally create one, either: Written materials given to new employees (including employee handbooks) should clearly state that they don’t create a contract between your business and the employee.
8. The record keeping begins. On the first day, an employee must fill out IRS Form W-4 (for tax purposes) and U.S. Citizenship and Immigration Services Form I-9 (verifying eligibility to work in the United States). You must keep Form I-9s separate from the personnel files and retain them for three years or for one year after an employee’s termination, whichever comes first.
9. Know thyself. Understand your own management style before interviewing applicants. Being up-front about how you work and what you expect will help prevent bad feelings during the employment relationship.
10. If it were only so. You can’t hire an employee and call him or her an independent contractor (there’s been much debate around this recently with companies like Uber). Check IRS Form SS-8 to distinguish the two. Careful here – the federal and state penalties for treating an employee as an independent contractor are severe.
Source: Your little legal companion. (2006). Berkeley, CA: Nolo.