Business and Corporate Employment Law

The business and corporate world of today operates in an environment with a significant number of requirements to manage employee benefits, discrimination, medical leave and safety. It is important as a business entrepreneur to have a firm understanding of the underlying components of the laws. You do not have to know every law back and forth but you should have an understanding so that you know if something does not feel right allowing you time to react before it becomes a significant issue. As with any business venture, you will achieve the best outcome with advanced planning. The important part is that you have an understanding of the framework in order to reduce risk for your company. There are several key areas of employment law you should understand so we will discuss these in more detail. They are designed to protect employees from discriminatory treatment, unfair labor practices, and unsafe working conditions.

The Hiring Process

As an entrepreneur depending on your business, you may need to hire additional employees. This process will involve developing the job description, developing job employment applications, conducting interviews, and pre-employment background checks. When hiring employees your goal is to find the right individual to fill your job. In the application process you may request references or do a background check. There a number of activities you may be performing.

Employee Discrimination

You want to be cautious and present a clear policy to preventing employment discrimination this will include sex discrimination, age discrimination, disability discrimination, religious discrimination, race discrimination, sexual harassment, sexual orientation, national origin, or pregnancy.

Workplace Privacy

Realize your employees have rights to privacy related to Internet usage in e-mail, phone calls, and drug testing.

Wages and Benefits

Wage and benefits cover the minimum wage, overtime information, health benefits, Health Care plans, payroll taxes, wage garnishment, veteran's benefits, retirement benefits, and issues such as maternity leave and jury duty.

Safety and Health Standards

Your company should have a stance to protect its employees against exposures in the workplace which includes exposure to injuries or toxic exposures. Workplace safety standards require that you clearly outline the hazards in the workplace, document accidents and injuries, and document any relevant safety training.

Workplace standards

You should also be prepared for workplace terminations. As an entrepreneur this is almost inevitable. Employees also have rights and should receive their final paycheck and be eligible for health care coverage and possibly unemployment compensation.

Employee handbook

As a business entrepreneur you should be create an employee handbook. It serves as a resource for what employees can and cannot do and explains your workplace policies. This allows for consistency of the expectations of employees and allows you to react appropriately in the even an issue occurs. The employee handbook lets employees know what is expected of them and provides you protection in the event you are challenged in court. An employee handbook is a valuable asset to your company and even serves as a reference to you. These are they key items:

An introduction which shows the history of your business and the mission vision and values.

Pay and issues related to hourly and salaried wages in the process for raises. This area should contain information on any bonus programs.

Work hours which tells the normal working hours for employees, the requirements for part-time employees, and how overtime compensation is it obtained. This will help you comply with work hour reporting and child labor laws.

Benefits of the company which explains to employees their vacation pay, sick pay, insurance benefits, health benefits, and retirement benefits.

Attendance requirements explaining the requirements for attendance, absences, leave time, tardiness, and the disciplinary actions to be taken.

Safety requirements explaining that safety is everyone's job and is your concern as an employer and that employees are expected to follow safety rules and report any dangerous conditions.

Drug and alcohol policy prohibiting use, the testing requirements, and help for employees to deal with substance abuse counseling.

Smoking policy are required by some states in order to restrict smoking in the workplace. Check with your local city requirements.

Sexual Harassment indicating your policy against harassment and unwelcome comments or conduct including the procedures to report incidents and what actions are taken against the harasser.

Employee discipline explains what type of activities will cause employees to be in violation of employee policy such as theft, violence, fighting, performance issues and other concerns. Your employee handbook should explain the progressive system of discipline depending on your needs. Which may begin with verbal warnings, and warnings, probationary periods, suspensions, or termination.

Employee complaints will explain what actions employees take sure they have a complaint and out complaints are resolved. Let the employees know there will not be retaliation for filing complaints.

Any activities not covered by your employee handbook should be included in a statement because is difficult to include everything. Be cautious in your wording to avoid making any commitments that obligates employees to work for you for a specified period of time. The best way to cover this is to stay in your employee handbook that your business reserves the right to terminate employment for reasons that are not stated in the employee handbook or for no reason at all.

Employee orientation

Employee orientation is very important to getting your employees off on the right foot. It is equal in importance to the employee handbook. This is your opportunity to clarify any questions and convey the importance of adhering to the procedures of the company. New employee orientation will consist of formally introducing employees to your business. You want to establish an open line of communication so employees feel comfortable asking questions and with your organization. This is your opportunity to explain the vision and values of your business, the structure and organization of your business, the employee policies, and employee benefits that you offer.

You want to monitor your employee's performance as they progress. Monitor their performance and develop a performance improvement plan if necessary. Hiring employees to replace the poorly performing employee takes a significant amount of your time. By monitoring performance you can make sure in real time that employees meet your expectations. Performance reviews are very important part of this. Performance reviews are a key business owner opportunity to evaluate and document the employee's performance. Performance reviews that are based on the job description and job requirements provide a systematic record of the employee's job performance. This is a good communication tool that allows valuable feedback from the employee and encourages improvement. It also allows for discussion on strengths and weaknesses, and human resource related topics such as promotions, raises, and terminations. Is important to use a standard method and format for all performance reviews The Guidelines on Uniform Employee Selection Procedures prohibits basing performance reviews on discriminatory practices such as race, ethnicity, religion, or gender preferences. These key that all performance reviews use the same format. Perform your reviews minimally on an annual basis.


Discipline should be handled and a consistent manner as outlined in your disciplinary action policy. Discipline should be handled proactively and in a scaled system based on severity. Your policy will address issues such as tardiness, waste, arguments or fighting, and other violations of company policy. Most employers have a warning system and give verbal or written warnings when an infraction occurs. The first action should be a verbal warning followed by a written warning which is a more formal counseling session with the employee that is documented. The employee should be asked if they understand the warning and sign it. The record should be placed in the employee's personal record.


Interested in learning more? Why not take an online Business Law for Entrepreneurs course?

If an employee does not respond to warnings they may be suspended. This is the most severe form of discipline and indicates to the employee they must change their behavior or risk termination. Is important to keep detailed records on in the termination which include a statement of the suspension action, the reason for the suspension, and a list and corrective actions required. Suspensions may last a period of several days to several weeks.


Terminations must be carefully documented and organized. Terminations are increasingly being challenged in courts. Once again you must be sure that your employee handbook intricately describes employment-at-will and that it does not imply permanent employment. Use these general guidelines when terminating an employee:

  • Handle all terminations discreetly, privately and in a professional manner.

  • Make sure the employee receives all pay that is due to them upon termination.

  • Only terminate the employee based on documented misconduct or substandard performance in accordance with your established procedures.

  • Make sure prior to the termination that all policies were followed including performance reviews, counselings, warnings, suspensions, and appeals.

Document termination on a standard form and retain it for your records.

Employee benefits

Although we have just mentioned many of the negative sides of employment law you also want to mention the positive sides of working for your company. This includes the benefits package. Benefits may be legally required or at the discretion of the employer. The legally required benefits include payment of Social Security taxes, workers compensation insurance, and unemployment insurance. Discretionary benefits include Medical Insurance or anything of value you provide to make your workplace enjoyable. Employee benefits can comprise 25 to 35% of the wage expenses for an employee. Your business may not support providing employee benefits depending on the size. Particularly if most of your employees are part time and your competitors do not provide a benefits package.

As an entrepreneur there are a number of compliance measures you will need to take to comply with employment law including pay and wages, promotion and retention, and safety and health regulations.

The Fair Labor Standards Act established the guidance for business owners to restrict child labor laws, provide for overtime over 40 hours, and establishes the minimum wage. The Fair Labor Standards Act's wage hour provisions must be posted.

Minimum wage is established by federal law and must be adhered to. As a business owner you must post the minimum wage at a specified area such as an employee break room.

Overtime pay If you pay employees on an hourly basis you would be required to pay overtime according to the Fair Labor Standards Act. The Fair Labor Standards Act does not cover executive, administrative, or professional employees who are paid on a salaried basis. To determine if your employees fall under this category and you do not have to pay overtime they would fall under one of these areas.

  • Executive employees are those who supervise a minimum of two full time employees, exercise independent judgement, and spend the majority of time in management activities.

  • Administrative employees exercise their own decisions and support management policies and business operations.

  • Professional employees are those who use their own independent judgement in a position that requires learning of science, innovation, imagination, or creativity.

Overtime is calculated on a weekly basis assuming 8 hour days within a 40 hour work week. Anything over that is considered overtime and should be paid at the overtime rate of time and a half.

Equal pay laws prevent discrimination. Equal pay laws state that that men and women should receive equal pay for doing the same work with similar skills and responsibilities.

Employment of minors The basics of the federal law for employment of minors states that anyone over 18 years of age can perform any job hazardous or not for unlimited hours. Youth that are 16 to 17 can perform any job that is non-hazardous for unlimited hours. Youth that are 14 to 15 can work outside of school hours no more than 3 hours per day and the job must be nonhazardous and cannot be in a manufacturing or mining operation. They also cannot work more than 18 hours per school week, 8 hours per non-school day, or 40 hours per week when school it out.

Reporting Wages Every employee you employ during a tax year must be provided an Annual Wage and Tax Statement (IRS form W-2).You are required to send these forms every year to the IRS and include a summary form W-3.

Antidiscrimination is covered under a number of laws these include:

  • The Civil Rights Acts of 1964 and 1991.

  • Uniformed Services Employment and Reemployment Rights Act of 1994

  • Affirmative Action

  • he Age Discrimination in Employment Act

  • Rehabilitation Act

  • Americans with Disabilities Act

  • Immigration Policy

The Civil Rights Acts of 1964 and 1991.

These Acts prohibit employers from discriminating against applicants and employees based on their race, religion, sex, color, or national origin. It further prevents discrimination in employment activities that include promotion, seniority, benefits, compensation, hiring, and testing.

Uniformed Services Employment and Reemployment Rights Act of 1994

This Act requires that employers grant military leave for up to five years. They must rehire a military member that has been called to active duty.

Affirmative Action

The Affirmative Action executive order places restrictions on companies that work with the federal government. It places restrictions on federal entities and contractors to practice affirmative action recruiting veterans, minorities, women and individuals with disabilities.

The Age Discrimination in Employment Act

This Act prohibits employers from discrimination when hiring, promoting, or retaining employees over forty years of age. This Act is provided as a basis to resolve age related issues.

Rehabilitation Act

The Rehabilitation Act requires that companies who work with or provide goods and services to the federal government hire and promote individuals with disabilities.

Americans with Disabilities Act may provide the small business entrepreneur with tax benefits for accommodating employees with disabilities. Employers must make reasonable accommodations for modifying a position to employ a person with disabilities.

Immigration policy

The Immigration Reform and Control Act of 1986 prevents illegal immigrants from finding employment in the United States. As a small business owner you are required to request identification from every employee you hire and the employee completes an Employment Eligibility Verification Form I-9. As an employer you must maintain the Form I-9 for least three years.

Family leave and is enforced under the Family and Medical Leave Act (FMLA). The FMLA Act allows them to take up to 12 weeks of unpaid leave every year. These are the keys allowances under FMLA:

  • For the birth of a child, to care for the newborn.

  • To care for immediate family members with a serious health condition

  • When the employee is unable to work to do serious health condition

  • When adopting a new child

The employer is required to guarantee the employee can return to the same job or a comparable job and you must continue their health care coverage during the leave period. This only applies to employers with 50 or more employees and the employee must have worked there for at least one year.

Safety and health requirements the Occupational Safety and Health Administration provides regulations for the safety and health of employees. Most companies are required to follow OSHA guidelines with the exception of self-employed persons, farms of immediate family members, or businesses that have working conditions that are regulated by other Federal agencies such as mining industries. OSHA standards cover general industry, maritime, construction, and agriculture.

As an employer you must keep a record of industrial injuries and illnesses. If you have 11 or more employees you are required to maintain records of these injuries and illnesses in what is called the Log and Summary of Occupational Injuries and Illnesses OSHA 200 log. The record keeping is not required for retail, finance, insurance, real estate, or a service Industries. The requirements change frequently so it is best to request from OSHA the free book called "Recordkeeping Requirements for the Occupational Injuries and Illnesses".

OSHA has specific guidance on minimum wage and overtime pay, occupational safety and health, and workers' compensation as well as workplace standards such as polygraph testing.

Environmental law depending on the business if you handle hazardous materials, discharge anything into the air, water, or on to land or use natural resources you may be subject to Federal, State, and local environmental laws. When in doubt of your requirements contact your local state agency or local city environmental agency. Federal information can be found on the U.S. Environmental Protection Agency's web site.

A key Part of your job as a business entrepreneur use to manage the business including the number of employment law requirements. You want to ensure your business is in compliance with fair employment practices. This requires you to follow minimum wage, overtime, equal pay, wage reporting, antidiscrimination, disabilities act and family leave act of and other employment guidelines. Remember employment laws impact a number of your employment situations and you should be prepared to mitigate your risk. Firing someone without appropriate documentation may result in a lawsuit.

These are the key employer duties you should remember to do related to employment law:

  • Register with the Internal Revenue Service to withhold Federal taxes and your state government. You should be reporting taxes on a quarterly report.

  • File with the Internal Revenue Service to pay Federal unemployment taxes and submit those on a quarterly basis.

  • Obtain your worker's compensation insurance.

  • Determine the safety and environmental laws you must comply with.

  • Ensure the hiring process is clear and documented.

  • Prohibit employee discrimination can be clear on your policy preventing any type of discrimination

  • Ensure you are incompliance with wage and hour requirements.

Summary Reminders and Takeaways

As an entrepreneur you will encounter numerous employment law requirements. Your job is to have a good foundation in understanding of the law and react to it to reduce risk for your business. You should have a plan for addressing employment law aspects and be aware of changes in law that impact your business. As with any business venture, you will achieve the best outcome with advanced planning. Employment law requires you address the hiring process, employee discrimination, workplace privacy, wage and benefits, and safety and health standards. As an entrepreneur you must carefully manage the employees you hire. Employees are critical investment in your business. You obviously want to hire the best. As a business owner you want to adhere to the necessary employment law requirements in a proactive manner. To do so you want to understand antidiscrimination laws, properly screen applicants, train your new employees, monitor their performance and support developing new skills.

As an entrepreneur you will develop a well-defined company policies and procedures and an employee handbook. You will document that employees have read your handbook and signed that they understand the policies and procedures outlined. Your policies and handbook should outline employee benefits, employee evaluation procedures, grievance procedures, employee safety, employee relations, policies and procedures to be followed, and pay rates and pay schedules. Clear communication in conjunction with standardized rules and documentation of the key to successful employment law compliance for entrepreneurs.