Making the move from entrepreneur to employer is one of the toughest transitions for small business owners. While many start out as their firm's first (and sometimes only) employee, as the customer base expands and the business grows it becomes necessary to bring more hands on deck. But there's more to hiring than you might think -- it actually requires serious judgment, insight and planning. Before you make that job offer and get ready to sit back and be the boss, make sure you have all your legal bases covered. With proper planning and staying compliant with the law, you will be able to grow your business and retain and mentor quality employees.
Here are a few tips on employment practices that can help you do just that:
1.) Get it in writing: Make sure you get ALL employment agreements in writing. Rocket Lawyer's recent 2013 Semiannual index survey found that lack of written contracts ranked high on the list of small business mistakes. Is your new hire an independent contractor or an employee? What are his or her job responsibilities? What are grounds for termination? You are the boss -- so be clear and put it in writing. If "You're Hired" has to turn into "You're Fired" - you'll be glad you did.
2.) Be Specific: Cite the terms and conditions of employment with an Employment Offer Letter - that confirms the position title, start date, salary, benefits, etc. Remember that communication is the key to all successful relationships. Set the tone and expectations through a professional offer letter and you can expect your new hire to take the job seriously.
3.) Create a Handbook: Develop an employee handbook that includes employee benefits such as: vacation, sick leave, personal days, holidays, maternal/paternal leave, flex-time, etc. Also be sure to include company policies and structures so there can be no dispute or confusion as to the processes and procedures of the company. In California, the 2012 Brinker decision makes it clear that an employee handbook may be able to save you from an expensive lawsuit, provided you specify legally-compliant meal and rest periods for your non-exempt employees. If you don't know what that means, you should take the time to learn it now, instead of learning the hard way - like getting sued for it.
4.) Know the Law: Acquaint yourself with the Fair Hiring Practices and Job Discrimination Laws for Employers and create policies that clearly define and prohibit discrimination in the workplace. Establish a zero-tolerance policy for racist, sexist and classist actions and/or language. Ignorance of the law is no excuse. As the owner of the business, you are legally responsible for your actions and, often, the actions of your employees. If you know your obligations, you can model and maintain good performance.
5.) Obey the Law: Stay compliant with state and federal structures regarding the classification of workers (part-time vs. full-time, contractor vs. employee) and compensation policies (minimum wage, overtime, working hours, etc). Legal compliance is like maintaining a healthy lifestyle. If you eat right, exercise, get regular checkups and take your vitamins, you will live a longer and healthier life. For your business to survive and thrive, you need to make sure you are taking the necessary steps to prevent problems before they develop. Good training and legal compliance will help prevent expensive litigation later.
6.) Worker's Comp: Provide a worker's compensation program--this can help a small business avoid costly lawsuits and out of pocket expenses via insurance policies that protects employers from the employee lawsuits in the event of an accident. Accidents happen no matter how careful we are. If you are prudent, you already have homeowner's insurance, auto insurance, health insurance and life insurance. Your business is your baby, so protect it like you would a child and get appropriate worker's compensation insurance and other key business insurance policies to make sure you don't lose your livelihood when the unthinkable happens.
William B. DeClercq is a civil litigator and business advisor, as well as a Rocket Lawyer On-Call Attorney. He works with a broad range of entities, from entrepreneurs and private individuals, to businesses large and small. His clients have included Fortune 500 companies, such as large banking and financial services companies, real estate investment trusts, and federal government agencies.