#VCTechLawTuesday: Employment Law Basics for Start-Ups with Daveante Jones
Start-ups can run into a number of employment issues as their workforce grows. Two of the more expensive mistakes are paying employees incorrectly and fostering or tolerating a toxic workplace. An increase in wage and hour lawsuits has demonstrated that employers who pay their employees incorrectly will sooner or later end up paying not only what their employees are rightfully owed but much more in litigation costs and attorney fees.
Additionally, in a society that values diversity and equality, developing a bad reputation as a company that fosters a toxic workplace can be costly in more ways than one. Establishing lawful payroll practices and a harassment-free workplace will not only help save money in the long run, it will ultimately help your start-up develop the type of business reputation necessary to attract and retain diverse talent.
Ensuring Wage and Hour Compliance
When it comes to paying employees, an employer should be aware of the federal minimum wage and overtime law — the Fair Labor Standards Act (FLSA) — and the corresponding law of the state of wherever it has employees. For instance, Arkansas employers are governed by the FLSA and the Arkansas Minimum Wage Act (AMWA). The FLSA covers employers whose annual sales total $500,000 or more or employers who are engaged in interstate commerce. The AMWA covers employers with 4 or more employees.
These laws establish the minimum wage employees are entitled to and the requirement that certain employees must receive an overtime premium for any hours worked in excess of 40 hours in a workweek. While the FLSA covers the nation, it allows states to establish a higher minimum wage than the $7.25/hour minimum wage set by the FLSA. The minimum wage in Arkansas is $9.25/hour and will increase to $10.00/hour in 2020 and $11.00/hour in 2021.
The more common mistake that employers make under minimum wage and overtime laws is not correctly paying their employees for overtime hours worked. Whether it be misclassifying an employee as an independent contractor in attempt to avoid minimum wage and overtime laws altogether or believing that paying employees a large salary will help avoid overtime requirements, many employers fail to educate themselves on the economic realities test for determining who is an independent contractor and the specific exemptions employees have to meet in order for an employee to be exempt from the overtime provisions, which focus not just on the salary but the employees’ primary job duties.
To avoid these issues, make sure to stay educated by visiting the federal Department of Labor and the state Department of Labor websites and reviewing the fact sheets that explain the many requirements of the minimum wage and overtime laws. In addition, while not required by law, prepare and keep up-to-date and accurate job descriptions for all positions and have your employees sign off on those job descriptions. Finally, do not hesitate to seek legal counsel if you have questions about the application of a specific exemption or if you have questions related to your other payroll practices.
Establishing a Harassment-Free Workplace
Establishing a harassment-free workplace is all about creating a workplace culture where employees feel comfortable, safe and respected. This helps not only with workplace productivity, but also helps establish a reputation that will help attract diverse talent and provide the best defense in the unfortunate event that an employer faces a lawsuit in the future. Harassment lawsuits often lead to large verdicts and establishing a harassment-free workplace now is a good way to avoid financial and reputational losses in the future.
The first step is developing a written anti-harassment policy that prohibits harassment or discriminatory behavior based on race, color, national origin, sex or gender, religion, age, disability, veteran or military status, genetic information or any other legally protected status.
These categories are normally protected by federal and state law. Under federal law, there is Title VII of the Civil Rights Act of 1964 which covers employers with 15 or more employees. Under Arkansas law, there is the Arkansas Civil Rights Act of 1993 which covers employers with 9 or more employees. While a start-up may not have a sufficient number of employees to be covered by these laws in its infancy, having a written anti-harassment policy that complies with federal and state law makes sure that a start-up is prepared to embrace its growing workforce.
In the policy, list examples of the type of behavior that is prohibited and provide details about how employees can report harassment or discriminatory behavior, including providing multiple reporting options. Have all employees review the policy and sign an acknowledgement that they have reviewed the policy and are aware of what’s required of them in the workplace. Finally, make sure to train all employees in accordance with the policy and to promptly and thoroughly investigate all complaints. There is no quicker path to a lawsuit than not taking complaints of harassment seriously.
Correctly managing a workforce is vital to a start-up’s success. Taking time to focus on these two topics can help avoid costly pitfalls in the future.
Daveante Jones is an employment attorney at Wright Lindsey Jennings in Little Rock. In addition to defending employment litigation and agency investigations, his practice focuses on the emerging topics of cybersecurity and surveillance in the workplace. He also advises start-ups about employment issues they will face as their workforce grows. You can email him at DLJones@WLJ.com.