As a small business owner, you are likely juggling many responsibilities. One of the most important aspects of running a successful business is managing your employees effectively and within the boundaries of the law. Unfortunately, many small business owners unknowingly make mistakes that can lead to costly employment lawsuits.
Mishandling Employee Classification
One of the most common mistakes employers make is improperly classifying their employees, which can lead to wage and hour laws violations. There are two primary classifications: exempt and non-exempt employees. Exempt employees are not eligible for overtime pay, while non-exempt employees must be paid overtime for any hours worked over 40 in a workweek.
Misclassifying employees can lead to significant financial penalties for employers. If an employee is incorrectly classified as exempt, they may be entitled to overtime pay for all hours worked over 40 in a workweek. This can result in substantial back pay, fines, and penalties for the employer.
To avoid misclassification, it is essential to familiarize yourself with the criteria for exempt and non-exempt employees under the Fair Labor Standards Act (FLSA). The FLSA provides specific tests to determine if an employee qualifies as exempt based on salary, job duties, and responsibilities. If you are unsure about an employee’s classification, consult with legal counsel to ensure compliance with the law.
Additionally, regularly review and update your employee classifications as job duties and responsibilities change. Ensuring proper classification from the outset and consistently monitoring it can help prevent costly litigation.
Failing to Comply With Anti-Discrimination Laws
Employment discrimination lawsuits are another common legal issue for small businesses. Employers must comply with various anti-discrimination laws, such as Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act (ADA), and the Age Discrimination in Employment Act (ADEA).
Failing to comply with these laws can lead to costly and time-consuming litigation. Discrimination claims can result in substantial damages, including back pay, compensatory damages, and punitive damages. Moreover, defending against these claims can severely damage a company’s reputation and employee morale.
It is essential to create and enforce a clear anti-discrimination policy to prevent discrimination claims. This policy should outline the company’s commitment to equal opportunity and prohibit discrimination based on race, color, religion, sex, national origin, age, disability, or other protected characteristics.
Additionally, provide regular training on anti-discrimination laws and your company’s policies to all employees, including managers and supervisors. This will help ensure everyone understands their rights and responsibilities under the law.
Finally, promptly investigate and address any complaints of discrimination. Taking appropriate action when a complaint arises can help prevent escalation and potential litigation.
Ignoring Employee Complaints
Employee complaints, whether about harassment, discrimination, or workplace safety, should never be ignored. Failing to address these concerns can lead to legal liability and a hostile work environment.
Ignoring employee complaints can result in a hostile work environment, which may lead to lawsuits alleging harassment or discrimination. Additionally, failing to address workplace safety concerns can result in violations of the Occupational Safety and Health Administration (OSHA) regulations, leading to fines and penalties.
Establish a straightforward process for employees to report complaints and concerns. This process should include multiple avenues for reporting, such as a designated HR representative or an anonymous hotline.
Take all complaints seriously and conduct a thorough investigation. If the investigation reveals any wrongdoing, take appropriate action to remedy the situation, such as disciplining the offending party or implementing new workplace policies.
Philadelphia Business Lawyers at Sidkoff, Pincus & Green P.C. Can Help You Prevent Employment Lawsuits
You cannot stop anyone from suing you, but you can take proactive steps to reduce the likelihood that a lawsuit against your company will be successful. To create a plan for your business, speak with our Philadelphia business lawyers at Sidkoff, Pincus & Green P.C. about your options. Call us at 215-574-0600 or contact us online to schedule an initial consultation. Located in Philadelphia, we proudly serve clients in Pennsylvania and New Jersey.