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As a veteran entrepreneur and small-business owner, I know how hard it is to keep your operation lean and profitable. Often small-business owners are striving to make their businesses less complicated so they can keep more of their time and money. However, the measures taken to streamline a small business can unintentionally lead to costly mistakes, like breaking employment laws.
Here are five employment laws that you might inadvertently be breaking.
Related: 5 Employment Law Tips for Startups
Do not label independent contractors as employees.
It can be tempting to designate workers as independent contractors. After all, you don’t pay contractors overtime wages or benefits, nor do you have to remit payroll taxes on their earnings as you would for an employee. All of these extra things are very expensive for employers and eliminating them simplifies your payroll and thickens your margins. Unfortunately, small-business owners do not get to choose if a worker is truly an employee or a contractor -- that privilege belongs to the government.
What are the costs if you label a worker as a contractor when they are really an employee? You could owe back wages, penalties, and back taxes. The government (both state and federal) takes worker misclassification very seriously. Don’t risk it.
Correctly classifying a worker can be complicated. Here’s a tip -- use the DOL independent contractor test to help you correctly classify a worker. If you are still unsure about a worker’s status, don’t hesitate to request an IRS determination by filling out Form SS-8.
Related: 3 Areas of Law Every Entrepreneur Should Know
Don't use exempt classification to avoid overtime.
Exempt employees are usually paid a salary and don’t receive extra pay for working overtime hours. Employing only salaried workers and automatically classifying them as exempt might sound nice. Doing so would definitely simplify your payroll. However, just because an employee is being paid a salary, s/he is not automatically exempt from overtime wages. According to government regulations, you are required to give overtime pay to some salaried employees under certain circumstances.
The government says that exempt employee qualifications must be met in order for correct classifications to be made. If you accidentally exempt employees from overtime wages when they should receive them, your employees can sue you.
An employee must meet the federal salary and job duties requirements in order to be exempt from overtime wages. Employees who don’t meet these requirements are designated nonexempt. For nonexempt employees, you must pay overtime wages when they work overtime hours.
You may not subtract loan payments from pay.
The great thing about being a small-business owner is that you get to know your employees very well. If you’re anything like I am, you also want to take good care of them. There may be an occasion when an employee needs a small loan during a tough time, and you want to, or need to, help them out. So, you decide that you’ll simply deduct a few payments from their paycheck to repay the loan.
Related: 5 Common Legal Mistakes That Can Trip-Up Your Startup
Whoops. As it turns out, you can’t do that. Your honest attempt to be a caring employer and friend can get you into hot water. Most states will not allow employers to deduct anything from employee paychecks other than taxes and benefits. This doesn’t mean you can’t give your employee a loan, however. It simply means that, when you give a loan to an employee, you’ll want to have them sign a promissory note. In other words, you’ll want to structure the loan like you would any other loan and treat their pay separate from the loan arrangement. You can ask a lawyer to create the promissory note and you’ll need to create a payment schedule with the employee.
Do not fire an employee for taking leave.
Consider the following scenario:
A doctor prescribes bed rest to one of your employees for a length of time. To accommodate this need, the employee must take leave, but that leave is disruptive to business operations and costs you productivity. So, you fire the employee as a cost-savings measure. Sorry, but you just broke an employment law.
You can legally fire an employee who is constantly late or abuses your vacation policy. But, employment laws prevent you from firing employees who take time off per the Family Medical Leave Act (FMLA), use military leave or take time off to vote or serve on a jury.
5. Do not refuse to pay employees for rest breaks.
A funny thing happens when you become an employer, you really start to notice when people aren’t working. I know what you’re thinking, “when my employees are on a break, they aren’t working. So, why should I pay them?”
Simple answer: Because federal law says you have to. Let’s break down employee meal and rest breaks so you don’t end up in hot water.
If you offer meal breaks, you don’t have to pay employees for that time away from the job. You also do not have to include meal breaks in the employee’s cumulative time worked. Meal breaks are generally longer than the aforementioned “short breaks” and are at least 30 minutes long.
On the other hand, you must compensate employees for short breaks. Short breaks are factored into total time worked, and employees are entitled to take them. You also have to include short break minutes in your overtime calculations. Typically short breaks last about five to 20 minutes.
So, have you broken any employment laws?
Alright, now that you’ve been briefed on commonly broken employment laws, take a moment to consider whether or not you’ve broken any of them.
Remember, employees can sue you and the government may punish you for your error, so you will need to correct these mishaps as soon as possible. If you have misclassified employees, reclassify them correctly. If you are underpaying your employees, adjust your payroll. In some cases, you might need to give employees back pay to make up for your error. If your employment policies violate employment law, you will need to make policy changes. If you do, make sure employees understand any changes that have been put in place.
Document, document, document! Always document your employment decisions. When you implement a new policy, write down the details such as reasons for the policy, consequences for violations, implementation details, etc. Same goes for when you classify your workers; write down how you came to each decision. And If you discipline or fire an employee, be sure to write down your reasons.
As a small-business owner, it is OK to try to make things easier for you and your employees. But, you must always abide by employment laws in the process.
You’d be upset if someone stole your car or phone. So, why are you not perturbed at the prospect of your documents (whether online or on an internal server) being misappropriated? Think about it.
There are a number of threats to your personal as well as proprietary information if you don’t take active measures to protect your documents. In fact, here are five reasons why you need to start taking document security seriously.
1. Protect Proprietary Information
Your proprietary information basically comprises your revenue generating assets. Such information can include trade secrets, training material, manuals, copyrighted material, and even employee data. Also, you spent a lot of time and resources to create these documents. So, you should definitely consider protecting them on your internal server or think about how they’re used when they’re shared and what document security measures you can take to protect them.
To be honest, unless your documents are properly secured, for example with Digital Rights Management (DRM) or encryption, anyone can make modifications to content created by you and pass them off as his or her own.
2. BYOD and Data Leakage
The Bring Your Own Device(BYOD) trend took off quite well because it allows employees to share their inputs, in real time, on a project or topic of discussion, wherever they are.
However, it also means that the proprietary files that your employees are viewing on their devices are always syncing and getting backed up onto their devices or a cloud sharing platform. This can lead to a security breach at any point, whether intentional or inadvertent. It also means your documents may end up being viewed in locations that are not appropriate or unknowingly shared with unauthorized individuals.
3. Copyright Infringement
If you’re a content creator who sells PDFs online, it might be worth looking into document security. The time and effort you invested in, say, writing an industry white paper could all be in vain if an unauthorized person decides to pass it off as his or her own. Also a purchaser could upload an unprotected PDF to the Internet for others to use for free thus damaging your revenue stream.
4. Legal Obligations or Compliance Policies
Organizations are required to protect various kinds of client data, such as personal, health, and financial information, by law or as an ethical practice of an industry. In fact, your clients share such data with you because they assume that appropriate security measures are in place.
Now, if there’s significant data leakage due to a lack of document protection measures, you’ll not only lose your competitive edge, but you’ll also lose the trust and loyalty of your clients.
Five Reasons Why You Need To Take Document Security Seriously Lyrics5. Control How Your Documents Are Used
Did you think constant vigilance with respect to business and other proprietary documents is impossible? With a robust document protection system, you can set up digital trails as well as dynamic watermarks to trace who’s viewing and printing your documents and when they do so.
Five Reasons Why You Need To Take Document Security Seriously DownloadSome Popular Document Protection Methods
You need to close all loopholes to have overarching control over your documents and to ensure that they’re being used judiciously. Here are some popular methods:
Encryption
Encryption software simply locks your documents with a key so that only those with the access key can view them. You need to share the access key with recipients.
If you’re sharing a low-security document or if the recipient is trustworthy, encryption can help. However, you should bear in mind that anyone with the access key can then save an unprotected copy and make changes to the document and share it, without your knowledge.
Access Control
You can choose who has access to certain folders or documents according to employee hierarchy.
However, this method is not completely secure, as anyone with read access to a document can make copies of it or modify it without your permission.
Five Reasons Why You Need To Take Document Security Seriously A New YearDRM
DRM basically combines encryption and access control features, along with providing more secure custom controls (such as expiry, locking documents to devices/IPs/countries, etc.), to prevent any data leakage. So, of the three, DRM is the most comprehensive document security method.
Five Reasons Why You Need To Take Document Security Seriously Work
An efficient DRM system will not only help you set up need-to-know document access, but will also allow you to set up custom controls to prevent copying, printing, and unauthorized changes.
Five Reasons Why You Need To Take Document Security Seriously Free
Are your organizational documents secure? Adopt data leakage prevention best practices if you haven’t done so already!
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