Small Business Mistakes That’ll Get You in Trouble With the Law

Finding a Job

shutterstock_360885590So you’ve started a new small business. You’ve consulted an attorney and filed the appropriate documents with your state’s department of state and determined your incorporation status. But are you sure you’re covering yourself legally in all facets?

Whether you are a sole proprietorship, a corporation, an S corporation, a partnership, a limited liability corporation, or a cooperative, it is important to be prepared to understand and try to prevent legal issues that may arise at any time.


Providing Safety in the Workplace

Every business needs to be cognizant of potential workplace hazards. To understand the particulars of your business’ potential hazards, you can have a free consult with the U.S. Department of Labor’s Occupational Safety & Health Administration (OSHA).

Consultants are usually employed by state agencies or colleges and universities. They will provide on-site consultation services, and give priority to hazardous industries. A consultant will begin the site visit with an initial discussion, followed by a walk-through of the business site. They will later follow up with a written report which contains information regarding the potential hazards and how to prevent injury. Because the consult is not conducted by official OSHA inspectors, any violations will not be reported to OSHA staff, and the information collected is completely confidential.

It is important to note that this on-site OSHA visit is completely separate from an inspection visit, and the consultation visit will not result in penalties. The only stipulation is that your business is asked to rectify any violations that are uncovered by the consultant.

In addition to correction of violations, the consultant may recommend that employees, especially those in particularly hazardous industries, participate in training programs. For example, if the OSHA consultant determines that your employees are exposed to electrical hazards, your staff will need employer-provided safety training.

And while many business owners might think that falls would overwhelmingly account for many of the fatalities in workplace injuries, electrocutions are second to falls as one of the greatest causes of workplace deaths. Falls accounted for 39.9% of construction deaths in 2014, while electrocutions were second with 8.5% of the deaths in construction jobs.


Ensuring Compliance With Wage Requirements

You have made the necessary adjustments to ensure that your employees will be working in a safe environment. You know that the reason your future employees will decide to work for you is that they will love their jobs and the value you place on a safe, productive work environment in a profitable, cutting-edge company. But no employee can afford to work for free.

After consulting with your attorney during your initial filings, you’ve been advised that your employees will be covered under the Fair Labor Standards Act (FLSA). Employees under the FLSA are either termed to be exempt or nonexempt. Typically, salaried employees are exempt, while hourly employees are nonexempt and eligible to receive overtime.


There are various criteria used when determining whether an employee is considered exempt or nonexempt.


  • Those earning less than $455 per week are nonexempt.
  • The basis test means that a salaried employee generally has a specific amount that they can count on each pay period.
  • The job duties test generally means that those with managerial duties and the ability to hire and fire are exempt employees.


In 2015, there were more lawsuits filed addressing alleged violations of the FLSA than ever before. This has been attributed to a greater understanding of the inaccurate classification of workers.  There were 8,781 filed in FY 2015 —  which was an 8% increase from 2014.


Once deciding whether your employees are exempt or nonexempt, it will be important to have job descriptions and actual duties which match the exempt or nonexempt classification. Employee claims under the FLSA can result when an employee is incorrectly classified and is doing overtime work as an exempt employee when they should have been classified as nonexempt.


Preventing Employment Discrimination


You now have set up your business, identified potential workplace hazards and created job descriptions. Your next step is to hire your employees. While you may understand that you can’t discriminate in hiring based upon race, color, religion, sex, age, disability or national origin, did you also know that there are a number of questions that you can’t ask in a pre-employment interview?


The same prohibitions in hiring exist with the pre-employment interview. While the pregnant owner of a maternity clothing store may believe she is just making conversation by discussing pregnancy issues with an obviously pregnant potential employee, such discussions are strictly prohibited in the hiring process. It is best to just stick to a conversation about the job itself.


If an employee does become pregnant, as their employer, you must offer maternity leave. According to the Family Medical Leave Act (FMLA), an eligible employee may take up to 12 weeks of maternity leave. In order to be eligible, they must have worked for the employer for at least a year. Whether or not the leave is paid or unpaid is determined by how much leave the employee has earned. However, they are entitled to take that leave unpaid if they do not have sufficient accrued leave.


The U.S. Equal Employment Opportunity Commission (EEOC) is the agency responsible for enforcing anti-discrimination laws. In addition to offering helpful information on their website, they also offer free educational and outreach programs that are available at no-cost.


This list includes some of the primary areas which can cause potential legal trouble for small business owners. This list is not intended to be totally exhaustive. While understanding that a small business sometimes runs on a shoestring budget, you should be prepared to have enough funds in reserve to consult an attorney for legal advice.


If there is ever a question that could have legal consequences, seek your attorney’s advice for an answer. Remember, legal consultative fees are much less costly than resolving a potential lawsuit.