Part II: Basic Labor and Employment Laws

Employment Laws Which Apply to All Businesses of Any Size

Fair Labor Standards Act requires that you pay employees a corresponding minimum wage as well as overtime.

Immigration & Reform Control Act requires that you hire only those who can work legally in the U.S. and maintain up-to-date I-9 forms for all employees.

ERISA applies if you have private pension and health plans and requires that you provide certain information about the plan features, funding, and responsibilities. One of those key components is COBRA

Equal Pay Act generally requires employers to pay men and women employees the same way for the same job.

Uniformed Services Employment & Reemployment Act
requires employers to allow employees to be absent from work for military duty and retain employment rates for up to five years as well as accommodate their disabilities.

Employee Polygraph Protection Act bars employers from using lie-detector tests in pre-employment screening or during employment (with a few limited exceptions).

HIPPA bars employers from receiving healthcare information about employees from healthcare providers.

OSHA requires employers to follow federally set standards providing safe employment conditions, hazard communications, and personal protective equipment.

Laws Which Apply to Businesses With 15 or More Employees

Americans With Disabilities Act (ADA). Employers may not discriminate against persons with disabilities in employment, transportation, public accommodation, communications, or governmental activities.

Title VII, Civil Rights Act. Title VII prohibits sexual harassment and other forms of sex discrimination in the workplace.

Laws Which Apply to Businesses With 20 or More Employees

Age Discrimination in Employment (ADEA). Employers may not discriminate in hiring practices against workers age 40 and older

COBRA. Employers must offer cover employees and their families the option to continue health insurance for 18 – 36 months after ceasing employment.

Laws Which Apply to Businesses With 50 or More Employees

The following additional laws apply where the business employs 50 or more employees:

Affordable Care Act. Employers must offer affordable health insurance options with strict record-keeping requirements.

Family Medical Leave Act (FMLA).
Employers must offer up to 12 weeks of unpaid, job protected leave to eligible employees following the birth, adoption, or foster placement of employer’s child or serious family illness.

Affirmative Action Program (AAP). Employers must create programs to actively recruit and train minorities, women, disabled persons and veterans.

Employers with Federal Contracts

Employers of all sizes with federal contracts must comply with a number of additional statutes including the Davis – Bacon act, drug-free workplace act, contract work hours and safety standards, and other statutes.

Discharging Employees

Arizona is considered an at-will work state. This means that unless there is a contract to hire someone for a stated period of time, the employee may be terminated at any time for any reason or no reason at all. The only limitation is that the employee cannot be fired for bad cause which typically means the employee cannot be discharged in violation of some established public policy. For instance, you cannot fire an employee for filing a workers compensation claim or reporting some violation of law.

Hiring Employees and Independent Contractors

Almost every business hires people to work for them. But a business needs to know whether the person they hired is considered an employee or an independent contractor. Generally speaking, a person is considered an employee when they are hired for an indefinite period of time and the employer controls the work details. If you hire a person to run your cash register, there most likely an employee. In contrast, independent contractors are typically hired to perform a specific job or project in the work details are left to them. For instance, if you hire someone to fix your roof, they probably are an independent contractor

This is important because employers are obligated to withhold income taxes, withhold and pay Social Security and Medicare taxes, and pay unemployment taxes on wages paid to employees. The IRS has withholding tables to calculate the amount to be withheld. You must then deposit the withholdings. You also have to withhold part of the Social Security and Medicare taxes paid by the employee and must pay a matching amount for both Social Security and Medicare.

In contrast, when a business pays an independent contractor, it does not deduct any taxes. It is the independent contractor’s obligation to pay taxes on what was paid. If an independent contractors paid more than $600 a year, it needs to be reported on a form 1099 which needs to be completed and provided to the independent contractor.

Restrictions and Limitations on Business Competition

Non-Compete Agreement & Restrictive Covenants

A restrictive covenant – commonly called a noncompetition agreement – is where an employee agrees not to compete against the employer in that business for a stated period of time or within a specific geographic area if he or she decides to leave the employer’s business. These types of agreements are enforceable, the courts generally do not like them and will not enforce them if they are too restrictive. A court will not enforce these agreements if its purpose is simply to eliminate competition. It will enforce these agreements if it serves a legitimate employer interest such as protecting important business information learned only through this employment.

Non-Solicitation Agreements

Employers may also try to protect their business by having employees agree they will not solicit employees, clients, or customers for a stated period of time after they leave their employment. These are treated like noncompetition agreements. They are enforceable, but only to the extent that a court determines it is necessary to protect a legitimate employer interest.

Confidentiality Agreements

Many businesses involve the use of confidential information or unique business approaches that give it an advantage over its competitors. Information that may be considered confidential may include customer lists, product information, sales methods, or other important information. As with non-compete and non-solicitation agreements, a court will enforce these but only words truly necessary to protect a legitimate employer interest.