Many entrepreneurs and founders fear legal risks from human resources/labor laws. Common sense goes a long way in mitigating risks.  However, you do need to understand the basics. Here is a discussion of the most important federal laws for you to plan for and comply with.  Resources to understand these, as well as required posters, are listed at the end.

Laws that Apply with your First Employee

1. Wages and Overtime

The Fair Labor Standards Act (FLSA) is a federal law that establishes minimum wage and overtime requirements among other aspects. This law is probably the most difficult for many small employers as even employment lawyers, human resource professionals, and other advisors argue over some of its definitions. Written during the Depression, it governs what jobs must be paid overtime (often called non-exempt) and which may be exempt from those rules.

FLSA guide – Job Status and Exemptions

Small employers tend to try to make as many jobs as possible exempt in hopes of reducing overtime costs and that can get you in trouble.

While the federal minimum wage is $7.25 per hour, a majority of states have higher rates as do some cities and counties. There are also special rules for jobs such as some tipped workers.

State and local wage and hour laws also govern requirements for paid or unpaid breaks, child labor, and tipped workers.

2. Immigration laws

Immigration laws, including the Immigration and Nationality Act (INA), the Immigration Reform and Control Act of 1986 (IRCA), the Immigration Act of 1990 and the Illegal Immigration Reform and Immigrant Responsibility Act of 1996 (IIRIRA), are designed in part to ensure that employers only hire candidates who are eligible to work in the U.S.

Employers must verify candidate eligibility through documentation ( I-9 forms) while also ensuring they don’t run afoul of anti-discrimination laws. The current administration has started to increase workplace visits and audits.

I-9 form

3. Health and Safety

The Occupational Health and Safety Act (OSH Act) was created to ensure employees had safe working conditions and is administered by the Occupational Health and Safety Administration (OSHA). You must keep a record of workplace accidents and injuries which may be reviewed if you are audited.

Workers Compensation is run by state laws. Depending on location you may pay into a state fund or be required to obtain insurance. Rates are tied to the type of work and may be tied to the organization’s usage rates. This should be shown as a benefit you offer employees.

4. Benefits

If you offer health care, retirement savings, or related benefits, the ERISA and HIPAA laws apply. Your broker or benefits consultant can support you in these complex areas.

5. Military Duty

The Uniformed Services Employment and Reemployment Rights Act (USERRA), is enforced by the U.S. Department of Labor (DOL) and prohibits discrimination based on military service and also provides job protection while individuals are serving, under certain circumstances.

Laws That Apply Once You Have 15 Employees

6. Discrimination and Harassment

Title VII of the Civil Rights Act of 1964 (Title VII) outlaws discrimination based on race, color, religion, sex or ethnic origin. Harassment based on any of these categories, is prohibited by Title VII because it is a form of discrimination. Note: many states and cities have expanded laws covering gender identification, sexual orientation, and other groups which you should check wherever you have employees.

The Americans with Disabilities Act (ADA) prohibits discrimination against individuals with disabilities. This includes protection for those who have a record of a disability, are regarded as having a disability or are associated with an individual with a disability. It also requires companies to provide covered individuals with reasonable accommodations.

7. At 20 employees, the Age Discrimination in Employment Act (ADEA) protects workers who are 40 years or older from discrimination based on age.


While these are the laws many small employers have difficulty with, they are but a sample of all the employment related laws covering your organization. Resources to help you understand various laws include:

What federal laws apply and what do you need to know –  Employer Info

What federal law posters do you need to post –  Posters

Help understanding federal laws as they apply to your questions – Questions Answered

Alexandria SBDC’s excellent Employer Checklist for start-ups, new employers  Employer-Checklist

Need more help?  Call us!