Lawful Hiring Practices for Small Business Owners

Most small business owners want to hire the best candidate for the job. But following lawful hiring practices involves more than choosing qualified job applicants. State and federal laws and regulations require employers to use hiring practices that ensure they treat all job applicants equally.

What Is Fair Hiring?

Think of fair hiring as equal employment opportunity compliance 2.0. Fair hiring practices are grounded in legislation. Federal employment laws, such as Title VII of the Civil Rights Act of 1964, make it unlawful to discriminate against job applicants because of their race, color, religion, sex, national origin, age, disability, and genetic information.

Fair hiring goes a step further than workplace discrimination laws. It aims to not only prevent discrimination against protected groups, it seeks to foster workplace diversity by providing a level playing field for all job applicants.

Fair hiring strategies take unconscious and unintentional biases out of the hiring process to ensure that all applicants get equal consideration based on merit.

Federal Fair Hiring Laws for Employers

Federal antidiscrimination laws currently identify the following protected groups and prohibit employment discrimination against them.

It's important to note that legislation and case law are always evolving. For example, Title VII now includes protections for the LGBTQ+ community pertaining to discrimination based on gender identity and sexual orientation.

In addition to Title VII, laws directly and indirectly related to hiring include:

The Pregnancy Discrimination Act (PDA) makes it unlawful to discriminate on the basis of pregnancy, childbirth, or a related medical condition.

The Americans with Disabilities Act (ADA) requires employers to make reasonable accommodation to allow workers with disabilities to do their jobs.

The Age Discrimination in Employment Act (ADEA) prohibits discrimination against those who are at least 40 years old.

The Equal Pay Act requires employers to give men and women equal pay for equal work.

The Immigration Reform and Control Act (IRCA) prohibits discrimination based on citizenship or national origin.

The Civil Rights Act of 1866 protects against discrimination based on race or ethnicity.

The Genetic Information Nondiscrimination Act (GINA) prohibits the use of genetic information for employment decisions.

Why Fair Hiring Is Important for Small Business Owners

Any business with 15 employees or more is subject to Title VII regulations. The U.S. Equal Employment Opportunity Commission (EEOC) enforces these laws, and companies that fail to comply risk stiff fines and penalties.

As a business owner, you also risk expensive lawsuits if a job candidate who believes they've been discriminated against takes you to court. Even a lawsuit that settles will be expensive, and more so if you lose your case at trial.

Besides avoiding negative legal consequences, fair hiring practices can advance your business's performance in several ways.

Fair hiring fosters innovation. People naturally gravitate to others who are like them. In business, this tendency often means that the people doing the hiring choose applicants who share their experiences and backgrounds. All that sameness leaves little room for the introduction of new ideas and approaches that the homogeneous workers might not have considered.

Fair hiring practices, on the other hand, lead to a diversified workforce and contribute to an environment where fresh ideas and viewpoints can flourish. This fair hiring outcome is one reason companies with a diverse mix of employees have been found to be more profitable than those that don't actively seek to employ a diverse workforce.

Fair hiring reduces turnover. One of the biggest drivers of employee turnover is job satisfaction (or the lack thereof). Employees who feel well suited to their jobs are likely to be more engaged and less likely to quit. Fair hiring focuses on matching a job candidate's experience and skills to job responsibilities. As a result, employees tend to have greater job satisfaction, and employers spend less time and money filling job openings.

Strategies for Achieving a Fair Hiring Standard

Achieving hiring standards that are truly neutral requires paying attention not only to who you hire, but also the way that you hire.

Job descriptions, job advertising and posting language, interview questions, and the actions of the team members responsible for recruiting and hiring all play a role in achieving a fair hiring standard.

Here's how.

Know What Questions You May and May Not Ask

Make sure your employment application is free from questions that require an applicant to reveal non-job-related information, such as their age or race. Many states also have Ban the Box laws that prohibit questions about an applicant's criminal history and arrests.

Create Detailed Job Descriptions

All too often, business owners shortcut the process of developing detailed job descriptions and ask for candidates who are "a good fit with company values," or "know how to get things done." Instead, job descriptions should describe the specific behaviors, skills, and knowledge needed for the job.

For example, suppose your job description says you're looking for a candidate who's a "good fit" for a company that puts customer service above all else. In your job description, you might include requirements for not only customer service experience, but also a belief that customer service is a highly important business objective.

Your job description should focus on the practical benefits a qualified candidate will bring to your company rather than whether someone fits in with the company culture. Opting for this type of job description could expand and diversify your pool of applicants and help you find the right person to fill the job.

Watch Your Language When Writing Job Listings

Aside from obvious no-nos like using salesman instead of salesperson or other gender-specific pronouns, look out for language that might exclude otherwise qualified candidates.

For example, suppose you own a consulting firm and you're looking for an entry-level data analyst. The job requires a business degree but you're willing to train on the job and don't need someone with prior work experience in data analysis. You decide to write a job posting asking for a recent college graduate with a degree in business. You like the idea of giving a chance to recent college grads who are famously faced with the dilemma of needing work experience to land their first job.

It sounds well-meaning enough. But what if someone with a business degree is looking to make a career transition? Worse yet, what if that someone is 40 years old or older (a protected class under anti-discrimination laws)? Your ad could be considered discriminatory.

Keep in mind, too, that different cultures might view traits you deem positive as negatives. Using words like "aggressive" or "ambitious" might dissuade some individuals from applying for your job because it's an unattractive trait in their culture. These individuals might have the same drive and desire to climb the corporate ladder that you're looking for; it's just that they exhibit those traits in different ways. And isn't that cultural difference exactly what your fair hiring practices are designed to achieve?

To avoid these cultural pitfalls, consider using a phrase like, "proven track record exceeding sales goals" instead of "aggressive, go-getter." Or, use the phrase "career-minded project manager seeking a management-track position" instead of "ambitious project manager."

Use Uniform Interview Questions

While it's always helpful to spend a few minutes at the start of the interview making applicants feel comfortable, it's important to quickly move on to strictly job-related questions. Lawyers and judges will presume that you'll use the answers to questions you ask during your hiring process, so keep non-job-related questions out of the interview.

By establishing standard questions for each position, you'll ensure that all applicants will get the same shot at your job opening and be evaluated based on the same criteria.

Using a uniform set of interview questions can also help you to score applicants' responses. A scoring system that assigns a value to each interview question keeps all applicants on an even footing. This standardized analysis also allows you to make the best hiring decision because it incorporates both strengths and weaknesses into a single score.

Use an Interview Panel

Instead of having one person conduct interviews, assemble a diverse team of interviewers charged with reaching a consensus on job candidates. The different points of view represented by the team will help weed out biases, especially unconscious ones that a single interviewer might have.

Practice Blind Resume Screening

Consider using one of the available artificial intelligence programs to remove names, photographs, year of college graduation, hobbies, and other similar, non-job-related references before you review resumes. These identifiers can trigger biases and assumptions that derail your fair hiring goals. You can better prevent unconscious biases by removing identifying information completely than trying to disregard it after you've already learned the information.

Use Skill Assessments

Skill assessments are another tool to evaluate candidates objectively. When a job requires skills like writing, bookkeeping, coding, or proficiency with software such as Excel, testing will save time by screening out applicants before you spend time interviewing them.

Be careful, however, because the EEOC and courts can hold employers liable for pre-employment skill testing that's not job-related or that's administered improperly.

Pre-employment tests can't be the only assessment method used for evaluating job applicants, and they must not have a disproportionate impact on any protected group. You must also ensure that all applicants get the same instructions, time limits, and conditions for taking tests.

Train Teams Involved in the Recruiting, Interviewing, and Screening Processes

All those involved in recruiting and hiring should receive training in employment laws, as well as best practices for fair hiring (including recordkeeping requirements).

How Fair Is the Use of Artificial Intelligence in Hiring?

As businesses more widely adopt artificial intelligence (AI) tools, many employers have turned to AI to assist in hiring.

AI holds the allure of streamlining the hiring process, especially when it comes to screening resumes using keywords tailored to experience requirements. However, the use of this technology is increasingly coming under state and federal scrutiny. AI that isn't well trained or is fed bad data can perpetuate stereotypes and result in discriminatory hiring practices. How will the regular employer know?

Employers should take note of EEOC guidelines meant to ensure that the use of AI doesn't disproportionately impact protected groups. They should also monitor state and local laws that are increasingly targeting these practices.

Legislation in New York City, for example, requires employers using AI for hiring to conduct regular, independent bias audits. The law also requires employers to notify candidates when they use AI tools in the selection process. (N.Y.C. Loc. Law 144 of 2021 (2023).)

In addition, Illinois and Maryland have enacted laws to limit the use of facial recognition software in video interviews for employment.

It's not unreasonable to assume that other states and localities will follow suit.

Fair Hiring Is a Sound Business Strategy

Navigating antidiscrimination laws can be complex, but when it comes down to it, fair hiring practices are little more than sound business strategies.

Focusing on the background, skills, and knowledge needed to get a job done is certain to yield a more qualified employee than haphazardly defining job requirements and prioritizing irrelevant characteristics like where an applicant went to school. Lawful hiring practices don't just reduce liability for employers, they also increase your business's competitive advantage.

If you're working on fair hiring practices for your business and you have compliance questions, consider talking to an employment expert like a human resources specialist or employment lawyer. They can review your hiring practices or help you create new policies that comply with federal and state laws.