Which Laws Your Company Must Follow

Most managers and human resources professionals -- particularly those who work for larger companies -- have to deal with federal employment laws every day. These laws reach into nearly every stage of the employment relationship, from hiring and first-day paperwork, to providing benefits and time off, to termination and layoffs. Whether you are developing workplace policies, creating forms and notices for your company to use with employees, establishing hiring and firing procedures, determining pay scales, choosing benefits, or handling employee performance and discipline issues, you have to understand your company's legal obligations -- and make sure that you don't inadvertently violate the law.

It can be tough to find out exactly what these federal laws require. To fully understand your company's obligations, you need a resource that explains each law clearly and completely, in plain English. That's where this book comes in. It explains all of the major federal employment laws: whom they protect, who has to follow them, what they require, and what they prohibit. Each chapter covers a single federal employment law, including the obligations and rights employers have under each law, deadlines, posting requirements, and recordkeeping rules. If you need more information, each chapter includes a list of resources. And many of the chapters include charts that provide information on laws in the 50 states and the District of Columbia that cover the same topic.

This first chapter gives you the information you need to get the most out of this book. First, we explain how to figure out which laws your company has to follow, including which federal laws apply to your company and when and how state and local laws might come into play. Next, we cover a handful of practical strategies that will help your company comply with these laws, such as consulting with a lawyer, documentation, and training. Finally, we explain what to do if you need more help.

Which Laws Your Company Must Follow

Employment law comes from many sources. Each of the federal laws (also called "statutes") covered in this book has been interpreted and refined by court decisions and sometimes by regulations issued by the federal agency responsible for enforcing and administering the law. What's more, many of the topics these laws cover are also addressed by state, and sometimes even local, laws. If more than one law applies, employers generally have to follow whichever law -- federal, state, or local -- is more beneficial to employees.

You can use this book to figure out which federal laws apply to your company, whether those laws protect particular employees, and whether the situation you're facing is addressed by a federal employment law. "Which Federal Laws Apply," below, will help you get to this information quickly.

This book also provides some information on state laws, in the form of charts briefly describing the laws of the 50 states and the District of Columbia, at the end of some chapters. However, you may have to do some research on your own -- or talk to a lawyer -- to find out whether a state or local law applies to your situation. This is covered in "Which State and Local Laws Apply," below.

Which Federal Laws Apply

Federal employment law consists of the statutes themselves, any regulations issued by the federal agency responsible for administering the law, and court decisions interpreting the law and regulations. Together, these sources determine what the terms in the law mean, what employers have to do to comply with the law, and how violations of the law will be handled. Each chapter of this book presents a federal employment statute, any regulations interpreting it, and the major court cases decided under the law.

Because the employment laws explained here are federal statutes, they apply throughout the country, regardless of what state the company or worker is in. This means that every federal law in this book has the potential to apply to your company if it operates in the United States. We say "potential" because no law described here applies to every employer and employee, in every situation. Instead, most laws specify which employers need to follow them, which employees are protected by them, and which specific actions they prohibit and require.

To figure out whether a particular federal employment law applies to your company and your situation, ask yourself these five questions:

1. Does your company have enough employees?
2. Is your company otherwise covered by the law?
3. Is the employee covered by the law?
4. Do all of the law's provisions apply?
5. Is this situation covered by the law?

1. Does Your Company Have Enough Employees?

Many employment laws apply only to employers that have at least a minimum number of employees. You'll find these rules under the heading "Regulated Employers" in each chapter. For example, an employer with only 20 employees is not covered by the Family and Medical Leave Act (FMLA); only employers with at least 50 employees must comply with that law.

2. Is Your Company Otherwise Covered?

Some employment laws don't impose a minimum size requirement, but instead apply only to companies that engage in "interstate commerce" (and, in a few cases, meet a minimum volume of business requirement). These rules are included in the chart, "Laws That Apply by Size or Operations of Employer," above.

All but the smallest local companies are engaged in interstate commerce within the meaning of these laws. For example, if your company buys, sells, or handles materials or products that have come from or will go to another state, or if your company's employees communicate across state lines as part of their job duties, your company is most likely engaged in interstate commerce. If, after reading the relevant chapter in this book, you believe that your company is not covered, you should probably check your conclusion with a lawyer.

Even laws that impose a minimum size requirement don't apply to every employer that is large enough to be covered. Some laws include exceptions for particular types of employers and some apply only to certain types of companies. For example, the Sarbanes-Oxley Act of 2002 applies only to companies that are publicly traded or required to register with the Securities and Exchange Commission. You'll find this information under the heading "Regulated Employers" in each chapter.

3. Is the Employee Covered?

Some employment laws apply only to employees who have worked for the employer for a certain period of time. Some exclude independent contractors, apply only to employees in certain occupations, or apply to people who don't even work for the employer. Each chapter provides this information under the heading "Covered Workers." For example, the Consolidated Omnibus Budget Reconciliation Act (COBRA) applies not only to employees and former employees, but also to an employee's spouse and dependents, if they are covered by the employer's group health insurance plan.

4. Do All of the Provisions Apply?

Some laws have provisions that apply only to certain workers and/or certain employers. For example, the provisions of the Fair Labor Standards Act that require employers to pay overtime and minimum wage don't apply to certain types of employees, including certain computer specialists, seamen, and criminal investigators. Similarly, only employers that have at least four employees are subject to the antidiscrimination provision of the Immigration Reform and Control Act (IRCA), but all employers -- regardless of size -- have to comply with IRCA's verification provision, which requires employers to verify that their employees are legally authorized to work in the United States.

You can find this additional coverage information within the discussion of each provision of the law, under the heading "Regulated Employers" and/or "Covered Workers."

5. Is Your Situation Covered?

Each of these laws covers a limited spectrum of employment issues and may not extend to the problem or question you're facing. We've included two charts here to help you figure out which chapters to review. The first, "What Each Law Covers," gives a very brief summary of the law. The second, "Laws That Apply to Common Employment Situations," lets you know which aspects of the employment relationship are covered by a particular law. Once you decide which laws might apply, you'll need to read the sections called "What's Prohibited" and "What's Required" in the chapters covering those laws to find out whether your particular situation is covered.

For example, if you have a question about discrimination, you'll see that several laws prohibit discrimination in employment. You'll also see that these laws prohibit different types of discrimination -- for instance, the Civil Rights Act of 1886 prohibits only race discrimination, while the Equal Pay Act prohibits only gender-based wage discrimination. To find out precisely what each law requires and prohibits, turn to the appropriate chapters.

In addition, some laws make exceptions for certain situations in which employers are not required to comply with the law. You can find this information in the "Exceptions" section of each chapter. For example, although the Worker Adjustment and Retraining Notification Act (WARN) generally requires certain employers to give employees advance notice of a layoff, employers don't have to give notice if the layoff results from a strike or the closing of a temporary facility.

Laws That Apply to Common Employment Situations Chart omitted for online sample chapter.

Which State and Local Laws Apply

Even if you follow every applicable federal employment law to the letter, your company could still be violating its legal obligations to employees. Why? Because the federal government isn't alone in regulating the employment relationship -- state and local governments often adopt their own employment laws as well. If your company and situation are covered by more than one law, you must follow whichever one is the most beneficial to the employee in a particular situation.

This book will help you get started in figuring out which state laws might apply. At the end of many chapters, you'll find charts summarizing the laws of the 50 states and the District of Columbia on the same topic. For example, at the end of the chapter on the FLSA, you'll find charts on state minimum wage, overtime, and meal and rest break laws. However, these charts may not provide the details you need. In that case, you should contact your state's labor or fair employment practices department (you can find contact information in Appendix A), consult a resource on the employment laws of your state, or talk to a local employment lawyer.

To find out whether local laws might come into play, you'll have to find out what your city or county requires. Some local governments post their laws (often called "ordinances") or information for local employers on their websites; you can find links to many city and county websites at www.statelocalgov.net. You can also find out what local laws require by talking to a local employment attorney.

State and local laws can be quite similar to federal employment laws: They cover similar topics, apply to only certain employers (often those with a minimum number of employees), and protect only certain types of employees. However, state and local laws very often provide workers with more benefits -- and apply to more employers.

Putting It All Together

Here are a couple of examples to illustrate how to figure out which laws your company has to follow.

Example: The only manager of a four-employee graphic design company in Berkeley, California, wants to know what the company's obligations are to disabled applicants. The federal Americans With Disabilities Act governs this issue, but it applies only to private employers with at least 15 employees. California also has an antidiscrimination law that prohibits disability discrimination, but it applies only to employers with at least five employees. However, the city of Berkeley prohibits all companies that contract with the city from discriminating on the basis of disability. Therefore, if the company wins a bid to redesign the city's website, it will have to comply with this municipal law.

Example: A national chain of grocery stores is considering expanding to Florida. Its HR director researches state employment laws and learns that, although the federal minimum wage is $5.15, Florida has a higher minimum wage of $6.40. Also, Florida's child labor laws allow 14- and 15- year-old workers (often hired as baggers) to work longer hours than the federal FLSA allows. And state law restricts the hours of 16- and 17-year- old workers, which the FLSA does not. The company will have to follow a patchwork of laws: So far, it will have to pay Florida's higher minimum wage, observe the FLSA's restrictions on younger teen workers' hours, and observe the state law's restrictions on the hours of older teenagers. And, the director hasn't even begun looking at local laws.

As you can see, things can get confusing if your company is covered by two or more laws that impose different requirements -- or seem to contradict each other. If you find yourself in this position, you may need some help figuring out what to do. This is a good time to consult with an employment lawyer.

Basic Compliance Tools

This book will help you understand which federal employment laws your company must follow, and what those laws mean. However, to stay out of legal trouble, your company must do more than simply follow the letter of the law. It will also have to adopt some practical strategies to make sure that it meets its legal obligations. These compliance tools are not strictly "required" by the laws covered in this book, but a company that wants to avoid legal problems should consider them standard operating procedures.

This section briefly explains a handful of basic strategies every company should follow, but it is only an introduction to these important topics. The ins and outs of creating an effective compliance program are well beyond the scope of this book. However, SHRM and Nolo both have plenty of detailed resources that will help you design and implement procedures for compliance; see "If You Need More Information," below.

Lawyers

Even the most conscientious HR professional occasionally needs help from a lawyer. Although you can handle many employment issues on your own, some are particularly tricky and require some legal expertise. As you read this book, you'll see that we sometimes advise you to see a lawyer if you need more information on a difficult topic. And with good reason: Although lawyers don't come cheap, your company can save money by paying a lawyer for advice and information that would be very time-consuming and difficult for you to research on your own.

There are no hard and fast rules determining when you should consult with a lawyer. You'll have to decide when it's time to get some expert help based on a number of factors, including your own comfort level, how important the issue is, how many employees are affected, whether your company is facing significant legal exposure, and your company's budget. However, a good general rule is to consider consulting a lawyer sooner rather than later in any potentially difficult situation.

You can use a lawyer for a variety of tasks, including:

• Document drafting or review. A lawyer can create or troubleshoot documents you use over and over again, such as employment contracts, employee notice forms, waivers, your employee handbook, and other written policies.
• Advice on employment decisions. Of course, your company would quickly go out of business if it consulted a lawyer every time an employee was hired or disciplined, but there are times when a lawyer's advice will be very valuable. If, for example, you are considering firing a worker who is on FMLA leave or has recently complained of sexual harassment, a lawyer can help you make sure that you have adequate legal support for your decision.
• Help understanding your legal obligations. As noted above, companies must follow whichever law -- federal, state, or local -- provides the most benefits for workers. A lawyer can help you untangle these obligations, and assist you in figuring out your responsibilities when several laws overlap.
• Representation in legal or administrative proceedings. If an employee files a complaint with an administrative agency or a lawsuit, your company should consult with a lawyer right away. Good legal advice at the outset can make the difference between winning and losing the case.

Training

Training is a great way to keep your company's legal exposure to a minimum -- and give your company an opportunity to deal with potential problems early on, before they have a chance to escalate.

Training is a vital component of a company's efforts to combat harassment and discrimination, for example. In this type of training, employees learn about harassment and discrimination and about how to report possible misconduct to the appropriate people. Managers should also be trained to learn how to recognize harassment and discrimination and what to do if they learn that harassment or discrimination might be taking place. You can learn more about discrimination and harassment training from the Training Institute of the Equal Employment Opportunity Commission, www.eeotraining.eeoc.gov.

As a legal matter, training can help limit your company's liability if it faces a harassment lawsuit. Companies that take reasonable care to prevent and correct harassment -- through adopting an antiharassment policy, training managers in their responsibilities, investigating complaints effectively, and taking swift action if harassment occurs -- have a potential legal defense to certain harassment claims.

You can also use training to help your company maintain a safe and healthy workplace (a requirement of the OSH Act). In fact, the OSH Act requires companies in certain industries to provide specific types of training to their employees. Safety training might include information on how to use particular tools or equipment, ergonomics, working with hazardous materials, and reporting possible unsafe conditions. You can learn more about safety training from OSHA's Office of Training and Education Training Resources, www.osha.gov/dcsp/ote.

Policies

Your company's written policies or employee handbook can make or break your efforts to comply with the law and can help limit your company's legal exposure. By clearly communicating what it expects from its employees and managers, a company can nip certain legal problems in the bud -- or at least give itself an opportunity to resolve problems when they first arise. If everyone at your company understands, for example, what retaliation is and that the company will not tolerate it, managers will be less likely to retaliate against employees who raise concerns or complaints, and employees will be more likely to report retaliation right away, before their relationship with the company has been damaged beyond repair.

When writing or updating your company's policies, you must choose your words with care: At the most basic level, your company's policies must not contradict what the law requires or allows. For example, if your company's employee handbook says that employees may take only four weeks off per calendar year, that policy could well violate several federal employment laws, including the Family and Medical Leave Act, the Uniformed Services Employment and Reemployment Rights Act, the Pregnancy Discrimination Act, and the Americans With Disabilities Act. If your company's policies lead employees to believe that they aren't entitled to the rights provided by these laws, the company could face major legal problems.

As you'll learn in later chapters, a company's policies sometimes also determine its legal responsibilities to employees. In some situations, a company may take certain actions only if its policies provide for it, even though the actions are otherwise legally allowed. For example, a company is legally allowed to pay less than the minimum wage to employees who earn tips (known as taking a "tip credit") under the Fair Labor Standards Act, but only if it clearly informs employees that it will do so. Similarly, your company's right to demand a doctor's certification from an employee who takes FMLA leave for a serious health condition can be limited if its medical leave policy is less strict. To take full advantage of its legal rights, your company must make sure that its policies meet these standards.

Some policies can also be used as a legal defense to claims of harassment and discrimination. As noted above under "Training," companies that have antiharassment and antidiscrimination policies and take quick action to investigate and resolve complaints may be able to avoid liability for certain harassment and discrimination claims.

Every company should have written policies prohibiting harassment and discrimination and outlining the steps the company will take if an employee comes forward with a complaint.

Companies that don't have written policies, or don't review their policies periodically to make sure that they are legally valid and up to date, are placing themselves at legal risk.

Responding to Legal Violations

If you learn of a possible legal violation -- for example, hazardous working conditions, discriminatory statements by a supervisor, or a manager's refusal to allow an eligible employee to take FMLA leave -- you must take action right away. You may need to investigate the situation first, to find out what happened and who's responsible. Once you know that your company has a problem, however, you should step in quickly to resolve it.

There are many very good reasons for taking action to correct legal violations. Perhaps most important, taking action will show employees that the company cares about their well-being and wants to do the right thing. This will help build the type of loyalty and positive feelings that can provide a strong deterrent to lawsuits. Putting a stop to illegal behavior will also limit an employee's damages, if he or she decides to take legal action against the company. And dealing quickly with troublemakers will send the strong message that your company doesn't tolerate misconduct, which will help prevent similar problems in the future.

Outsourcing

A few of the laws in this book -- particularly those that deal with benefit plans, such as COBRA and ERISA -- can be extremely difficult to understand and administer. That's why many companies hire outside service providers to handle their obligations under these laws. Outsourcing these responsibilities is a great way to maximize efficiency: Rather than spending weeks of your time trying to understand what these laws require, you can hire a company that specializes in compliance to take care of everything for you.

But use caution when hiring a third party to discharge your company's obligations. Generally, your company will remain legally liable for any actions taken by an outside provider (although the provider may have to indemnify your company -- repay the costs it incurs -- if it is sued for the provider's actions). This is why you must choose service providers very carefully; create a clear, written agreement about what you expect the provider to do for your company; monitor the provider's performance; and periodically review your outside contracts to make sure that your company is getting what it pays for.

Among the factors your company should consider when hiring an outside service provider are:

• The services to be provided. Is your company looking to outsource its entire HR function or only the administration of its pension plan?
• Performance benchmarks. How will you measure whether the provider is meeting its obligations to you?
• Pricing. What will your company pay, and how will the price be calculated (for example, per employee, per task, or a set monthly or annual rate)?
• Control. Does your company want to retain some input into the tasks you are outsourcing, or will the provider be solely responsible for those issues?
• Liability. Does using an outside provider create additional obligations or legal exposure -- as is true, for example, if you outsource certain obligations created by the Fair Credit Reporting Act? If your company is sued, will the provider have to provide indemnification?
• Handling problems. How will you deal with disagreements or other problems in the company's relationship with the provider, and under what circumstances can either of you end the arrangement?

By carefully considering these issues up front, and getting some legal assistance in drafting and reviewing provider contracts, you can ensure that your company gets the most benefit from outsourcing administrative functions.

Documentation

As you'll see, many of the laws we cover require companies to keep certain documents -- for example, payroll records, job applications, or forms signed by employees. Beyond these legal requirements, however, your company should carefully document in writing all important decisions and required actions relating to its employees. Even if this type of documentation is not specifically required by the law, it's the best way to prove that you complied with the law, if necessary.

For example, the Fair Credit Reporting Act requires covered employers to provide written notice and obtain an applicant's or employee's consent before requesting a consumer report on that person. Because the law doesn't specifically obligate employers to keep copies of these records, an employer is technically free to shred these documents. But what if the employee claims never to have consented to the report? If the employer saved these records, it would have a written consent signed by the employee. If not, it will have no written proof that it complied with the law.

Companies should also carefully document employment decisions. For example, when a manager fires, promotes, disciplines, gives a pay raise to, or transfers an employee, or otherwise changes an employee's status or situation, he or she should fully document the reasons for the action. This will help the company later, if the employee complains that the action was taken for illegal reasons (for example, discrimination or retaliation). The manager will have an easier time remembering the details and explaining the basis for the decision. The company will have a contemporaneous record (that is, one made at the time of the decision) of what it did and why. And, ultimately, documents will help the company persuade a government agency, jury, or judge that it acted properly.

If You Need More Information

You may need more information than this book provides. You may have to figure out exactly how your company can comply with apparently conflicting federal, state, and local laws on the same topic. You may need help with the practical aspects of compliance, such as how to conduct an investigation of sexual harassment or develop an appropriate procedure for taking anonymous complaints of shareholder fraud under Sarbanes-Oxley. Or, you may need help developing employment contracts or an employee handbook. This section will direct you to some other resources that might help.

Government Agencies

Your first stop should be the federal or state agency that administers and enforces the law you're interested in. At the end of our discussion of each law, we give you a list of resources available from the federal agency that interprets and enforces the law. But these lists aren't exhaustive -- some of these agencies have dozens of fact sheets, guidance memoranda, and special bulletins for employers and small businesses that can help you figure out the law's requirements. These agencies also have staff members available to help answer your questions or point you toward the information you need.

If your question involves state law, you can start your research by contacting the state agency that enforces the law. For questions about employment discrimination, contact your state fair employment practices agency. For other employment-related questions, contact your state labor department. Appendix A includes contact information for the federal agencies that enforce and interpret the laws covered in this book, as well as the fair employment practices agency and labor department of each of the 50 states and the District of Columbia.

SHRM and Nolo Resources

The Society for Human Resource Management (SHRM) and Nolo both provide a number of resources on employment law, policies and procedures, and other issues of special interest to the HR profession. Both organizations have websites with lots of information on HR topics, and both offer written materials on a variety of subjects. If you need help with an HR question or issue, you should be able to find the answers in our products. See Appendix B for a list of resources you might find helpful.

Updates

Nolo and SHRM are committed to providing you with the most current information available. For the latest updates on the information in this book, go to www.nolo.com or www.shrm.org/books/employmentlaws.