Legal Requirements to Fulfill Before Hiring Employees

Your business may be raring to hire its first employee, but have you taken all the necessary steps to set yourself up as a lawful employer?

Beyond the sheer decision of whether to add new employees to your business, there are several steps required by the federal and state government that must be taken before you can hire someone.

Here’s a look at 10 legal requirements every employer must do before taking on a new hire:

1. Apply for an EIN.

Every employer—even if you just employ one person—is required to have a federal Employer Identification Number (EIN) that serves as the entity’s tax ID. The Internal Revenue Service (IRS) offers several ways to apply: The fastest and preferred way to file is online using the Internet application, which allows you to receive your EIN immediately.

But you can also apply by phone, standard mail or fax. All you need to apply is the taxpayer ID number, such as the Social Security number, of the principal officer or owner of the company and basic information about the company, such as whether and how it’s incorporated.

2. Register with your state’s unemployment insurance office.

For every employee you hire, including the first one, you will need to pay unemployment taxes to your state. This generally requires registering with the state office that oversees unemployment insurance and then reporting quarterly wage details of each employee along with making the required payments into the fund. The taxes can typically be paid electronically.

Each state has its own rules and deadlines for payments, so it’s important to familiarize yourself with your state’s rules. All states now have online resources to inform employers on their requirements regarding unemployment insurance. Do a Google search for “unemployment insurance,” “employers” and your state’s name to find your state’s website with that information.

3. Verify each prospective hire’s eligibility to work.

Before you hire someone, you need to verify that they are who they say they are, and that they are legally able to work inside in the United States. This is done through filling out the U.S. Citizenship and Immigration Services’ Form I-9 with the new worker after they’ve accepted the job offer.

Along with filling out the form, the new employee will have to provide an original document (such as a U.S. passport) or documents (such as a state driver’s license and a Social Security card) that prove their identity and legal status to work in the U.S. You’ll need to examine the documents for authenticity (and perhaps photocopy them). A Form I-9 must be completed within three days of a worker’s first day on the job.

You don’t need to file Form I-9s with USCIS, but you will need to have them on file for three years after hire (or one year after employment ends, whatever is later). It is best to keep all your Form I-9s in a file or binder that only a few people in human resources are able to access, according to the Society for Human Resource Management. You’ll need to be able to produce I-9s should Immigration and Customs Enforcement come calling.

4. Look into your state’s workers’ compensation insurance rules—and get coverage.

Most states require employers to carry workers’ compensation coverage in case an employee gets injured on the job, though some exempt very small employers. It’s important to find out your state’s particular rules and get the required coverage. This database gives a brief summary of each state’s worker’s compensation rules along with links to the applicable state website where you can find more detailed information.

5. Report new employees to state registry.

You will want to keep employee records—such as full names, contact information and Social Security number—for your own administrative purposes. But you’re also required by law to collect that information.

Federal law requires employers to report basic information on new employees within 20 days of hire to the state in which the employee will work. (Some states have even tighter deadlines.) This information is put into the National Directory of New Hires that is used to locate and withhold income from people who owe child support.

The information required includes the new employee’s full name, address and Social Security, your EIN and address and the employee’s date of hire. Most employers collect this information by using an employee information form that all new hires must fill out. (Read eight tips for creating an employee information form.)

6. Set up a payroll and tax withholding system.

You’ll need to withhold federal and state income taxes, as well as federal Social Security and Medicare payroll taxes, from each employee’s paycheck. A reputable third-party payroll provider makes all of this this easy by providing you with a solution in which you can simply type each employee’s compensation, employee benefit deduction and tax withholding information into the system and it will automatically create regular paychecks (paper or electronic) for you while deducting the correct amount for each type of tax withholding for each pay period.

Many large payroll providers also bundle in extra services, such as human resources. Make sure to thoroughly review your options and find a payroll provider that meets all your needs at the right price. You’ll want to find a payroll provider that also has strong customer service and support in case you encounter any problems or have questions.

7. Have all employees fill out form W-4.

Before you can start paying an employee, you need to know how many “allowances” he or she wants withheld for taxes. The more allowances an employee decides to take, the less tax that will be withheld from their paycheck.

Again, payroll providers typically provide a W-4 form and make it easy to enter the information into the system. You just have to ensure every new hire fills it out and submits it. You can also download the W-4 form from IRS.gov.

8. Get and post employee notices.

There are a number of federal labor laws that require employers to post their requirements in conspicuous places in the workplace so that workers understand their rights under the law. For example, you’ll likely need to display a poster about the Fair Labor Standards Act and its rules establishing a minimum wage, overtime pay rules, child labor restrictions, nursing mother protections and more.

What you’re required to post depends on such factors as the size and nature of your business, which state you’re in, whether you have federal contracts or employee disabled or foreign workers, and more. The U.S. Department of Labor has a FirstStep Poster Advisor that will guide you through a series of questions and then provide you PDFs of the posters you likely need to display.

Also note that individual states may have their own poster display requirements. So it makes sense to also contact your state’s labor department for guidance. The U.S. Department of Labor keeps an online contact list of state labor offices.

9. Comply with OSHA rules.

Employing workers also means that you must comply with the federal Occupational Safety and Health Administration (OSHA) and its rules, which go back to the Occupational Safety and Health Act of 1970.

OSHA rules cover a variety of workplace conditions. Think having safe tools and equipment, safe use and maintenance of the equipment, safe handling of hazardous chemicals and much more.

You’ll need to use codes, posters, labels and signs to warn your workers about dangers, as well as provide them necessary training and medical examinations. The OSHA poster, or its state-level equivalent, must be displayed in a prominent workplace location.

10. Establish any necessary employee benefits.

Small businesses with fewer than 50 full-time-equivalent (FTE) employees are exempt from the Affordable Care Act (ACA) mandate that requires larger businesses to carry health insurance for their employees or pay an annual penalty. That said, the federal government offers incentives for small employers who do offer insurance.

Employers with fewer than 50 FTE employees can get their employees insurance through the Small Business Health Options Program (SHOP) exchanges. Those with fewer than 25 FTE employees can qualify for tax credits worth up to 50% the cost of the health insurance premium.

Depending on your industry and market, offering health insurance to employees may be a smart, competitive move even if you’re not required by law to offer it. Several states are also in the process of enacting regulations that will require employers who don’t offer their employees a standard retirement plan—such as a 401(k) or pension—a state-sponsored retirement plan.

California, for example, is phasing in rules requiring employers with five or more employees to either automatically make IRA payroll deductions for each employee through its CalSavers Program or offer an employer-sponsored retirement plan.

Covering Your Bases

Though these are the main steps employers must take that are required by federal or state law, there are other smart things to do before you start employing people. These include writing an employee handbook, so there are no questions about your rules and protocols for employees (even your first hire), and creating a personnel file for every employee.

While keeping personnel files is not technically required by aw, it protects you if you ever get sued by an employee. It also makes it easy for you to quickly find any relevant information about an employee, including their basic information, work and performance history, and benefits enrollment information, and workplace injury history.

Medical records, any disciplinary actions taken against the employee, and I-9 forms should be kept outside the personnel file. (Nolo offers tips on what should—and shouldn’t—go into an employee’s personnel file.) Once you create personnel files, it’s important to have an organized and consistent system for maintaining those files. For example, you’ll need to limit who can access the files to just supervisors of the employee. States also have various rules for how much access employers must give employees to their personnel files, if requested.

Before you hire, it’s essential to thoroughly review all the required steps you need to ensure you’re not exposing yourself to legal problems. The payroll provider you choose to go with may be able to help you with several of the steps, depending on the level of service you choose.

Once you get the right processes and procedures in place, adding new employees should be much easier and faster. It’s just getting set up in the first place that takes time.

30 employee handbook do’s and don’ts from the NLRB

To help employers craft handbooks that don’t violate the National Labor Relations Act, the National Labor Relations Board has issued a compilation of rules it has found to be illegal — and rewritten them to illustrate how they can comply with the law.

It was issued as a memorandum by NLRB General Counsel Richard F. Griffin, Jr. to “help employers to review their handbooks and other rules, and conform them, if necessary, to ensure they are lawful.”

Specifically, the memorandum points out employer policies found to violate and conform to Section 7 of the NLRA.

The main area of concern

Section 7 mandates that employees be allowed to participate in “concerted activity” to help improve the terms and conditions of their work.

The NLRB has made it abundantly clear recently that it’s on the lookout for rules that:

  • explicitly restrict protected concerted activity, and/or
  • could be construed to restrict protected Section 7 activity.

One thing the memorandum makes very clear: extremely subtle variations in language could be the difference between having a legal policy in the NLRB’s eyes and having one that’s viewed as violating the NLRA.

What to say, what not to say

Here are many of the dos and don’ts highlighted by the memorandum, separated by topic:

Rules regarding confidentiality

  • Illegal: “Do not discuss ‘customer or employee information’ outside of work, including ‘phone numbers [and] addresses.’” The NLRB said, in addition to the overbroad reference to “employee information,” the blanket ban on discussing employee contact info, without regard for how employees obtain that info, is facially illegal.
  • Illegal: “Never publish or disclose [the Employer’s] or another’s confidential or other proprietary information. Never publish or report on conversations that are meant to be private or internal to [the Employer].” The NLRB said a broad reference to “another’s” information, without clarification, would reasonably be interpreted to include other employees’ wages and other terms and conditions of employment.
  • Illegal: Prohibiting employees from “disclosing … details about the [Employer].” The NLRB said this is a broad restriction that failed to clarify that it doesn’t restrict Section 7 activity.
  • Legal: “No unauthorized disclosure of ‘business “secrets” or other confidential information.’”
  • Legal: “Misuse or unauthorized disclosure of confidential information not otherwise available to persons or firms outside [Employer] is cause for disciplinary action, including termination.”
  • Legal: “Do not disclose confidential financial data, or other non-public proprietary company information. Do not share confidential information regarding business partners, vendors or customers.”

The NLRB said the last three rules above were legal because: “1) they do not reference information regarding employees or employee terms and conditions of employment, 2) although they use the general term “confidential,” they do not define it in an overbroad manner, and 3) they do not otherwise contain language that would reasonably be construed to prohibit Section 7 communications.”

Rules regarding conduct toward the company and supervisors

  • Illegal: “Be respectful to the company, other employees, customers, partners, and competitors.”
  • Illegal: “Do ‘not make fun of, denigrate, or defame your co-workers, customers, franchisees, suppliers, the Company, or our competitors.’”
  • Illegal: “Be respectful of others and the Company.”
  • Illegal: “No defamatory, libelous, slanderous or discriminatory comments about [the Company], its customers and/or competitors, its employees or management.’”

The NLRB said the rules above were unlawfully overbroad because: “employees reasonably would construe them to ban protected criticism or protests regarding their supervisors, management, or the employer in general.”

  • Illegal: “Disrespectful conduct or insubordination, including, but not limited to, refusing to follow orders from a supervisor or a designated representative.”
  • Illegal: “‘Chronic resistance to proper work-related orders or discipline, even though not overt insubordination’ will result in discipline.”

The NLRB said the rules above, while banning “insubordination,” also ban “conduct that does not rise to the level of insubordination, which reasonably would be understood as including protected concerted activity.”

  • Illegal: “Refrain from any action that would harm persons or property or cause damage to the Company’s business or reputation.”
  • Illegal: “It is important that employees practice caution and discretion when posting content [on social media] that could affect [the Employer’s] business operation or reputation.”
  • Illegal: “Do not make ‘statements “that damage the company or the company’s reputation or that disrupt or damage the company’s business relationships.”‘”
  • Illegal: “Never engage in behavior that would undermine the reputation of [the Employer], your peers or yourself.”

The NLRB said the rules above “were unlawfully overbroad because they reasonably would be read to require employees to refrain from criticizing the employer in public.

  • Legal: “No ‘rudeness or unprofessional behavior toward a customer, or anyone in contact with’ the company.”
  • Legal: “Employees will not be discourteous or disrespectful to a customer or any member of the public while in the course and scope of [company] business.”

The NLRB said the rules above are legal because they wouldn’t lead an employee to believe they restrict criticism of the company.

  • Legal: “Each employee is expected to work in a cooperative manner with management/supervision, coworkers, customers and vendors.” The NLRB says employees would reasonably understand that this states the employer’s legitimate expectation that employees work together in an atmosphere of civility.
  • Legal: “Each employee is expected to abide by Company policies and to cooperate fully in any investigation that the Company may undertake.” The NLRB said this rule is legal because “employees would reasonably interpret it to apply to employer investigations of workplace misconduct rather than investigations of unfair labor practices or preparations for arbitration.”
  • Legal: “‘Being insubordinate, threatening, intimidating, disrespectful or assaulting a manager/supervisor, coworker, customer or vendor will result in’ discipline.” The NLRB said: “Although a ban on being  disrespectful’ to management, by itself, would ordinarily be found to unlawfully chill Section 7 criticism of the employer, the term here is contained in a larger provision that is clearly focused on serious misconduct, like insubordination, threats, and assault. Viewed in that context, we concluded that employees would not reasonably believe this rule to ban protected criticism.”

Rules regarding conduct between employees

  • Illegal: “‘Don’t pick fights’ online.”
  • Illegal: “Do not make ‘insulting, embarrassing, hurtful or abusive comments about other company employees online,’ and ‘avoid the use of offensive, derogatory, or prejudicial comments.’”
  • Illegal: “Show proper consideration for others’ privacy and for topics that may be considered objectionable or inflammatory, such as politics and religion.”
  • Illegal: “Do not send ‘unwanted, offensive, or inappropriate’ e-mails.”

The NLRB said the rules above were unlawfully overbroad because employees would reasonably construe them to restrict protected discussions with their co-workers.

  • Legal: “[No] ‘Making inappropriate gestures, including visual staring.’”
  • Legal: “Any logos or graphics worn by employees ‘must not reflect any form of violent, discriminatory, abusive, offensive, demeaning, or otherwise unprofessional message.’”
  • Legal: “[No] ‘Threatening, intimidating, coercing, or otherwise interfering with the job performance of fellow employees or visitors.’”
  • Legal: “No ‘harassment of employees, patients or facility visitors.’”
  • Legal: “No ‘use of racial slurs, derogatory comments, or insults.’”

The NLRB said the rules above were legal because: “when an employer’s professionalism rule simply requires employees to be respectful to customers or competitors, or directs employees not to engage in unprofessional conduct, and does not mention the company or its management, employees would not reasonably believe that such a rule prohibits Section 7-protected criticism of the company.

Blockchain Will Become a Necessity for HR

We are already living in a digital age but soon a wave of technological disruptions will change the current HR scenario. While AI is already making it big, Blockchain will revolutionise the way data is shared. Apart from this, the most uplifting part of Union Budget 2018 is the fact that AI and Blockchain became buzzwords not only within the technology community but also the wider world and common man. The words which were only used by some communities, these days they are known by all.

What is Blockchain?

Blockchain can be seen as a transparent and secure transaction ledger where transactions are both recorded and confirmed. All participating parties in a distributed network can share access to this continuously growing database to address their needs for information. Users in the network can contribute to the database by adding new transactions (or blocks) to the ledger stream. And, more importantly, every transaction across the network is recorded and stored without the ability to alter it, whether intentionallyor accidentally. This level of security in technology creates a beautiful new reality for a decentralized trusted information source in a landscape of broken global trust.

More than 40 leading financial firms and a growing number of companies across industries are already using Blockchain, according to The Wall Street Journal.

While there are numerous reasons that Blockchain is a game changer, here are few which will change Human Resource industry:

  • Blockchain will be very helpful in verifying and assessing the educational credentials, skills and performance of potential recruits – enabling those recruits to be allocated to the most appropriate roles, thereby reducing the amount of time recruiters spend cross checking and verifying information
  • Blockchain has always been seen as a quicker cross-border payment option. It is very efficient in  cross-border payments, including international expenses and tax liabilities, with the potential for organizations to create their own corporate currencies.
  • Blockchain can trigger an increase in wages. Also, when an employee becomes eligible for health coverage, they could be used to initiate the benefit; when a probationary period is satisfied.
  • For international employees, Blockchain can process payroll faster and less expensively, skirting international currency trade fees. By cutting out the intermediary, payments could come within hours rather than days.
  • Blockchain also increases productivity, by automating and reducing the burden of routine on the employees, data-heavy processes like VAT administration and payroll.
  • It enhances fraud prevention and cyber security in HR, including both employees and contractors.
  • For aspirants/ candidates, Blockchain will act as a concept of “self-sovereign identity.” They will be able to store their identity data on their personal devices and share it with those who need to validate it. Through this technology, individuals will be able to have complete control over the data of their lives, providing access keys when they apply for jobs. They could include degrees, certifications, courses taken, grades, employment history, salary and more.

Finally, we can say that technology has surely come a long way and the journey of Blockchain has just begun. The relevance of blockchain will soon be required knowledge for all job seekers, regardless of industry or position. Knowing where to fill the gaps of knowledge is one area where a certified career coach, such as those offered by outplacement and career transition service providers, can help job seekers ensure they are the most qualified candidate for any new role.

For the HR professional, knowing how blockchain can be used to streamline processes, create higher levels of security, and innovate processes will ensure future personal success and further position you as a strategic partner in your organization.

Current FMLA Forms Now Expire June 30

The Family and Medical Leave Act (FMLA) forms expire June 30—not on their original expiration date of May 31—but aren’t likely to change when they’re replaced with new forms, experts say.

Employers who customize their own forms aren’t too concerned with the imminent replacement of the current forms, while employment law attorneys disagree on how much the DOL forms might be tweaked.

The FMLA forms are used to certify that an employee is eligible to take FMLA leave and to notify him or her of leave rights under the law. The forms expire under the Paperwork Reduction Act of 1995, which requires the Department of Labor (DOL) to submit its forms at least every three years to the Office of Management and Budget (OMB) for approval, so the OMB can ensure processes aren’t too bureaucratic.

The DOL is renewing the current FMLA forms on a month-to-month basis until it replaces them with new forms. But the new forms may be virtually identical to the current ones and have a different expiration date, according to Jeff Nowak, an attorney with Franczek Radelet in Chicago.

In 2015, the DOL made a few minor tweaks to the FMLA forms so they would conform with the Genetic Information Nondiscrimination Act.

This cycle, the DOL did not request any changes to the forms, Nowak said.

There have not been substantive changes to FMLA or its regulations in the past three years that would require changing any of the information provided or sought on the current forms, noted Tina Bengs, an attorney with Ogletree Deakins in Indianapolis and Valparaiso, Ind., and Chicago. So it seems likely that the new forms, once issued, will be approved for the maximum three-year period, she predicted.

Customization of Forms

Some employers customize the DOL-recommended forms for their own use, observed Steven Bernstein, an attorney with Fisher Phillips in Tampa, Fla. For example, some employers are covered by state and federal FMLAs and adjust the federal forms to reflect state law requirements. Others make minor changes, such as referring to workers as “associates” rather than “employees.”

On occasion, employers incorporate reference to their accrued leave policies, while others adopt robust language disclaiming liability under the FMLA, he said.

He cautioned, however, that an employer can be held liable for using a form that harms the employee by misleading him or her about FMLA rights, and recommended that any changes be reviewed by an outside expert to ensure that added language does not inadvertently conflict with the FMLA.

Monica Velazquez, an attorney with Clark Hill in Collin County, Texas, prefers customized forms so that employers aren’t handing workers documents with the DOL logo. The logo makes the forms look more official than they are, she said, emphasizing that their use is optional.

Copy and paste the information from the DOL form into the employer’s own form, she recommended. If the employer plans to use its own language, use plain English and bullet points, she said. “Keep things as direct as possible.”

“I think the forms should have less space for health care providers to handwrite information,” said Megan Holstein, a senior vice president of absence and disability with Fineos in Denver. For example, instead of an open-ended question about the employee’s treatment schedule, a customized FMLA form might ask the doctor to choose a frequency of treatment—every week, month or year—and circle the response. This would reduce the challenge of reading doctors’ often illegible handwriting, she explained. Less space for handwritten information also would reduce the chances of doctors’ filling certification forms with confusing medical lingo, she added.

Many employers put the information about health conditions at the top of the medical certification forms, as it’s the first piece of information the employer wants—what ails the employee or family member—so the employer has a better sense of whether the employee is covered by the FMLA, Nowak noted. Nevertheless, he said he doesn’t have many concerns with the FMLA forms and encourages clients to use them.

FMLA Forms

The current DOL forms are:

ICE Planning Surge of I-9 Audits This Summer

Derek Benner, acting executive associate director for ICE’s Homeland Security Investigations (HSI) told The Associated Press that in addition to the plans for this summer, the agency will continue to focus on criminal cases against employers and deporting employees who are in the country illegally.

ICE has already opened more worksite investigations seven months into fiscal year (FY) 2018 than the agency completed in all of FY 2017. The federal fiscal year runs from Oct. 1 to Sept. 30. Enforcement investigations in FY 2018 have doubled last year’s total, and arrests related to worksite enforcement have nearly quadrupled.

Since October 2017, HSI has opened 3,510 worksite investigations, initiated 2,282 I-9 audits, and made 594 criminal and 610 administrative worksite-related arrests. That’s up from 1,716 investigations, 1,360 I-9 audits, 139 criminal arrests and 172 administrative arrests the previous fiscal year.

If anyone was wondering if the Trump administration was more bark than bite, these numbers indicate a significant increase in enforcement action, noted Muzaffar Chishti, an attorney and director of the Migration Policy Institute’s office at New York University School of Law. “What is not clear is whether any employers are included in the arrests,” he said. “Arrests—both criminal and civil—are almost always workers. For example, no one from management was charged in the high-profile Tennessee raid in April. That seems to be an imbalance.”

The ICE Toolkit

ICE said it uses a three-pronged approach to worksite enforcement:

  • Compliance, via Form I-9 audits, civil fines and debarment from federal contracts.
  • Enforcement, through the criminal arrests of employers and administrative arrests of unauthorized workers.
  • Outreach, by participating in the ICE Mutual Agreement between Government and Employers program, in which ICE certifies organizations for complying with the law. As part of the program, ICE and U.S. Citizenship and Immigration Services provide education and training on proper hiring procedures, fraudulent document detection and use of the E-Verify employment eligibility verification system.

Chishti believes pushing employers to enroll in E-Verify may be the aim of ICE’s more aggressive enforcement actions. “That strategy may work, but it only works for people who are on payroll,” he said.

E-Verify doesn’t enforce compliance for people paid as independent contractors, outsourced workers or those paid off the books, he said, adding that there’s a tendency for employers to explore these alternative hiring methods in response to increased enforcement.

Be Prepared for a New Normal.

Soon, ICE intends to conduct up to 15,000 Form I-9 audits per year, to be completed by electronically scanning documents in a not-yet-created national inspection center, Benner said.

“Investigations most often start with a notice of inspection alerting employers that ICE is going to audit their employment records for compliance with existing law,” said Michael H. Neifach, an attorney in the Washington, D.C., region office of Jackson Lewis. Enforcement actions can begin from a law enforcement tip or from an investigation into another type of violation, such as labor standards violations, and could result in civil penalties and/or criminal charges for employers.

ICE recently changed the way it calculates civil penalties to increase the fines imposed for I-9 violations. In FY 2017, employers were ordered to pay $97.6 million in judicial forfeitures, fines and restitution, and $7.8 million in civil fines.

“Unauthorized employees who are not legally in the U.S. may be detained and, ultimately, deported,” Neifach said. “Given the government’s focus on worksite inspections, preparing for possible inspections by auditing your employment verification processes and records is an essential precaution.”

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