Hiring employees is a big step for any small business.  Doing it right and complying with all state and federal laws and regulations is no small task and should be taken seriously.

Here are the main items to cross of your checklist:

Hiring without Violating any Laws

The recruiting, interviewing and hiring process alone is a minefield of potential legal problems.

As you may know, you are prohibited from discriminating against any applicant based on race, color, religion, sex (including pregnancy), national origin, age (40 or older), disability or genetic information. To learn more about prohibited employment policies, including advertising and hiring, see this publication, straight from the U.S. Equal Employment Opportunity Commission.  If in doubt, this would be an area to consult an attorney.

Another often encountered issue is the use of background checks in making hiring decisions.  Be aware that you cannot use everything you can possibly find about your potential employee.  For more insight, see this Small Business Owner Background Check Guide.

Employment Eligibility Verification Form I-9

After you made the decision to hire a particular employee, you must complete Form I-9 to verify the employment eligibility and identity of that employee.  The form does not have to be filed anywhere, but you must maintain the completed form in your files for three years minimum or one year after you fired the employee.  There may be an inspection, in which case you have to produce these documents promptly, within three days.

New Hire Reporting

Within 20 days after the employee started working, you must report your new hire to the New York State Department of Taxation.  It can be done on paper, Form IT-2104, to be mailed to New Hire Notification, P.O. Box 15119, Albany, New York 12212-5119 or you can do it online:  www.nysnewhire.com.

Payment of Wages

There are lots of laws dealing with when and how to pay your employees.

Make sure you know how frequently you have to pay your employees (Article 6 of the Labor Law is a starting point) and maintain records that show the hours worked, gross wages, payroll withholdings and net wages paid each employee. This information also has to be given to the employee along with each payment (aka paystub).

Be very careful before deducting any money from an employee’s paycheck (other than tax and other withholdings authorized by law).  Unless the employee agreed to the deduction in writing, it is illegal.

When you hire someone and then again each year before February, you have to give the employee a notice setting forth the basic terms of his or her employment, such as the amount of pay, the regular paydate, the employer’s information and so forth.  For exact requirements, see the Department of Labor’s Guidelines.  Also, the Department has very helpful forms to illustrate what information has to be on the paystub and what information must be in the annual notice. See here for a sample paystub andhere for a sample annual notice for an hourly employee.

Tax Withholding, Wage Reporting, Unemployment Insurance

For your own mental health, get a payroll service or a dedicated payroll department to deal with all required withholding and wage reporting requirements.  Just briefly, you must withhold federal, state and local tax, pay the withheld tax to the government, pay employment insurance, pay Social Security and Medicare Taxes (FICA) and the Federal Unemployment Tax (FUTA).  For detailed info on the New York State obligations, see the NYS Department of Taxation and Finance’s Publication 50, Employer’s Guide to Unemployment Insurance, Wage Reporting, and Withholding Tax, and for your federal obligations, see Publication 15, Circular E, Employer’s Tax Guide.

Insurance

Unemployment Insurance

You must register for unemployment insurance, which can be done online.  Once registered, you actually pay the insurance along with your quarterly state tax reporting on Form NYS-45.

Worker’s Compensation and Disability Insurance

You have to get worker’s compensation and disability insurance for each employee you hire.  Workers’ compensation insurance provides help to employees injured or killed on the job.  Disability Insurance provides help to employees who get sick or disabled off the job and unrelated to the job.  You can get both insurances from a private insurer or from the NYS Insurance Fund.

Workplace Posters

For New York requirements as to posters in the workplace, see here:  New York Posters

For federal posters, see here: Federal Posters

Not every poster applies to every business.  Make sure you understand the requirements.

 

The Department of Labor recently released an app for workers to independently keep track of their hours worked, wages earned and breaks taken.  According to their press release, "This app will help empower workers to understand and stand up for their rights when employers have denied their hard-earned pay."

Obviously, this raises concern that the small business owner will soon find himself or herself in a dispute with employees over conflicting time records on the worker's smart phone versus the employer's records.  

A small business owner's first line of defense?  Knowing its record keeping obligations and keeping such records in tip top shape at all times.

Employer Payroll Recordkeeping Obligations

THE FLSA

Recordkeeping requirements of many employers are governed by the Fair Labor Standards Act (FLSA 29 CFR Part 516).  See here for which employers and employees are covered.  The covered employers must keep the following records for at least 3 years:

  1. Employee's full name and social security number.
  2. Address, including zip code.
  3. Birth date, if younger than 19.
  4. Sex and occupation.
  5. Time and day of week when employee's workweek begins.
  6. Hours worked each day.
  7. Total hours worked each workweek.
  8. Basis on which employee's wages are paid (e.g., "$9 per hour", "$440 a week", "piecework")
  9. Regular hourly pay rate.
  10. Total daily or weekly straight-time earnings.
  11. Total overtime earnings for the workweek.
  12. All additions to or deductions from the employee's wages.
  13. Total wages paid each pay period.
  14. Date of payment and the pay period covered by the payment.

For more information, see this fact sheet from the DOL.

NEW YORK STATE LABOR LAWS

In addition, New York has its own laws on payroll recordkeeping, see Labor Law Section 195.

Each employer is required to maintain for not less than 6 years the following records for each week worked by its employees:

Rate of pay and basis thereof, whether paid by hour, shift, day, week, salary or piece; gross wages, deductions, allowances and net wages; for non exempt employees, regular hourly rate, overtime rate, number of regular hours worked and number of overtime hours worked.

See here for the NY DOL wage and hour law information and helpful forms.

 

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 **This post is for informational purposes only.  For actual legal advice contact a business lawyer, business attorney or business law firm**

Today is National Bike-to-Work Day.  In that context, you may not know yet that New York City business owners and office tenants have certain rights with respect to storing bycicles in office buildings under the Bicycle Access to Office Buildings Law.

 

I posted the other day about the government's increased efforts to crack down on misclassified independent contractors. "Misclassified independent contractors" are workers who should really be employees of the business,  In other words, these workers are entitled to workers compensation and disability insurance, unemployment benefits, tax withholding by the employer and so forth.. 

Here are some pointers on making your independent contractors or consultants audit proof:

  • Pay your independent contractors per assignment or per project, not by the hour, and don't pay them a fixed weekly or monthly salary; 
  • Keep them away from your “real” employees and don’t dress and equip them like employees, i.e. don't give them company business cards, don't let them use your company letterhead, don't let them perform the exact same tasks that your employees perform.
  • Keep the independent contractors on a long leash (give them their "independency"). They should be able to control when they can work and how they work; Avoid micro-managing their work.
  • Don’t forbid them from working for other employers on similar projects. But you could require them to at least inform you when they do, to give you the option to limit their engagement at that time.
  • Put

all of the above into an independent contractor agreement, a.k.a. consultant agreement. 

The Law Firm Orrick put a pretty good consultant agreement of this sort on its website in its startup library.  But beware, each agreement needs to be tailored to your particular situation. 

This question becomes more important, as New York and the federal Government are increasing their enforcement actions to root out employers who misclassify their workers as independent contractors.  Don’t wait with an answer until the Task Force on Employee Misclassification comes knocking at your door.

Read more

I recently got a pleasant letter from Dun & Bradstreet, acting as a debt collector for the New York Workers' Compensation Board. Supposedly, I owed the New York Workers Compensation Board $60,000 in penalties and outstanding insurance premiums for a household employee of mine. 100 phone calls and letters later (I am only slightly exagerating), I finally got them to concede that I owed them nothing. The problem arose due to a clerical error; the Board couldn't find proof of my insurance in their records. But let me tell you, those debt collectors aren't in the business of being nice or listening to the voice of reason.

Anyway, the Board is known to come after you with full force if they suspect that you haven't fulfilled your insurance requirements for your employees. When are you required to get coverage? See here. When are you NOT required to get coverage? See here

FYI, not that many people know that you DO NOT require workers compensation insurance for domestic workers (nannies, home health aides and so forth) who work less than 40 hours.  

**This post is for informational purposes only and does not constitute legal advice**

E-Verify is a free and voluntary system offered by the Department of Homeland Security that lets you check your employee's employment eligibility.  It doesn't save you the step of completing Form I-9, but it gives you a system to check information and documents given to you by your employees.

By way of background, Employment Eligibility Verification by way of completing Form I-9 is required every time you hire a new employee. 

You have to complete and keep on record a Form I-9 for each employee (U.S. citizens and non-U.S.-citizens).  In completing the form, you have to examine the employees authorization to work in the U.S. and the offered identity documents presented to you.  

Form I-9 does not have to be filed anywhere.  But be careful to keep it in your records for three years after the date of hire or for one year after employment is terminated, whichever is later.  For more information and a very detailed Employer's Handbook on the topic, see here.

Among other exceptions, you do not have to complete Form I-9, if:

  • your employee is hired for casual domestic work in a private home on a sporadic, irregular, or intermittent basis;
  • the person is hired as and independent contractor rather than an employee; or
  • you are getting the employee through an employee leasing or temporary agency. 

As stated above, participation in E-verify is voluntarily for most employers.  However, federal contractors and subcontractors are required to use E-Verify as of September 8, 2009.

When using E-Verify and fulfilling your I-9 obligations, you must be mindful of procedures that were designed to protect employees from unfair employment actions. You cannot discriminate based on whether your employee is a citizen or non citizen, both types have to be checked. You cannot prescreen applicants for employment or ask them to fill out Form I-9, before you made a decision to hire them.  

Don't think you are immune from getting caught, enforcement activity by the U.S. Immigration and Customs Enforcement has been stepped up and it is more likely than before that your business may be hit with an audit.

Outsourcing employment verification does not always save you from trouble, as reported here.

**This post is for informational purposes only and does not constitute legal advice**

There is a reason many startups and small businesses try getting away with using independent contractors as long as they can.  Hiring employees means a lot of paperwork and added responsibilities, potential liabilities, extra financial burdens and on and on…

When you  hire a new employee in New York, this is some of the paperwork that awaits you:

1. New Hire Reporting

In order to get hold of child support debtors, every new employee needs to be reported as a "new hire."  This so called new hire reporting can be done online.

2. Unemployment, Wage Reporting, Tax Withholding Registration

You need to fill out NYS-100 and file it with New York State’s Department of Labor in order to register as an employer and for purposes of wage reporting and tax withholding. Unemployment Insurance gets paid together with your quarterly tax payments to New York State, i.e. the state and city taxes you withhold from your employee’s paycheck.

3. Workers Compensation and Disability Insurance

You must arrange (and pay) for workers compensation and disability insurance for your employees.  You can do so through a private insurance carrier, or choose to go with New York’s semi-governmental Insurance Fund.

4. Knowing your obligations as an Employer

For more of your obligations as a New York employer, read this helpful guide by New York’s Attorney General.  As you will see in the guide, some of the obligations are no laughing matter, since there may be criminal penalties for non compliance.

For more federal reporting obligations, check out this IRS’ guide.

5. Decking the Halls with Posters

Finally, be prepared to decorate your business with all kinds of posters required by federal and state law.  To find the required federal posters, consult this E-laws -Poster Advisor.  For New York posters, see here.

**This post is for informational purposes only and does not constitute legal advice**

I’m back from a mini blogging break having to do with a lot of work, taxes and other miserable paperwork that needed to get done.  One thing I learned is that you can file your W-2s and wage reports for your employees with the Social Security Administration conveniently online.

It is free and as an added bonus, if you file your wage report online, it extends your deadline from February 28 to April 2, 2007.

**This post is for informational purposes only and does not constitute legal advice**