So, you founded a company. Next thing, someone is working for you, you need to expand your team and suddenly you are an employer. You may decide to manage human resources internally or you can outsource a range of tasks to a payroll administrator or a professional employer organization (PEO). Either way, the hiring process is rife with legal risks. Here are nine basic guidelines to consider before you start.
1. Interviewing
When you interview people, ask the same questions of all candidates. Asking different questions could make you vulnerable to a claim that you asked a particular question because you had a bias or stereotype in your mind. Do not ask applicants about their compensation history. Instead, ask about salary expectations.
2. Form I-9
Every employee must prove they are legally authorized to work in United States by filling out Form I-9, issued by U.S. Citizenship and Immigration Services. Most companies designate an I-9 authorized representative. Documentation, such as a passport, must be submitted in hard copy, not virtually, in most instances.
3. Discrimination
Many laws protect innate characteristics of individuals — gender, race, color, age, marital status, medical conditions, disabilities, and so on. Employment decisions, hiring, firing, or otherwise, cannot be based all or in part on any protected characteristics. When hiring, be consistent in identifying the skills of your successful candidate. Evaluate all candidates on a list of say, ten items required for the position, and choose the most qualified person.
4. Background Checks
Be clear if your employment offer is contingent on a background check and be consistent about who you check. For example, do background checks on everybody, or check everybody in a classification of employment, such as senior level or anybody working with finances. Be sure to get appropriate consents for background checks. Use social media with care and consistency to avoid discrimination claims.
5. Offer Letter
It is good practice to present an onboarding employee with an offer letter. Key items include title, reporting relationships, start date and salary. If a bonus is offered, make clear the terms for receiving it. An offer letter can also discuss eligibility for benefits, such as health insurance, as well as vacation time and any conditions of employment, such as a background check. It should confirm “at-will” employment.
6. Employment Agreement
An employment agreement documents terms of employment. It should use “at-will” language: In the United States, there is the legal concept of at-will employment. That means that you can employ someone and terminate them, with or without notice and with or without cause, as long as it is not for an unlawful reason. Using at-will language avoids confusion about the type of relationship you are creating. Also use this language in offer letters, handbooks, commission agreements and other documents for employees.
7. Company Policies
Not all states require them, but it is good practice to have an equal employment opportunity (EEO) policy, a non-harassment policy, a policy that explains and defines company property, and a statement of company rights. Additional policies may address disability and accommodation, leaves of absence and paid sick leave.
8. Exempt vs. Non-Exempt Employees
At a very basic level, exempt refers to employees who are exempt from overtime regulations. They are paid a salary and typically have administrative or professional duties. Individual states have minimum salaries for exempt employees. Non-exempt employees are typically paid hourly plus overtime. Your payroll provider can help classify workers as exempt or non-exempt.
9. Independent Contractors
Laws determining whether a person is an employee or an independent contractor vary from state to state. In general, if you have a company and you are setting the worker’s schedule and rates, that person is an employee. An independent contractor is a person who has their own business and who does project-based work for a number of clients, including your company. They control their own schedule and use their own equipment.