Managing Employees and Keeping Good Records

Managing Employees and Keeping Good Records

Many small businesses thrive with a staff of one while others need dozens or even hundreds of employees to run smoothly. Regardless of how many people you employ, and whether or not you have a human resources department (which is likely you), it is important to follow labor and employment regulations and keep the same records for each employee. A Denver-based small business attorney will ensure you start off and stay compliant with all of the complex aspects of employment law from agreements and contracts to liability and workers’ compensation. This post will highlight what your employee files should and should not contain, so you are organized and protected in the face of an audit or lawsuit.

Hiring Employees and Obeying Employment Law

As a small business owner, your checklists never end. Hiring a new employee means yet another checklist: get an Employer ID Number (EIN), register for an unemployment account, sign up for workers’ compensation coverage, submit employment verification, classify workers properly, implement an employee handbook, display workplace posters, and so on. The various state and federal regulations can be dizzying, but once you have completed your new hire checklist, the next step is to maintain organized employee files.

Without certain documents on file, you are not only subject to costly audits and fines, but you are actually at risk of being shut down.

What Colorado Small Business Employee Files Should Contain

  • employment contracts, agreements, or acknowledgments between the employee and you
  • documentation related to employee performance, including commendations as well as disciplinary actions taken (this is particularly helpful when you are asked to give a reference for a former employee)
  • job description
  • application and resume
  • offer of employment
  • W-4 form
  • Colorado employee withholding allowance certificate
  • employee signature upon receipt of employee handbook
  • position/rate change forms
  • requests for time off
  • emergency contact and next of kin information
  • documents of any training programs completed by employee
  • warnings of poor attendance or frequent tardiness
  • documents relating to an employee leaving the company (exit interview or clear documentation of why an employee was terminated)

Maintaining certain records separate from employee files allows for appropriate access by managers, employees, and outside auditors while preventing people from having inappropriate access to other employee information.

What Employee Files Should Not Contain

  • documents or entries that do not relate to the employee’s job performance or qualifications (e.g. political views, private life, or criticisms involving race, gender, or religion)
  • medical records (if you employ someone with a disability, you are required by law to keep that employee’s medical records in a separate file with limited access)
  • Employment Eligibility Verification (Form I-9)
  • Equal Employment Opportunity (EEO) records
  • interview notes and employment test results
  • reference or background checks
  • drug test results
  • child support or garnishments
  • litigation documents
  • workers’ compensation claims
  • requests for employment or payroll verification

As a small business owner (and HR officer), it is your responsibility to provide your employees with a safe and healthy workplace, to comply with state and federal employment laws, and to maintain good records. Just as you keep track of your inventory or financial transactions, you should have complete records of all of your work with your employees. Your small business attorney will see to it that you are prepared and protected regardless of whether you are faced with an audit or lawsuit. Good records mean good business and peace of mind.

If you need help with employment law, contact me, Elizabeth Lewis, at the Law Office of E.C. Lewis, P.C., home of your Denver Business Lawyer. Phone: 720-258-6647. Email: elizabeth.lewis@eclewis.com

Contact Us Today

Law Office of E.C. Lewis, P.C.
Your Denver Business Attorney
501 S. Cherry St., Suite 1100
Denver, CO 80264
720-258-6647
Elizabeth.Lewis@eclewis.com

Sign Up For Our Email Newsletter

Privacy by SafeSubscribeSM





Common Employment Law Mistakes and How to Avoid Them

Common Employment Law Mistakes and How to Avoid Them

Your small business may only employ a few people, but you are still subject to most of the same laws and regulations as corporations that employ thousands. Compliance with employment law will save your business from stressful audits or legal fines. A small business attorney will help you with every aspect of employment law from contract review to hiring to working with employees. Here are five of the most common areas where employers make mistakes when it comes to employment law compliance.

  1. Regulatory Agencies and Laws
  2. Americans with Disabilities Act (ADA)
  3. Employee Classification
  4. Occupational Safety and Health Administration (OSHA)
  5. I-9 Forms

1. Failing to Stay Current with Regulatory Agencies and Laws
Practically everything associated with employment law falls under here, and the number of regulatory agencies with their corresponding laws continues to grow rapidly. Some of the areas governed by regulatory agencies include: workplace safety and health laws (see #4 on OSHA), payroll and overtime payment laws (see #3 on employee classification), recordkeeping requirements (see #5 on I-9 forms), anti-discrimination (see #2 on ADA compliance) and anti-harassment laws, local, state and federal leave laws, and employee privacy laws. Creating a checklist before you begin hiring new employees and working with an attorney will ensure you start off and stay compliant with state and federal employment laws.

2. Not Following the Americans with Disabilities Act (ADA) Guidelines
The ADA prohibits discrimination and ensures equal opportunity for persons with disabilities in employment, state and local government services, public accommodations, commercial facilities, and transportation. This applies to all employment-related activities, including recruitment, training, tenure, layoff, leave, and fringe benefits among others. The law protects individuals who have a disability, which means they have a physical or mental impairment that substantially limits one or more major life activities, they have a record of such impairment, or they are regarded as having such impairment. The U.S. Equal Employment Opportunity Commission’s website has ADA and other discrimination-related information for small businesses.

3. Mis-Classifying Employees
By classifying your employees accurately, you ensure they get the appropriate wages, benefits, and protections to which they are entitled. An exempt employee, according to the U.S. Small Business Association, is someone who is paid a specified amount of money regardless of the number of hours worked a week. These employees may be exempt from overtime payments and meal or rest breaks. Assuming it is easier to pay everyone a salary, however, can lead to problems. Be sure to classify your employees properly in order to avoid noncompliance issues with the Colorado Department of Labor and Employment and the U.S. Department of Labor. Your business attorney will help you with hiring employees, choosing the right employment contracts and agreements, keeping good records, and providing advice and representation in the event of an audit or lawsuit.

4. Ignoring Occupational Safety and Health Administration (OSHA) Regulations
OSHA’s detailed safety regulations include a General Duty Clause, for small and large businesses alike, which requires every employer to provide every employee with a work environment that is free from recognized hazards. It is your responsibility to communicate these rules to your employees via written safety and health rules in the form of visible signs and/or posters. In the unfortunate event of an accident at your business, you will need to take corrective action immediately. With a host of other federal acts, intended to protect employees, such as the Fair Labor Standards Act, the ADA, the Age Discrimination in Employment Act, and the Family Medical Leave Act, it is paramount that you understand and remain compliant with all aspects of employment law.

5. Keeping Invalid or Incomplete I-9 Forms on File
The I-9 form, also known as Employment Eligibility Verification, is completed by employees and employers in verifying the identity and employment authorization of every employee hired. Simple as it sounds, omitting or not completing I-9 forms can result in fines and legal trouble. Before filing it away, be sure the whole form is filled out, including dates and signatures – within three days of the employee’s hire date. Too often, employers miss the deadline or employees fail to provide the correct supporting documentation. You can provide a list of acceptable documents and allow the employees to make their own selection.

These are just a few of the many employment law mistakes and potential pitfalls for small business owners.

If you need help with employment law, contact me, Elizabeth Lewis, at the Law Office of E.C. Lewis, P.C., home of your Denver Business Lawyer. Phone: 720-258-6647. Email: elizabeth.lewis@eclewis.com

Contact Us Today

Law Office of E.C. Lewis, P.C.
Your Denver Business Attorney
501 S. Cherry St., Suite 1100
Denver, CO 80264
720-258-6647
Elizabeth.Lewis@eclewis.com

Sign Up For Our Email Newsletter

Privacy by SafeSubscribeSM





Employee References – How to Tell the Truth and Avoid a Lawsuit

Employee References – How to Tell the Truth and Avoid a Lawsuit

As a small business owner, you are likely the boss and human resources (HR) department all in one. This means the unfortunate task of firing an employee is yours. Once the dreadful termination is done, you are relieved and ready to move forward. Then, a month later, you get a call from a prospective employer asking for a reference for the employee you fired. Before you panic, decline, or say too much, know your rights.

Employee Job Performance, Skills, and Abilities

In Colorado, employers cannot be sued for providing information about former employees unless the information given is false. In many cases, you are protected from liability for certain types of information you give out, like the employee’s job performance, including work-related skills, abilities, habits, suitability for reemployment, and reasons for separation. However, you should not give any of this information out without talking to a small business lawyer about your specific situation as you could be liable for even giving out this information. There are enough bad cases and an endless number of potential circumstances that can leave you feeling vulnerable. A small business attorney will help ensure you stay compliant with Colorado state employment laws, from hiring your first employee to increasing your workforce to deciding to let someone go.

A Fortune article compares employment references to a legal hornet’s nest. Most business owners are well aware that they can be sued for defamation for badmouthing someone in a reference, but not many realize that you can be sued for giving a raving reference that does not match up to the employee’s performance in their new position. It is no wonder some employers shut down any requests for references.

Until you speak with a small business attorney, you should only answering the “who, what, and when” (i.e. job title, salary, and dates) of a former employee’s history. If you feel you need to answer more, for example because there are details that may be critical for a potential employer, speak with an attorney. What if you fired the person for frequent absence, poor performance, or grave misconduct? If you are reluctant to disclose such details, you can use a general comment like “I would really prefer not to say”.

Former Employees and Written Records

Some states have enacted service letter laws that require employers to provide former employees with basic written information about their employment – however, Colorado law does not affirmatively require it. Visit the Colorado Department of Labor and Employment for information on state labor laws that outline what employers can disclose about their former employees.

Hopefully, if you have had to fire an employee, you maintained documentation of the employee’s history with your business, particularly the details leading up to their termination. Despite your best efforts, they may blame you for their inability to obtain a new job, claiming slander or libel from your reference (or lack thereof). By speaking to a business lawyer before speaking to a potential employer, you can avoid or protect yourself from a lawsuit. Here are some precautions you can take.

Make a company reference policy. Be sure all of your employees are aware of the policy. If there are other staff members who are responsible for HR, make sure they know the policy well.
Keep it short. Do not volunteer extra or unsolicited information. It is best to keep your references short and to the point.
Provide only the facts. Keep your references as factual as possible. The truth is your best defense against defamation claims.
Designate who can give references. Select the most discrete and trustworthy employee, other than yourself, to give references. The more experience the person has with giving references, the less likely they are to say something wrong.
Create a reference request form. Include a statement about the possible disadvantages that are inherent to the reference process. This will provide you with another level of protection from liability. Requiring employees to review and fill out the form will supply you with detailed documentation as well as the right to decline a reference request if the employee did not fill out the form.

Employment Law is Complex

Employee references are just one small part of the large area of employment law. With its complex regulations and compliance requirements, employment law covers vast topics, such as contracts, hiring, and working with employees. The U.S. Department of Labor publishes an employment law guide for small businesses to develop employer policies on wages, benefits, safety and health, nondiscrimination and disclosure. For more on Colorado employment law essentials, see 7 New Business Essentials in Colorado Employment Law.

If you need help with employee references or employment law in general, contact me, Elizabeth Lewis, at the Law Office of E.C. Lewis, P.C., home of your Denver Business Lawyer. Phone: 720-258-6647. Email: elizabeth.lewis@eclewis.com

Contact Us Today

Law Office of E.C. Lewis, P.C.
Your Denver Business Attorney
501 S. Cherry St., Suite 1100
Denver, CO 80264
720-258-6647
Elizabeth.Lewis@eclewis.com

Sign Up For Our Email Newsletter

Privacy by SafeSubscribeSM





Classifying Your Workers and Why it is Crucial to Your Small Business

This week, we are going to dive into some details on classifying your workers and why it is crucial to your small business. Why? Because it is important for all Colorado small business owners to understand when they can call someone a contractor, and when that person is really an employee. Without this understanding, it is fairly easy to wind up on the wrong side of the law.

First, let’s define what we mean by Worker Classification and explain why it is important to all employers, not just small business owners.

Classifying your workers correctly means understanding if they are independent contractors or employees so that you can avoid breaking the law with regard to federal and state employment tax. It also means you can determine if you are following the Fair Labor Standards Act (FSLA) with regard to the individual worker.

Determine If Individuals Providing Services For Your Small Business are Employees or Independent Contractors

If individuals providing services for your small business are employees, you pay taxes on their earnings. If the same individuals are independent contractors, in most cases, you don’t. You may also have other obligations to employees that would not apply if the worker were an independent contractor. The temptation to call some one a contractor when he or she is really an employee is strong, but it is not worth it under any circumstance.

Let’s take a look at the rules, so you can feel confident about when someone can legally be classified as an independent contractor. For the sake of brevity, we are going to focus on how the IRS defines an independent contractor vs. a common law employee. There are different classifications of employee, and you should consider speaking with a business attorney if you think you may have workers who fall under these other categories (ex: statutory nonemployee).

Classifying a Worker as an Independent Contractor

The IRS provides the following insight:

The general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done.

They recommend the following test to determine if someone is a common law employee, but maintain there is “no magic formula” for knowing if someone is an employee or independent contractor:

  1. Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job?
  2. Financial: Are the business aspects of the worker’s job controlled by the payer? (these include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)
  3. Type of Relationship: Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?

If you have tried to apply these test questions to your specific situation and are still not sure how to classify a worker, the IRS has a form you can submit and they will review on your behalf. Once they set the worker’s status, it becomes official, so you may want to ask a business attorney to review the form on your behalf before your submit it, if your goal is to establish that a worker is a contractor and not an employee.

What About the the Fair Labor Standards Act?

Most small business owners are at least aware that there are important differences between contractors and employees when it comes to paying State and Federal employment taxes, but many do not realize the classification of an employee also impacts the employer’s legal obligations under the Fair Labor Standards Act. First, a quick reminder of what the Fair Labor Standards Act is. Wikipedia gives a good explanation and some history:

The FLSA introduced the forty-hour work week, established a national minimum wage, guaranteed “time-and-a-half” for overtime in certain jobs, and prohibited most employment of minors in “oppressive child labor.”

If you have individuals who are performing work for you, you need to know if you owe them minimum wage, and time-and-a-half in compliance with the FLSA statute, or if you can claim an exemption. The easiest way to be exempt from the FLSA rules is to make sure the worker can be categorized as an independent contractor. That doesn’t mean calling someone an independent contractor when he or she isn’t. The IRS is not playing games when it comes to miss-classification:

If you classify an employee as an independent contractor and you have no reasonable basis for doing so, you may be held liable for employment taxes for that worker.

If you think you may have mistakenly been paying someone as an independent contractor, you can qualify for forgiveness under a Relief Provision, but you have to do so before the IRS calls you out. If you think you may have made a mistake in this regard, talk to an attorney sooner than later. The expense of being caught is much greater than the expense of getting an attorney to help you now.

If you need help classifying your workers or understanding why it is crucial to your small business to know if a worker is an employee or an independent contractor, contact me, Elizabeth Lewis, at the Law Office of E.C. Lewis, P.C., home of your Denver Business Lawyer. Phone: 720-258-6647. Email: elizabeth.lewis@eclewis.com

Contact Us Today

Law Office of E.C. Lewis, P.C.
Your Denver Business Attorney
501 S. Cherry St., Suite 1100
Denver, CO 80264
720-258-6647
Elizabeth.Lewis@eclewis.com

Sign Up For Our Email Newsletter

Privacy by SafeSubscribeSM