Federal Labor Laws: Things Business Owners Should Know

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It's easy to take for granted simple things like the weekend, overtime pay, workers' compensation, employee benefits, workplace safety and the ability to take time off if you get sick without losing your job. However, none of these simple luxuries would exist without federal labor laws dictating employee rights and protecting workers from unfair labor practices.

As a small-business owner, understanding federal labor laws is vital to keep you out of hot water. It's wise to consult with a lawyer until you feel comfortable with hiring and managing employees or until you can hire a human resources expert to ensure your policies are legal. Until then, there are some major federal labor laws to review.

Brief History of Federal Labor Laws

The Wagner Act of 1935 (also known as the National Labor Relations Act) was a federal law that created the National Labor Relations Board and was arguably the first major step forward for employee rights in the United States. The primary goals of the NLRA included giving employees the right to unionize and compelling private-sector employers to bargain with those unions. Federal labor laws have been evolving ever since.

Fair Labor Standards Act

The 1938 Fair Labor Standards Act regulates the federal minimum wage, child labor and overtime pay. Employees everywhere can also thank the FLSA for establishing the 40-hour work week. The FLSA helps ensure all employees are guaranteed a minimum hourly pay rate and an overtime pay rate of one-and-a-half times their normal pay rate. However, states can choose to enact a higher minimum wage.

In addition, some employees are not covered by the FLSA. Notably, independent contractors are not considered employees and are therefore exempt from FLSA standards. In addition, employees who work on small farms, at seasonal amusement or recreational parks, as companions for the elderly or in the airline industry are exempt from FLSA.

Child Labor Laws

Some of the major changes the FLSA introduced to the U.S. work environment were child labor laws. Can you imagine an 8-year-old working in a factory? Before federal child labor laws were enacted, this was common. It not only put children in physical danger but also prevented them from going to school.

However, what about letting a 16-year-old work in a grocery store or a 14-year-old get paid in the summer for working on a farm? The Department of Labor offers fact sheets for various industries to help employers and small-business owners understand laws about hiring people under 18.

In general, however, anyone under the age of 14 cannot be employed for any job other than farm work. There are rules about how many hours teens can work, and their schedule can never conflict with school hours. As adolescents get older, the rules become less strict, but anyone under the age of 18 cannot work in an occupation deemed dangerous by the secretary of labor.

Equal Pay Act

The Equal Pay Act of 1963 prevents employers from discriminating against employees on the basis of sex by paying lower wages to women versus men. Before the Equal Pay Act, it was common for women to be paid only 77 cents per every dollar that their male counterparts were paid. The Equal Pay Act aims to close this wage gap by making it illegal to pay different wages to men versus women when performing the same duties for the same employer.

However, as an employer, you can start with the best of intentions and then end up in violation of the Equal Pay Act without realizing it thanks to raise negotiations, for example. You don't have to wait for an employee to file a complaint in order to get help with equal pay compliance. Both the U.S. Department of Labor and the Equal Employment Opportunity Commission can assist business owners in adhering to the Equal Pay Act.

You can also take some steps in the meantime, such as being completely transparent about everyone's salaries and wages. This will allow employees to point out unfair payment discrepancies or assure them that no such discrepancies exist. You can also ask your human resources department to routinely examine wages and salaries for fairness.

Equal Employment Opportunities

Equal employment laws — including title VII of the Civil Rights Act of 1964, the Americans With Disabilities Act and the Age Discrimination in Employment Act — make it illegal to discriminate against employees or potential employees. You cannot make hiring or firing decisions based on someone's "race, sex, religion, color, national origin, age, disability, veteran status, pregnancy or genetic information."

Under equal employment opportunity laws, it is also illegal to use these characteristics (called "protected classes") as the basis for treating an employee differently from other employees, harassing them or retaliating against them. Employers also need to avoid taking any actions that could unintentionally impact an employee unfairly based on a protected class.

Workplace Safety Laws

The Occupational Safety and Health Act of 1970 sets the standard for workplace safety and outlines processes for workplace inspections and for the investigation of safety complaints. The OSH Act is concerned with reducing instances of workplace-related fatalities, injuries and illnesses and is enforced by the Occupational Safety and Health Administration.

Because OSHA and the OSH Act have been around for 50 years, it can be hard to imagine a time when hard hats and other personal protective equipment weren't required on a job site or when a factory explosion wouldn't have landed the owner in serious legal trouble. However, that was the reality that spurred the formation of OSHA and the OSH Act. Now, businesses in violation of workplace safety laws face a financial penalty and have a limited time to correct the issue before additional action is taken.

OSHA has rules and regulations for four main categories of industry: general industry, construction, maritime and agriculture. Business owners should become familiar with the requirements for their particular industry. At minimum, employers must provide employees with personal protective equipment and training on how to use it if such equipment is available for a known hazard. In addition, employers are required to clearly communicate when a hazard is present by following OSHA's hazard communication standards.

The Family and Medical Leave Act

In 1993, the federal government enacted the Family and Medical Leave Act in order to protect the rights of workers who cannot work due to serious illness, to care for ill family members, to give birth, to welcome home a newly adopted child or for matters related to military service. Thanks to this law, eligible employees are granted 12 weeks of unpaid time off during a 12-month period of time. Crucially, the FMLA also requires that the employee's position remain protected, allowing the employee to come back to work after the leave.

However, not everyone your company pays falls under the umbrella of "eligible employees," and not every company is required to follow the FMLA guidelines. For example, independent contractors are not covered by FMLA. Neither are employees who have worked for your company for less than a year or less than 1,250 hours in the last 12 months. In addition, the FMLA only takes effect when the employer hires more than 50 employees.

Putting Labor Laws Into Action

Federal labor laws continue to be up for discussion. For example, many people are currently advocating for an updated federal minimum wage. As a small-business owner, it's crucial to understand your employees' rights to avoid infringing on them and to protect your company's reputation.