chapter 7


As your company grows and you continue to hire employees, there are some federal laws that you need to be aware of. It’s important to stay compliant with employment and workplace laws so that you and your company don’t become entangled in a legal mess. Also, it’s smart to do a little research on your state and local laws that may affect how you stay compliant, as well as talking to an experienced lawyer who has your back.

In this chapter, we’ll discuss a few topics that’ll help keep your business compliant with federal laws:

  • Insurance

  • Privacy Rights: Health Insurance Portability and Accountability Act of 1996 (HIPAA)

  • Exempt vs. Nonexempt: The Fair Labor Standards Act (FLSA)

  • Withholding Taxes

  • Safety in the Workplace: Occupational Safety and Health Administration (OSHA)

  • Workplace Posters

What kind of insurance do I need?

Whether you work on a dangerous construction site or in a secure office building, injuries happen. That’s why the government asks businesses with employees to pay for certain types of insurance to protect workers from work-related injury, disability, or losing their jobs. Generally, these are:

Not all of these are required in every state, so check your state’s rules to make sure you need to sign up for them. Your rates will likely vary based on the sort of work your business does, of course.

How do I protect my employees’ privacy rights?

Insurance is a great way to financially protect your employees and your business. But how do you protect them in other aspects—like their privacy?

The easiest way is by keeping their personal information, well, private. We previously discussed the importance of privacy rights and as your new hire hops on board, it’s important to keep this level of privacy.

One example: don’t ask your employees for passwords to their online accounts or demand they connect on social media. Give them a little space and allow them to have a work life that’s separate from their personal one.

As far as your employee’s health information goes, HIPAA provides privacy protection for patients and health consumers, such as your employees. Since most employers are not classified as “covered entities,” (which are health care providers, health plans, and health care clearinghouses), they do not have the broad authority to disclose or ask for protected information. In other words: don’t ask or tell other people about your employee’s health issues. That’s their business.

The one thing you can do? As an employer, you can ask an employee about issues related to work. For instance, you can request a doctor’s note when an employee calls in sick several days in a row. Consult the U.S. Department of Health & Human Services website for more information.

What’s the difference between exempt and nonexempt employees?

As the employer, it’s not up to you to choose if your employee is exempt or nonexempt. The Fair Labor Standards Act (FLSA) already has a set guideline that you must abide by. To be an exempt employee, they must, in general, meet all three “tests”: how much they’re paid (over a specific amount set by the FLSA), how they’re paid (usually paid on a salary basis), and what kind of work they do (perform exempt job duties).

So what are the differences between an exempt and nonexempt employee? Here’s what you need to know:

Nonexempt EmployeesExempt Employees
Entitled to overtime payNot entitled to overtime pay
Hourly employeesSalaried employees
Non-managerial responsibilitiesManagerial-level responsibilities
Examples: Customer service workers, pharmacy assistants, skilled trades workers Examples: Lawyers, doctors, school teachers

Not all jobs are controlled by the FLSA. If your industry is governed by some other federal labor law, the FLSA does not apply. For instance, most of the labor in the railroad industry is regulated by the Railway Labor Act so the FLSA would not apply to most railroad workers. Consult with an attorney to see if your employees fall under the rules of the FLSA.

What taxes do I need to withhold?

The next box to check on your compliance worksheet is your responsibility for withholding tax from your employee’s paycheck. We briefly discussed this in a previous chapter but it’s important to reiterate that you do not need to withhold taxes for contractors. You will, however, need to withhold the following taxes for your employees:

The rates on these taxes change frequently, so visit the IRS to make sure you’re up to snuff.

How can I keep my workplace compliant?

One of the most important things you can do as an employer is making sure your employees feel safe and comfortable at work. Check out the OSHA website to make sure your workplace complies with the requirements and policies regarding smoking, drugs, and alcohol, though keeping each off your premises is, of course, the safest avenue.

Additionally, you are required to display certain posters in the workplace, which can be found on the U.S. Department of Labor website. Make sure that they’re in a highly visible place so your employees can revisit and review them any time they need to. Those notices are as follows:


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