6 Key HR Issues for Small Businesses

Most common HR mistakes for small businesses:

#1    FAILURE TO COMPLY WITH MIOSHA

Although most reporting requirements through MIOSHA start with 11 or more employees, a small business is required to comply with MIOSHA the same way a large business is required. The only exception is when there is a rule or standard that contains a restriction to size.

What Does This Mean? It means organizations will need to comply with MIOSHA requirements such as: mandatory posters, safety programs, hazard communication programs, personal protection programs, extensive workplace safety assessments, and training programs to name a few.

  • Organizations that fail to ensure they are maintaining a safe workplace may face huge fines. Take a dollar store in Bolivar Ohio for example, who failed to have clear exits and marked fire extinguishers. Their fine? $156,772! Nationwide, this dollar store chain has paid more than $1,000,000 in safety fines. (Source)

    To see a list of Michigan enforcement cases with fines greater than $40,000, click on the following link click here.
     
  • There is mandatory reporting directly to MIOSHA for serious injuries such as in-patient hospitalizations, loss of an eye or amputation or death.
  • If your organization had a hazardous communication program in place that was written prior to 2015, it is likely out of date.
  • ¬ More to come: OSHA has added new rules which take place in 2016 and 2017. Michigan will have 6 months to implement these changes which will require certain employers to electronically submit injury and illness directly to the state. There are also new anti-retaliation protections which, along with many other practices, will require employers to look at how they drug test their employees after an accident.

#2    FAILURE TO COMPLY WITH I-9 FORMS

The I-9 form seems simple enough. It is really only two pages with a lot of instructions… During an initial audit, many small employers don’t know what it is.

For those that do make attempts to complete the form, here are the most common mistakes:

Mistake #1: Asking the new employee to bring in their driver’s license and social security card (or any specific document).

  • These are two types of documents that can be used, but if an employer simply asks for just these two forms of proof that a person is eligible to work in the US, it can be seen as discrimination. Examples of fines for requiring specific documents to complete I-9’s:
    • A fast food franchise paid - $355,000 (Source)
    • A beef processing company paid - $200,000 (Source)
    • A major retailer paid - $250,000 (Source).

Mistake #2: Missing information or having incorrect information.

  • There is a tendency for employers to fail to fully complete the form, and this can be very costly. Simple errors like not signing, dating or completing the employer’s address can, and will, bring substantial fines if audited. Moreover, the fines are per occurrence.
    • Consider a small restaurant with about 55 employees with average turnover for the restaurant business. This employer did not complete any I-9’s which translated to 134 paperwork violations and the hiring of 4 unauthorized individuals. The initial fine for this small restaurant: $131,554.
    • A small daycare employer did not complete I-9’s, although they did thorough background checks and retained copies of things like driver’s licenses and work authorizations. Their fine for not having complete I-9’s was initially $55,352. (Source)
    • A large events planning company was ordered to pay more than $600,000 in fines for paperwork violations primarily from the employer failing to sign the bottom of the form! (Source)

#3    INCONSISTENT RECRUITMENT PRACTICES

When a small business owner begins to grow, more employees are needed. The tendency in many cases is to hire relatives, friends or acquaintances. Small business owners may do this because they “know” them, but they also may not be as thorough in following hiring processes like completing an employment application, checking backgrounds or putting offers of employment in writing. This can create serious headaches by not hiring the right person for the job or not establishing the employment relationship appropriately from the onset.

It is critical that a business owner decide the job requirements for each position, which background checks are related to each position, and employment policies (like employer “at will” relationship with employees and who/how employment “promises” are made or changed).

Failure to consistently complete this process can lead to:

  • Unexpected Turnover. This can cost annually from $2,000 - $10,000 per position.
  • Discriminatory Hiring.
    • A staffing company in Tennessee agreed to pay $580,000 to settle allegations that they engaged in race and national origin discrimination when they were accused of giving Hispanics preferential treatment in hiring and placement . (Source)
    • An automobile processing facility agreed to pay $350,000 to settle an EEOC Race Discrimination suit for relying on word-of-mouth recruiting that deterred qualified African Americans from applying. (Source)

#4    NON-EXISTENT, OR OUTDATED HANDBOOKS

Most small employers don’t focus on things like handbooks. They either don’t have one or they may, but it was completed long, long ago. Considerable time and effort must go into the development of a handbook. Invariably, after all the work is put into it, it quickly goes onto a shelf, never to be dusted off again. The problem with that concept is that labor laws change constantly and most handbooks contain policies primarily related to labor law. An outdated handbook can be just as bad for an organization as not having one at all! Here is an example:

  • The NLRB found the following handbook confidentiality rule to be unlawful: “You must not disclose proprietary or confidential information about the employer, or other associates if the proprietary or confidential information relating to the employer’s associates was obtained in violation of law or lawful company policy.”
  • The NLRB found the following rules unlawfully overbroad since employees would construe them to ban protected criticism or protests regarding their employer or its employees:
    • "Be respectful of others and the company."
    • "No defamatory, libelous, slanderous or discriminatory comments about the company, its customers and or competitors, its employees or managers."
  • The NLRB declared the following policy’s prohibited conduct ambiguous:
    • "Material that is fraudulent, harassing, embarrassing, sexually explicit, profane, obscene, intimidating, defamatory or otherwise unlawful or inappropriate may not be sent by e-mail."
  • Now look at social media: The NLRB found the following unlawful:
    • At a popular hot wings restaurant, the employer’s policy prohibited any social media post that “negatively affects, or would tend to negatively affect, the employee’s ability to perform his or her job, the company’s reputation, or the smooth operation, goodwill or profitability of the Company’s business.” (Source)
  • In many cases, the NLRB will order changes to your handbook/policies, require you to post a notice in your workplace that you violated the law, order you to re-hire the person if you terminated them for unlawful reasons and provide back-pay for the time they missed work. For a real live example of this see: (Source)

#5    DOCUMENTATION (OR LACK THEREOF)

Many times, small business owners have to talk with their employees who are not performing to the required standards. Where this simple act of communication can go awry is when that conversation goes undocumented. This often happens because there is an expectation that the employee will make the necessary corrections. Unfortunately, this is not always the path this issue takes. In many instances the employee may continue to make the same mistakes until the issue boils over one day, and they are asked to leave. If the repeated concerns and the corrective actions which were discussed weren’t documented, an employer might have a very difficult time defending itself against a law-suit. In many cases, if there was no documented reason for the performance concerns, or the termination, the employee could claim that the termination occurred for reasons other than performance, like discrimination.

#6    FLSA - FAIR LABOR STANDARDS ACT

Generally, under FLSA, all time spent by an employee performing activities which are job-related is potentially “work time.” It typically does not matter if the extra time spent working was “approved” by the supervisor or not for payment.

Some of the biggest issues a small employer may face under FLSA include:

  • A big issue is classifying most workers as “salaried exempt” and paying them a standard wage without looking at their duties to determine if they are truly “exempt” by legal definition. Organizations need to clearly define the meaning of “salaried exempt.” This includes providing clear details as well as categorizing all other job categories.
  • Using the honor system for paying employees can be costly. If you have no records signed by the employee attesting to the hours worked, you could be facing large fines should the employee claim they worked overtime and you as their employer didn’t pay it and cannot prove that they did/didn’t work the over-time. For example:
    • The US Department of Labor settled its own $7,000,000 wage and hour lawsuit. Employees who worked for the department of labor were either misclassified as salaried or as hourly employees, and they did not receive overtime compensation for hours worked in excess of 40 hours in work week (Source)
    • A St Louis motel is ordered to pay $200,000 in back pay and damages to employees to remedy minimum wage and overtime violations. (Source)

Not only can employers be subject to civil and criminal fines for willful violations of labor laws, they may also appear in the news or at least online. To view more department of labor actions against employers, click here. Be smart, and don’t end up on this list!