Are there legal requirements to hiring an employee? (Employee Series)
Our team will be the very first to tell you that we are not attorneys and cannot offer legal advice, but we’re here to point you in some helpful directions to get you started on your journey to hiring an employee! And with that, we do recommend speaking to your attorney to see if there is anything you need to be aware of for your company.
If you’re jumping into the mid-point in our series and you haven’t started from the beginning, please be sure to check out our intro to get started!
There are just a few things we’d like to point out that can start your research on the requirements necessary for your company.
The main place you’re going to want to search out is the State Department of Labor for where your employees are going to work. There may also be City pages that have additional workplace information for you. For most of the laws, if you fall under multiple jurisdictions (federal, state or city), generally the more “generous” law is going to prevail. That means if the state minimum wage is $12 but your city says it’s $15, then it’s $15. “Generous” means in terms of the employee, not your company.
Minimum Wage Laws
States and some larger metropolitan cities have different minimum wage laws from the federal rate. Minimum wage means if you’re hiring someone (hourly, salary, commission, piece work, etc.), you have to calculate how much they’re paid and divide it by the number hours they worked. That number has to be above minimum wage. Hourly and salaried individuals are easy to calculate. It’s when individuals are paid commission or piece work that it gets complicated.
For commission or piece work employees, each pay period, you must calculate their rate on an hourly basis. If the pay doesn’t meet minimum wage requirements, they will need to be paid enough to reach minimum wage.
Some states have their minimum wage requirements updating every year, so it’s important to continue monitoring for updates in each state.
Age Requirements (Child Labor)
If you’re thinking of hiring youth, it’s important to look up what the age requirements are for where they’ll be working. There are certain requirements for teenagers, which are different for younger pre-teens. There are different rules during the summer months when there is no school, and for weekends vs weekdays, on how late they can be at work and how many hours per day they can work. There are also regulations on the type of work that can be performed by individuals under 18 years old.
Another thing to think about is hiring your children to perform work. There may be different rules in each state, but in Minnesota, for example, a child of any age can work for a parent if one or both of the parents are the only owners of the business. If you are the sole owner of your business and you want to hire your 10 year old to help with an age-appropriate task, you can pay them on payroll! (There are also some payroll tax exemptions you can claim!) But if you’re in a business with a non-parent, the child must be at least 12 years old to begin working in Minnesota.
Overtime Laws
Most people think of overtime as over 40 hours per week. That is correctly the federal overtime law, but of course there are states that like to change things up. For example, in California, overtime is based on hours “per day.” That means if you work 9 hours one day but 7 hours the next, you’ll receive 1 hour of overtime in California. Employees will receive time and a half (x 1.5) for all hours in excess of 8 in one day, and they are eligible to receive double pay (x 2) for all hours in excess of 12 in one day.
In Minnesota, there is a slight difference for small employers where employees are eligible for overtime over 48 hours instead of 40.
Another item to look up is required breaks for employees – this is paid and unpaid breaks. You can usually find this in the same area as overtime information.
Exemption Status
One thing to know about these laws is that it doesn’t apply to only hourly individuals. It can also apply to some employees who are paid salary or even commission, depending on their role. You’re going to need to determine for your employees is whether they are “exempt” or “non-exempt.”
Exempt employees are “exempt” from the Fair Labor Standards Act's (FLSA) overtime laws, minimum wage requirements, and/or child labor laws.
Non-exempt employees are, you guessed it, not exempt from FLSA.
And no, you don’t get to choose whether your employees are exempt or non-exempt. The definitions of these two status are determined by the role the employee is performing. They are listed in the FLSA’s Exemption Criteria. There are also some changes looming to the criteria, so keep an eye out for that.
The roles are generally defined for exempt employees in executive, administrative, or professional positions who are paid a salary.
Employees who perform technical or manual tasks are generally considered non-exempt.
State Mandated Sick Leave
Beginning in 2023, many states and some cities implemented a mandatory sick leave for employees who work in those areas. There are complexities to these rules so it’s important to research what is required for where your employee is working. In general, most employees are going to be eligible to earn sick time, even part-time. This sick time/leave is usually only able to be used for sick and safe (safety from abuse) time away from work. This is not a mandated vacation policy for your employees.
We wrote about this new law for Minnesota’s Earned Sick and Safe Time (ESST) earlier. This is specific to employees who work in Minnesota, so if your employee works in another state, be sure to look up the requirements in that location.
Handbooks & Other Notices
We’ll wrap up this section with other requirements employers have for their employees. Based on the MN Wage Theft Law, employees must be given a written offer letter before they start work. This can be a form provided by the department of labor, or you can create a letter that includes all of the information on the form. Examples of this would be what their wage rate or salary would be, whether they are exempt or non-exempt, if they’re eligible for time off or benefits, who they will report to, contact information of the company, among other items.
Another provision of this law states what is required to be listed on an employees paycheck. Namely, contact information of the company, rate of pay and total pay, all withholdings, net pay and any time off accruals, including the new MN ESST.
While it’s not required to provide an employee handbook to your employees, it is recommended. Some payroll software can help you create one for your location, or you can reach out to an attorney or HR company for assistance. In addition to a handbook, there are other workplace posters that are required to be visible to employees where they work.
Most of the time, hiring an employee is straight-forward and simple, but for the times that it’s not, we want to be able to help point you in the right direction. Maybe most of this information doesn’t apply to you, but when you run into a situation down the road, you will at least have an idea that you may need to look further. We hope this information helps you on your journey!
No assurance is given that the information provided in this blog is comprehensive in its coverage or that it’s suitable in dealing with each individual’s particular situation. This blog article exists to provide general information only and does not constitute tax or legal advice, and cannot be used or substituted for tax or legal advice. Savvy Bird Consulting, LLC is not responsible for the implementation or outcomes this material may have.