When you hire your first employee, you have some legal and ethical responsibilities to that employee and to all future employees when it comes to pay, benefits, and working conditions. These responsibilities are set out by federal, state, and local laws.
Minimum Wage and Tipped Employees. Federal laws say you must pay at least the minimum wage (currently at $7.25 per hour). Minimum wage requirements also apply to tipped employees. You can take up to $5.12 as a tip credit against the minimum wage, but you must pay the employee at least $2.13 in cash wages.
These tables from the DOL's Wage and Hour Division show
See your state's overtime pay laws by finding your state on this list of state labor agencies.
Overtime. The Fair Labor Standards Act regulates overtime pay. Unless an employee is categorized as exempt (managerial, professional, and supervisory employees), you must pay the person overtime at one and a half times hourly pay for all hours worked over 40 in any week.
If the employee is categorized as exempt from overtime because of their job, and this person is paid below a specific amount, you must pay that exempt employee overtime. Effective January 1, 2020, the DOL raised the standard salary level for overtime to $684 per week (equal to $35,568 a year) for exempt employees. This means salaried exempt employees who earn under that weekly amount must be paid overtime.
State laws differ in their requirements for minimum wage, overtime, and tipped employees. Some apply different minimum wage requirements for tipped income to businesses with fewer employees or lower gross annual sales. Some states require employers to pay tipped employees the full state minimum wage before tips.
When state and federal laws differ, you must use the one with the higher standard (the higher minimum wage or overtime rate, for example).
Time off. Federal law doesn't require you to pay employees for time not worked including vacations, sick time, rest breaks, or holidays. Short breaks must be included in hours worked for overtime purposes. Meal periods are not considered work time and you don't have to pay for this time off.
Some states have more strict requirements for paying employees for time off. Here are state-by-state lists for:
Paydays/Last Paycheck/Severance Pay
Federal laws don't have a requirement for how often you pay employees. State laws have different requirements for pay periods (weekly, bi-weekly, semi-monthly, or monthly). Here's a list of the payday requirements for each state.
- You can't withhold employee wages without their consent, except for withholding required by law (like FICA tax).
- You can't withhold pay as punishment.
- You can't retaliate against or punish an employee who files a pay claim, on an internal complaint, or a whistleblower complaint.
- You can't discharge an employee whose earnings have been garnished for any one debt.
Last Paycheck and Severance Pay
Federal labor law doesn't require you to give employees their final paychecks immediately, but some states have specific requirements for the last paychecks.
If your company files bankruptcy, that doesn't relieve you of your responsibility for paying employees. Employees have rights and priority status for being repaid, depending on your bankruptcy type.
Reporting to Employees
Paycheck reports and Annual Earnings Statements
Along with each paycheck, you must provide employees with a statement showing gross pay, deductions and withholding, and net pay for the pay period and the year to date.
You must provide employees with a yearly statement of earnings, withholding, and deductions no later than the end of January of the next year. This statement is a W-2 Statement of Earnings.
Employee Information Posters
Another part of reporting to employees is the requirement for posting notices so employees can find information about their rights under federal laws, including:
- Fair Labor Standards Act (FLSA/minimum Wage)
- Occupational Safety and Health Act (OSHA)
- Family and Medical Leave Act
- Equal Employment Opportunity
- Pay Transparency/Nondiscrimination
- Workers with Disabilities
- Employee Polygraph Protection Act
- Uniformed Services Employment and Reemployment Rights Act (USERRA)
You can use the Department of Labor's elaws Poster Advisor (sign-up required) to figure out which poster you are required to display. Check your state's labor department for state poster requirements.
Keeping Employees Safe
It sounds obvious to say that you have a responsibility to keep employees safe, but that responsibility wasn't always so important to employers. The passage of the Occupational Safety and Health Act (OSHA) in 1970 spelled out employer responsibilities. The provisions of OSHA apply to any employer with even one employee.
You must provide all workers with a safe, healthy place in which to work under the provisions of the law, which applies to all employers. The Department of Labor has quite a long list of employer responsibilities under OSHA.
If your employees are under 18, you have responsibilities to keep them safe based on child labor laws.
Treating Employees Fairly
New laws in the 20th century made it clear that treating all employees the same way is important.
The Equal Pay Act requires that men and women doing essentially the same job must be paid at the same rate. All forms on compensation are covered, including salary, overtime, bonuses, stock options, profit sharing. life insurance, allowances, and reimbursements.
The Equal Employment Opportunities law makes it illegal to discriminate against employees or applicants because of their race, color, religion, sex (including pregnancy, gender identity, and sexual orientation), national origin, age (40 or older), disability or genetic information.
Your responsibility for fair treatment for disabled employees under the provisions of the Americans with Disabilities Act includes:
- Making existing facilities readily accessible and usable for disabled employees,
- Job restructuring, modifying work schedules, and reassignment, and
- Buying or modifying equipment or devices, adjusting or modifying exams, training materials, or policies, and providing qualified readers or interpreters.
More general responsibilities for treating employees equally come under federal, state and local civil rights laws.
Some Additional Responsibilities
If you have 50 or more employees, under the provisions of the Family and Medical Leave Act you must give employees time off for sickness, disability, or family leave.
Employee Responsibilities to Employers
What about responsibilities that employees have to you as their employer? While your employees don't really have any responsibilities to you legally, most companies expect employees to recognize the following responsibilities:
- Obedience. Obeying rules, policies, and work directions and commands is a basic part of what it means to be an employee.
- Dealing honestly with the employer. That means not lying or stealing from the employer, and honestly representing himself/herself in an employment application.
- Working with reasonable care and skill. In other words, the employee gives full value of the time for which they are being paid.
- Not disclosing information to others. confidential employer
- Disclosing any possible conflict of interest. This can include work for a competitor or a relationship that could compromise the employer.
- Caring for the employer's property, equipment, and facilities.
- Complying with safety rules, including OSHA standards, rules, regulations, and orders.
Putting Responsibilities in Writing
You have all these responsibilities to employees, so why not get credit for them? Include your responsibilities in your employee handbook, along with other policies and procedures. Write a section of your handbook that describes these responsibilities and includes responsibilities employees have to you as their employer.