Employment Laws

Startups Make These 5 Compliance Mistakes All Too Often

Compliance isn't the most exciting part of running a business, but it's incredibly important. And startups make these compliance mistakes too often.

Blog Author - Jacob Donelly
Jacob Donelly
Jul 15, 20154 minutes
Blog Author - Jacob Donelly
Jacob Donelly
20 postsAuthor's posts
Blog - Hero - startup compliance mistakes

While it isn’t the fun part of running a business, compliance remains one of the most important pieces of the day-to-day operation of your business.

What’s unfortunate for many small companies and early-stage startups is that they just don’t know what the rules are. Even more, there are different regulations for each state, plus the federal regulations. And then those regulations are different depending on the size of the business.


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5 Compliance Mistakes

There are many different compliance mistakes that small companies make. But there are ones that consistently show up because the rules are unknown. And whether we like it or not, ignorance isn’t an acceptable answer when explaining why that compliance issue wasn’t followed.

1. Not Complying With the Affordable Care Act

Since ACA was passed, businesses large and small have been rushing to try and figure out what they need to do to ensure they are compliant. If your business has 50 or more full-time employees, you need to provide health insurance by 2016. It’s as simple as that. And if you don’t, you'll be assigned a $2,000 penalty for every employee that you don’t provide health insurance for.

The way to avoid this is really quite simple. Offer health insurance. A full-time employee is someone that works for an average of 30 hours a week for more than 120 days in a year. However, part-time employees get grouped together. If you have three part-time employees that each work 20 hours, you take those 60 hours and divide it by 30. The number that comes out is how many full-time employees all your part-time employees count for.

2. Discrimination in Interviews

While interviewing candidates, there are certain rules that you must follow to ensure that you are not accidentally discriminating against candidates. Even if it unintentional, if the candidate feels that you discriminated against them while in the interview, that is enough to sue you.

The easiest way around this is to ensure your interviewers don’t talk about children, pregnancy, handicap, religion, race, political opinions, and pretty much anything else that might cause any concerns. Focus on the facts of the job rather than information personal to that candidate.

3. Poor Disciplinary Documentation

Staying compliant is difficult enough when hiring employees. How do you handle an employee that is habitually poor at his or her job, late, rude, and did whatever else is ground for termination. If you fire them because the employee is at fault, you are not responsible for paying any unemployment compensation.

However, many companies to do two things in this situation. First, they don’t provide a company handbook. Without this handbook, how is an employee supposed to know what the rules are? Even if you tell them verbally, there’s no proof. And the second thing that business fail to do is record all the employee’s infractions. When they are fired, there is no proof, so the company winds up paying.

The easiest way around this is to have a company handbook provided for all of the employees. Confirm that they sign off that they have received it and read it. Further, if the employee does break policy, you need to record what policy they broke and the actions you took. This will ensure you don’t wind up paying unemployment compensation for employees that don’t actually deserve it.

4. FMLA Violations

If you don’t allow the FMLA, the employee can file a complaint with the Department of Labor and then sue you. That lawsuit can turn into a very expensive debacle.

The Family Medical Leave Act (FMLA) offers very clear rules that dictate when an employee should be allowed to take a long-term of absence from work without their job being lost. If the employee is dealing with a sick parent or has a brand new child and has worked for 1,250 hours for the past 12 months, they are entitled to take an extended leave to take that time. 

Ensure that your state doesn’t have any stricter rules than the Federal version of the FMLA. And if an employee puts a FMLA request in and has the required hours, approve it.

5. Getting All Your Forms In

When you hire a new employee, there are a ton of forms that you need to submit to the different government agencies. Can you name them all? You’ve got Form W-4, which is for taxes. You have your state’s withholding forms for state taxes. You have the I-9, which is meant to verify that the employee can work in the United States. What if the employee is a contractor? What if the employee is in a different state?

When it comes to forms, there are more than we think there are. This becomes a classic case of “you don’t know what you don’t know.” The easiest way to get all of your forms in and to ensure that you are compliant is to use a Professional Employer Organization (PEO). What is a PEO? These are companies that handle the majority of the HR busy work, payroll and healthcare so that you don’t have to.

Justworks is a PEO, which has major advantages like guaranteed compliance. Through the software, every form is handled for every employee, whether they are full-time or a contractor. Further, handling of ACA and other government requirements is done right in the system. Rather than spending time trying to figure out how to remain compliant, Justworks handles this for you. We spend all our time thinking about compliance and human resources so you can focus on growing your business.

This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, legal or tax advice. If you have any legal or tax questions regarding this content or related issues, then you should consult with your professional legal or tax advisor.
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Written By
Blog Author - Jacob Donelly
Jacob Donelly
Jul 15, 20154 minutes

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