4 Legal Workplace Mistakes to Avoid As a Business Owner

Everyone makes mistakes, and savvy business owners are no exception. While you might have years of experience running a successful company, you can be misinformed about things or experience significant misunderstandings.

Unfortunately, when those situations relate to your employees, they can have serious consequences. You likely won’t avoid making mistakes throughout your career, but awareness may prevent serious, business-changing errors.

Not Carrying Workers’ Compensation Insurance

Many employees meet with a workers comp lawyer to recover benefits after a workplace injury when they discover that their employer doesn’t carry workers’ compensation insurance. This form of insurance is designed to support employees who are injured in the workplace and is a legal requirement in nearly all states.

While some employers may not be aware they need to carry it, others intentionally avoid doing so by misclassifying employees as contractors. They may also choose not to, believing their workplace is safe, or to save money by illegally avoiding premiums.

If a business is found without workers’ compensation insurance, it can face heavy fines, employee lawsuits, and even criminal charges. Businesses may also be directly liable for their employees’ medical bills and lost wages.

Not Having Written Employment Contracts

Verbal contracts are sometimes legal, but written employment contracts make far more sense. They allow employers to set clear expectations, outline the job requirements, and protect business assets.

There can be serious repercussions for not having written employment contracts for both employees and employers. Employees may face job insecurity, difficulty enforcing terms, and no protection against unfair practices, such as discrimination.

Meanwhile, employers can face operational chaos from undefined roles and legal and financial costs stemming from labor standards violations and wrongful termination claims. Enforcing policies and safety rules is also much harder when there are no written contracts.

Underpaying Employees

Underpaying employees might seem like a ‘win’ to some employers because it allows them to keep more of their profits. However, it would be a major legal mistake if discovered. Businesses must pay their employees in accordance with legal standards, including minimum wage requirements and leave entitlements. If they don’t, they may be required to pay substantial back pay and may face federal fines and class-action lawsuits for violating laws, such as the Fair Labor Standards Act (FLSA). The reputational hit can also be harmful.

Making a ‘Bad Hire’

The labor market can be tough. You won’t always have a broad talent pool to choose from for some jobs, and you feel like you have to hire whoever applies. However, hiring the wrong person for the job can be costly in terms of resources and productivity. If they don’t fit in with your team, they can even cause other long-term employees to leave.

You won’t always be able to avoid hiring someone who doesn’t meet your expectations, but you can certainly reduce the risk. There are several actions you can take, such as interviewing the candidate, checking their references, and considering their attitude and cultural fit.

While most businesses don’t set out to make legal workplace mistakes, they can still occur and have serious consequences. Awareness of the most common and severe ones may make it easier to avoid making them and keep all business practices above board.

Allen Brown