Every newly formed business with employees will require some counseling on employment and labor law issues. Jeff can directly assist your business with many of the common matters such as employment agreements and setting up an employee system, and he also has access to a number of specialists in this area to advise and assist in more technical aspects of labor and employment matters.
At the very minimum, the newly formed corporation should immediately consult with an accountant or other tax expert to receive advice about how compensation should be handled, reported, taxed, etc. In addition, if the corporation has other employees, there are a number of other very important considerations to be taken into account and procedures to follow.
Documenting the Employment Relationship
A corporation should consult with its attorney regarding how to document the employment relationship between the corporation and its employees. Whether simple offer letters are enough or whether full-blown employment agreements are needed is a matter that needs to be discussed and resolved with the advice of counsel.
Employee Handbook
The corporation should also have a handbook for its employees describing its policies, practices, and procedures. This document is extremely important in establishing that the corporation has created specific policies on important issues like: at-will employment, equal employment opportunity, sexual harassment, regulation of outside employment, inspections at work, pay policies and practices, employee benefits, leave policies, standards of performance and conduct, termination policies, workplace safety, and others. The corporation should consult with its attorney in order to properly draft and implement the handbook.
Labor Laws
Employers are required to comply with numerous state and federal laws which regulate employment conditions, including, but not limited to:
- the National Labor Relations Act (union organizing);
- the Fair Labor Standards Act (minimum, overtime pay, etc.);
- the Americans with Disabilities Act (discrimination against the disabled);
- the Civil Rights Act (race, sex discrimination in employment);
- the Age Discrimination in Employment Act (age discrimination);
- the California Labor Code (minimum wage, overtime pay, manner of payment);
- the California Government Code (race, sex, age, medical condition, physical handicap discrimination in employment);
- the Cal OSHA (safety); and
- common law theories (wrongful discharge)
Workplace Notices
Employers are required to post, in a conspicuous location, a number of notices regarding employees’ rights. Some of the notices most commonly required, and the agencies from which copies may be obtained, are:
- Industrial Welfare Commission orders (California Department of Industrial Relations, Division of Labor Standards Enforcement);
- federal minimum wage notice (Wage and Hour Division, U.S. Department of Labor);
- notice entitled “Safety and Health Protection on the Job” (California Department of Industrial Relations, Division of Occupational Safety and Health);
- notice regarding the Fair Employment and Housing Act (California Fair Employment and Housing Commission);
- federal civil rights notice (U. S. Equal Opportunity Commission);
- notice of paydays and times and places of payment (Department of Industrial Relations); and
- workers’ compensation notices (which should be obtained from your workers’ compensation insurance carrier)
If you belong to the local Chamber of Commerce, you may be able to obtain from them a preprinted copy of the notices to post.
Payroll and Withholding Taxes
Various procedures apply to withholding taxes for employees. It is important for a business owner to become familiar with these practices and comply with their requirements. The federal procedures are detailed in IRS publication circular E, “Employer Tax Guide” along with its current supplement. California’s withholding requirements are set forth in Form DE-44, “Employer’s Tax Guide for the Withholding, Payment, and Reporting of California Income Tax” and in Form DE-4525, the “Employer’s Guide,” which may be obtained from most offices of the California Employment Development Department. Hefty penalties apply for willful failure to collect, account for, and pay withholding taxes (100-percent monetary penalty and personal liability).
Employee Benefit Plans
Federal law allows a corporation to establish a variety of tax-favored employee benefit plans. A corporation may establish stock bonus, pension, and profit sharing plans. These can be mutually beneficial for the employer and the employee, in that they allow for an immediate deduction by the corporation, and they defer income recognition for the employee. For example, 401(k) plans may be established relatively inexpensively by even small corporations. Medical and dental plans, including “cafeteria” plans may be provided for employees and their dependents which allow the corporation to deduct the expense without taxable income to the employee. Certain formalities will need to be followed, like the preparation of tailored documents to establish the plan. In addition, state tax consequences should be reviewed. If your corporation is interested in any of these programs, call (650) 321-0410 so we can provide you with further information or work with you to establish the program which would be most beneficial to your corporation and its employees.
Employment Practices Liability Insurance
This type of insurance provides coverage for (and protects the corporation against) claims made against the corporation relating to its employment practices. Most business attorneys, including me, strongly recommend this type of insurance because of the substantial liability involved, for the claim itself as well as the attorneys fees generated in defending the claim. It is highly recommended that you explore this type of insurance with your insurance broker.
If you would like to discuss any labor, employee, or employment law matter in detail, please call (650) 321-0410. We can either supply the information or we can provide an appropriate referral to a labor & employment expert.