How To Be an Ethical, Fair and Lawful Manager of Employees (While Protecting Your Interests) - The University of La Verne Small Business Development Center (SBDC)
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How To Be an Ethical, Fair and Lawful Manager of Employees (While Protecting Your Interests)

Managing employees can be a daunting prospect, especially if you are new to it. Many small business owners started their businesses because they wanted to be their own boss, but what happens when it comes time to hire employees – what kind of leader will you be, how will you juggle your business and the regulatory requirements of being the boss?

While great leadership is often measured by your ability to lead and mentor your employees, it’s also important to remember that as an employer and manager you are required to treat all employees equally and fairly.

Sounds obvious, but as a new employer, there are a range of employment laws and regulations that you need to be aware of such as those that protect employees against discrimination and sexual harassment, wage and overtime abuse and more. Ignore these and you run the risk of creating an environment for disgruntled employees and the potential for a government investigation or lawsuit.

So what can you do to ensure you adhere to basic managerial ethics and the law? Which laws even apply to your business? Here are some tips and considerations to bear in mind to help you avoid costly managerial mistakes.

Treat All Employees Equally and Fairly

U.S. equal opportunity laws require that “covered” employers cannot make any hiring decisions based on your own bias for a certain group of people – this includes gender, race, religion, age, disability, genetic information or any other class of individual protected by the law. (Note: Not all businesses are covered by these laws. More on this below). 

Likewise, as a manger, you cannot harass employees because of race, color, religion, sex (including pregnancy), national origin, age (40 or older), disability or genetic information. If your actions are questionable in this regard, an employee may be entitled to file a charge of discrimination with the U.S. Equal Employment Opportunity Commission (EEOC). Visit the EEOC website for a complete list of equal opportunity laws that impact employers.

IMPORTANT: Not all businesses fall under the EEOC’s jurisdiction – and this may very well apply to most small businesses. For example, the EEOC does not enforce or uphold complaints of businesses with less than 15 employees for general bias against certain groups. Visit the EEOC website for employers for more information on who is covered by its laws. Also, your state may have its own equal opportunity laws, so check these carefully.

Even if you don’t fall under the EEOC laws, all employers are subject to the Equal Pay Act (EPA), which makes it illegal to pay different wages to men and women if they perform substantially equal work in the same workplace.

Other considerations to bear in mind include operating a safe and secure workplace for your employees; ensuring employees receive the appropriate meal and rest breaks, overtime pay and more.

TIP: To help you determine which laws apply to your business, read: Which Employment Laws Apply to Your Business? There’s an E-Tool for That!

Keep Good Records

Good record keeping is a must in business, and it can help protect you should an employee raise a complaint (or even a lawsuit) against you. So document and record everything – from performance reviews, 360 feedback gleaned from colleagues about a job candidate, disciplinary actions (warning notices, performance improvement plans, etc.) and so on.

Develop an Employee Handbook

It’s also a good practice to develop an employee handbook and code of conduct so you can ensure all new employees are aware of your corporate policies and procedures, as well as their rights.

Communicate any Policy Changes

Small businesses with a certain number of employees are often exempt from certain labor requirements – but as you grow or take on more employees, your compliance obligations will change. For example, most businesses with less than $500,000 in sales and only one employee aren’t required to pay overtime according to federal law. (But do note that there are exceptions for certain jobs involved in “interstate commerce.” In addition, state laws can supersede federal laws – so check carefully.) But as the business grows, you’ll need to adhere to overtime laws.

So as your business changes, make sure that you are aware of how it’s legal obligations are shifting as well. And be sure to revisit employment contracts and corporate policies so the changes are clear to your staff.

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