The 4 Employment-Law Pitfalls You Must Avoid

Entrepreneurs aren't always great at following employment rules. It's an oversight that can cost a lot of money and grief

Written by Robert Gold

People running small and mid-sized businesses aren’t always the best at adhering to employment law, according to Hermie Abraham. And that needs to change.

“Often, entrepreneurs think they’re small shops, they don’t have to worry about employment law so much,” says Abraham, an employment lawyer at Samfiru Tumarkin LLP, which serves both employees and employers. “But from the moment you hire your first employee, even if it’s a contractor or someone part-time, you’ve already created employment-law liability.”

Read: How Not to Get Sued By Employees

In this week’s BusinessCast, Abraham describes the four most common employment-law mistakes small and mid-sized businesses tend to face, and explains what to do to avoid them.

1. Hiring without a contract

“The employment contract in employment law is what a prenuptial agreement is to family law,” Abraham says. “Employers and employees without a contract will assume many things about the relationship.” A good contract will set the terms of the relationship, define what each party is responsible for and makes it a lot easier when the term ends.

There’s nothing wrong for companies (in a non-union environment, at least) to offer different contracts to different people—even in the same job. “It’s important to have a contract tailored to each employee,” she says. “Things like compensation, maybe even vacation will be different for each employee.”

2. Hiring contractors who aren’t actually contractors

You should be careful about categorizing employees as independent contractors just because to avoid paying benefits, says Abraham. “There’s nothing wrong with hiring independent contractors if they are, in fact, independent contractors,” she explains. “The problem is when employers characterize someone as an independent contractor to avoid some obligations they might have.” If you’ve miscategorized an employee in this way, you might be liable when the employment relationship comes to an end (if not before) for unpaid liabilities like taxes, deductions and unpaid vacation time.

3. Relying on non-enforceable restrictive covenants

“There’s a misconception among employers that after employment relationship ends, there are obligations that survive that the employee is bound to abide by,” says Abraham. “The fact is, that’s not true. Unless you have a non-competition or non-solicitation provision that’s written and enforceable, it’s not going to hold.” Such clauses must be established, written and agreed upon by both parties to hold water.

Read: The Unforeseen Consequences of an Employee Lawsuit

4. Ignoring overtime

Overtime has become a hot-button issue in Canada, Abraham says, and that’s because so many companies ignore it. “Employers are required to pay overtime once an employee has worked in excess of 44 hours in week,” she reports. While there are some exemptions to that, in most cases an employee does have the right to extra pay if her hours exceed this threshold—even in skilled professions in which workers aren’t paid an hourly rate.

For more of Abraham’s advice, listen to this week’s BusinessCast, which you can download by clicking on the iTunes logo below:

Available on iTunes

For more BusinessCast podcasts, click here.

Click here for more employment-law advice.

Originally appeared on PROFITguide.com