NEW VENTURE GUIDE
by the UALR Arkansas Small Business Development Center
Major Federal Regulations and Laws
That Affect Personnel Management
Various regulations and laws exist pertaining to
employess. If you plan to hire individuals to work for you, some
understanding of the rules that apply to your business are
necessary. Federal laws, depending on your sales volume and
number of employees, may supercede state laws.
The following list is representative of the types
of regulations and laws that may govern your business operations.
Consult with the state and federal Department of Labor to learn
more. An attorney's guidance can be useful in assisting you as
you meet legal requirements during the establishment of your
business venture.
WAGES/HOURS & CONDITIONS OF EMPLOYMENT
Fair Labor Standards Act (FLSA)
US Dept. Of Labor, Wage Hour Division
Coverage: Generally, employers with 2
employees handling goods moving in interstate commerce and
annual dollar sales of $500,000; certain types of employers
have lower or no dollar volume thresholds.
Summary: Minimum wage of $5.15/hr.;
overtime pay after 40 hours/week at time and 1/2 regular rate
and accurate time records required for all non-exempt
employees. Child labor restrictions.
Primary Penalties: Civil: Employees (jury
trial) or Government may sue for double back wages for 2-3
years; Atty's fees; child labor penalties up to $10,000 per
child; and penalties up to $1,000 each for repeated or
willful minimum wage or overtime violations. Compensatory and
punitive damages available for retaliation.
Walsh-Healey Public Contracts Act
US Dept. Of Labor, Wage Hour Division
Coverage: Employees of employers with
fed. gov't supply contracts in excess of $10,000 who work on
gov't contract.
Summary: Employer must pay covered
employees time and 1/2 after 40 hours in a week.
Primary Penalties: Gov't withholds funds
and can collect back wages; $10/day fine for each minor
knowingly employed; debar from future contracts.
McNamara-O'Hara Service Contract Act (MOSCA)
US Dept. Of Labor, Wage Hour Division
Coverage: Employers with fed. gov't
service contracts in excess of $2,500 involving use of
service employees.
Summary: Employer must pay specified
minimum hourly rates and specified fringe benefits.
Primary Penalties: Gov't can withhold
funds and collect back wages; debar from future contracts.
Davis-Bacon Act
Contracting agency and/or US Dept. Of Labor's Wage Hour Division
Coverage: Federal public works contractor
on contracts in excess of $2,000.
Summary: Employer must pay specified
minimum hourly rates and specified fringe benefits.
Primary Penalties: Gov't can withhold
funds and collect back wages; debar from future contracts.
Migrant and Seasonal Agricultural Worker Protection
Act (MSPA)
US Dept of Labor
Coverage: Most agricultural employers
including forestry operations; farm labor contractors.
Summary: Requires disclosure of job,
terms, record keeping, payment of wages when due, housing and
vehicle safety standards for migrant and seasonal workers;
contractor licensing.
Primary Penalties: Administrative fines,
lawsuits by workers for greater of statutory or actual
damages, criminal penalties, including imprisonment for
willful violations.
Contract Work Hours and Safety Standards Act (CWHSSA)
US Dept of Labor
Coverage: Federal contracts including
construction requiring employment of laborers and mechanics.
Summary: Employer must pay one and 1/2
times basic rate for hours over 40 in a week.
Primary Penalties: Gov't can withhold
funds and collect back wages; debar from future contracts;
$10/day penalty.
Family and Medical Leave Act (FMLA)
US Dept. Of Labor, Wage Hour Division
Coverage: Employers engaged in interstate
commerce with 50+ employees
Summary: Employer must provide eligible
employees with up to 12 weeks of unpaid, job-protected leave
annually for certain family and medical reasons.
Primary Penalties: Employees or DOL can
sue for back wages and benefits, reinstatement, atty. fees
and actual losses sustained. Employees may recover double
damages for willful violations.
EMPLOYMENT PRACTICES
Title VII of the Civil Rights Act of 1964
Equal Employment Opportunity Commission
Coverage: Employers engaged in interstate
commerce with 15+ employees.
Summary: Prohibits discrimination because
of race, color, national origin, religion, sex, pregnancy
(including childbirth or related conditions).
Primary Penalties: Employees or EEOC can
sue for back wages, reinstatement, promotions, atty. fees.
For intentional discrimination (disparate treatment),
employees can sue for "capped" compensatory and
punitive damages with jury trial allowed.
Title I of the Americans with Disabilities Act of 1990
Equal Employment Opportunity Commission
Coverage: Employers engaged in interstate
commerce with:
25+ employees (7/26/92)
15+ employees (7/26/94)
Summary: Prohibits discrimination in
terms, conditions, and privileges of employment against
individuals with disabilities who, with or without reasonable
accommodation can perform essential functions of job.
Primary Penalties: Employees or EEOC can
sue for back wages, reinstatement, promotions, atty. fees.
For intentional discrimination (disparate treatment),
employees can sue for "capped" compensatory and
punitive damages with jury trial allowed.
Section 1981, Title 42 USC (Civil Rights Act of 1866)
Private lawsuits
Coverage: All private employers,
including individuals regardless of size or dollar volume.
Summary: Prohibits racial and ethnic bias
in employment.
Primary Penalties: In addition to suits
for back wages, reinstatement, promotion, atty's fees. Allows
jury trials and "uncapped" punitive and
compensatory damages.
Executive Order 11246
US Dept of Labor, Office of Federal Contract Compliance Programs
Coverage: Employers with gov't contracts
in excess of $10,000 in any 12-month period.
Summary: Requires antidiscrimination
clause in contract plus written affirmative action plan for
single contract of $50,000+ and 50+ employees.
Primary Penalties: Terminate contract;
debar from contracts; collect back wages; prosecute for false
statements.
Age Discrimination in Employment Act (ADEA),
including Older Workers Benefit Protection Act (OWBPA)
Equal Employment Opportunity Commission
Coverage: Employers engaged in interstate
commerce with 20+ employees.
Summary: Prohibits age discrimination in
employment, including benefits, for employees 40 or over.
Primary Penalties: Employees or EEOC can
sue for back wages for 2-3 years, with jury trial; atty.
fees; double damages if violation was willful.
Equal Pay Act of 1963 (EPA)
Equal Employment Opportunity Commission
Coverage: Generally, employers with 2
employees handling goods moving in interstate commerce and
annual dollar volume sales of $500,000; certain types of
employers have lower or no dollar volume thresholds.
Summary: Prohibits pay differentials on
basis of sex in substantially equal work requiring equal
skill, effort and responsibility under similar working
conditions. No exemption for executive, administrative,
professional and outside sales employees.
Primary Penalties: Employees (jury trial)
or EEOC can sue for double back wages for 2-3 years.
Rehabilitation Act of 1973, Section 503
US Dept. Of Labor, Contract Compliance Programs
Coverage: Employers with gov't contracts
in excess of $10,000.
Summary: Requires affirmative action and
nondiscrimination in employment of handicapped persons.
Written AAP required if 50+ employees and contract of
$50,000+.
Primary Penalties: Gov't can withhold
funds, collect back wages and require hiring, reinstatement
or promotion; debar from future contracts.
Rehabilitation Act of 1973, Section 504
Federal Agency responsible for providing financial assistance
Coverage: Employer's programs or
activities receiving federal financial assistance.
Summary: No discrimination against,
denying benefits to, or exclusion from participation,
including employment, by any qualified handicapped
individual.
Primary Penalties: Gov't can withhold
funds and collect back wages; debar from future contracts;
employee can sue for back wages and reinstatement or hiring.
Compensatory and punitive damages available.
Employee Polygraph Protection Act of 1988 (EPPA)
US Dept. Of Labor
Coverage: Employers subject to the FLSA.
Exemptions for governments, certain government contractors,
and employers in the security and drug industry.
Summary: Generally prohibits the use of
"lie detectors" and lie detector results in private
employment. Limited exemptions apply for certain internal
investigations.
Primary Penalties: Civil penalties up to
$10,000. Gov't/employee can sue for lost wages, benefits,
employment, reinstatement and promotion; atty's fees.
Federal Military Selective Service Act
US Dept. Of Labor, Veterans' Employment Service
Coverage: Employers in interstate
commerce.
Summary: Give employee returning from US
military service the same wages, benefits, and rights as the
employee would have received had he/she not left.
Discrimination against Reservists barred.
Primary Penalties: US District Attorney
sues on behalf of veteran for wages lost or reemployment.
Vietnam Era Veteran Readjustment Assistance Act
US Dept. Of Labor, Office of Federal Contract Compliance Programs
Coverage: Employers with gov't contract
of $10,000 or more.
Summary: Requires affirmative action
regarding Vietnam era veterans and disabled veterans. Written
AAP required if 50+ employees ans a contract of $50,000+.
Primary Penalties: Gov't can withhold
funds, collect back wages and require hiring, reinstatement
and promotion, debar from future contracts.
Immigration Reform and Control Act of 1986 (IRCA)
US Dept. Of Justice, Immigration & Naturalization Service
Coverage: All employers.
Summary: Prohibits hiring of illegal
aliens. Requires verification and record keeping of work
authorization documents.
Primary Penalties: Up to $10,000 fine for
hiring violations. Fines up to $1,000 for record keeping
violations.
Drug-Free Workplace Act of 1988
Federal agency that contracts or provides assistance.
Coverage: Employers with federal
contracts of $25,000 or more; all federal grant recipients.
Summary: Establish drug-free awareness
program and make good faith effort to carry out; requires
penalties or rehabilitation for employees convicted of
workplace drug offenses.
Primary Penalties: Debarment from future
contracts or grants.
Department of Transportation Drug Testing Regulations
Federal Highway Adm.,US Coast Guard, FAA, Federal Railroad Adm.,
Urban Mass Transportation Adm.
Coverage: All employers operating
vehicles over 26,000 pounds, buses over 15 people, or moving
hazardous materials; other regulation sections cover
aviation, railroad, shipping and natural gas industries.
Summary: Requires employers to conduct
drug tests of certain employees in compliance with strict
regulations, provide education and minimal Employee
Assistance Programs (EAP's).
Primary Penalties: Penalties vary from
agency to agency and range from monetary citation to loss of
FAA certification.
Worker Adjustment and Retaining Notification Act
(WARN)
DOL issues regulations, but WARN is enforced only by private
lawsuit.
Coverage: Employers with at least 100
employees.
Summary: With some exceptions, requires
600-day notice to employees and state and local governments
before layoffs of 50 or more employees.
Primary Penalties: Payment of 60 days'
wages and benefits to employees; $500 per day civil penalty
paid to local government for up to 60 days.
TAXES, INSURANCE, & EMPLOYEE BENEFITS
Social Security Act (FICA)
US Social Security Adm., Internal Revenue Service
Coverage: Employers who pay over $50 per
quarter in wages.
Summary: Employer and employee each must
contribute 7.65% of wages up to $80,400 and 1.45% on all
earnings for 2001. Withholding required. Wage base subject to
annual adjustment.
Primary Penalties: Back taxes plus
interest and penalties collectible by IRS.
Federal Unemployment Tax Act (FUTA)
Internal Revenue Service
Coverage: Employers who employ 1 or more
persons 20 or more weeks/year.
Summary: Must contribute 0.8% (varies
with credits for participation in state unemployment
programs) on first $7,000 of each employee's wages.
Primary Penalties: Back taxes plus
interest and penalties collectible by IRS.
Employee Retirement Income Security Act of 1974
(ERISA)
US Dept. Of Labor, Office of Pension and Welfare Benefits and
Pension Benefit Guaranty Corporation.
Coverage: Employers in interstate
commerce.
Summary: Requires extensive pension and
welfare plan reporting, plus disclosure to plan participants
and beneficiaries; minimum participation vesting and funding
standards for pension plans, including profit-sharing plans;
plan termination insurance for pension plans.
Primary Penalties: Employees,
beneficiaries, or Gov't can sue for benefits and to enforce
rights. Administrative fines up to $1,000 per day for failure
to file annual report. Personal liability of up to $100 per
day for failure to timely provide information to participant.
Consolidated Omnibus Budget Reconciliation Act of 1985
(COBRA)
US Dept. Of Labor, Internal Revenue Service
Coverage: Employers in interstate
commerce and who claim tax deduction for group health plan
expenses or who have "highly compensated employees"
participating in group health plans; exception if under 20
employees in preceding year.
Summary: Requires provision of
continuation coverage under employer's group health plan to
employees, spouses, and/or dependent children upon the
occurrence of specified events, including termination of
employment or reduction in hours.
Primary Penalties: Same as ERISA, plus
personal liability up to $100 per day for failure to timely
provide employee or dependent with notice of commencement of
coverage or election form.
Health Maintenance Organization Act (HMO)
US Dept. Of Health & Human Services, Office of Health
Maintenance Organization
Coverage: Employers subject to the FLSA's
minimum wage provision with 25+ employees, offering a health
benefits plan, and with at least 25 employees in HMO service
area.
Summary: Employer must offer membership
in a qualified HMO if available where employees live.
Voluntary or upon demand by qualified HMO.
Primary Penalties: Fines of up to
$100,000 for every 30-day period which employer is out of
compliance.
LABOR RELATIONS
National Labor Relations Act (NLRA)
National Labor Relations Board
Coverage: Employers in interstate
commerce.
Summary: Employee rights to engage in
protected concerted activity and organize or decertify union.
Primary Penalties: Cease-and-desist
order; reinstatement of employees with back pay; Injunction
proceedings. NLRB orders enforceable in federal court.
Railway Labor Act
Atty General, Private federal court suits.
Coverage: Airlines, railroads, express
companies, some related companies.
Summary: Regulates company-union
elections/mandatory dispute resolution processes.
Primary Penalties: Civil/criminal; up to
$20,000 and/or six month prison per day of violation.
WORKPLACE
Occupational Safety and Health Act (OSHA)
OSHA, US Dept. Of Labor
Coverage: Employers in interstate
commerce.
Summary: Employer must furnish safe
employment according to designated workplace standards;
record keeping; no retaliation against employees for
exercising rights.
Primary Penalties: Civil penalties for
violations of standards; Gov't/employee can sue for
reinstatement and back pay; possible criminal action.
GARNISHMENT
Consumer Credit Protection Act., Title III (Federal
Wage Garnishment Law)
US Dept. Of Labor, Wage Hour Division
Coverage: Employers under federal Wage
& Hour Law.
Summary: Restricts garnishment w/holding
to 25% or less of disposable income. Allows larger deductions
for support/alimony garnishments. No discharge for one or
more garnishments of one debt.
Primary Penalties: Gov't can sue for
excessive w/holding. Reinstatement and back pay.
PRIVACY
Fair Credit Reporting Act
Federal Trade Commission
Coverage: Employers in interstate
commerce.
Summary: Disclose to applicants &
employees intent to use investigative consumer report and, on
request, nature/scope of investigation. Must inform
applicant/employee if credit report is related to adverse
action and disclose credit agency.
Primary Penalties: Civil suit for willful
noncompliance (with no ceiling on punitive damages) and for
neg. compliance (actual damages).
PLEASE NOTE: Because of space
limitations, only the most important features of these laws and
regulations have been listed. Consult professional advice before
acting on this information.
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