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Becoming a Small Business Owner

“One of the most difficult things about starting a business is trying to learn all of the state and federal laws that pertain to business owners,” said Gerald Lavarias, clinical director and co-owner of MAPSS, a local business that provides support services to children and adults with special needs. California is home to more than 850,000 small businesses (< 500 employees), according to the latest data from the U.S. Small Business Administration. If you think you’d like to join the club, here are just a few things you need to know about employment law. Employers must:

Inform employees of their rights. State and federal laws require employers to display a variety of posters and distribute certain pamphlets to employees upon hire, termination, or when a triggering event occurs (such as pregnancy or disability).

Classify employees correctly (exempt or nonexempt). According to the California Chamber of Commerce, “Some of the largest multimillion-dollar awards of back pay to plaintiffs by the courts stem from employers’ misclassification of nonexempt employees as exempt from overtime.”

Comply with wage and hour laws. In general, employers must:
• pay nonexempt employees at least the state minimum wage (in most cases)
• pay exempt employees at least twice the minimum wage
• pay nonexempt employees overtime for working more than 8 hours a day and/or 40 hours a week
• pay nonexempt employees at least twice a month on regularly scheduled days; pay exempt employees at least once a month on or before the 26th of each month
• give employees their final paycheck in accordance with state law.

California employers also need to comply with laws regarding: local “living wage” ordinances, tips and gratuities, piece rates, commissions, split shift pay, reporting time pay, call-in pay, on-call/standby pay, travel time, and a variety of other requirements regarding paying employees. Additionally, employers must make proper deductions from pay.

Provide nonexempt employees with meal and rest breaks. While a recent court case (Brinker v. Superior Court) relaxed the rules requiring employers to ensure that their hourly employees take a 30-minute meal period at a specified time, employers are still required to allow meal and rest breaks. Employers must also be aware of issues that pertain to meal breaks such as when a second meal break must be taken, when on-duty meal breaks are allowed, when designated eating places are required, and properly paying hourly employees for meeting or training during meal breaks.

Provide a safe working environment for all employees. This includes protecting employees from work-related illnesses/injuries and workplace violence. Every California employer must comply with standards set by both OSHA and Cal/OSHA.

Provide an environment free of harassment and discrimination. According to the Department of Fair Employment and Housing, employers must “take all reasonable steps to prevent discrimination and harassment from occurring.” This includes developing a policy, informing employees of their rights, promptly investigating complaints, and taking prompt and effective corrective action if inappropriate behavior does occur.

In addition, employers with 50 or more employees are required to provide at least two hours of sexual harassment training every two years to each supervisory employee (new supervisors must be trained within six months of promotion or hire).

Reasonably accommodate employees. Employees needing modifications to their schedules, job requirements, or work environment because of their religion, physical disability, or mental disability must be accommodated if the request is reasonable.

These are just some of the employment laws with which California employers must comply. Fortunately, there are resources available to help you start a business at no cost, such as the U.S. Small Business Administration, the Employment Development Department, and the CSUB Small Business Development Center. Lavarias said he learned a lot about operating a business just by talking to other business owners.

Being an employer is a dream come true for many people. Knowing employment laws can prevent it from becoming your worst nightmare.

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Disclaimer: The information and resources provided herein are not a substitute for experienced legal counsel and does not constitute legal advice or attempt to address the numerous factual issues that inevitably arise in any employment-related dispute. Although this information attempts to cover some major recent developments, it is not all-inclusive, and any recommendations are based upon HR best practices and procedures. We recommend you consult an attorney for legal guidance.

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