10 Employment Compliance Issues for Small Businesses

10 Employment Compliance Issues for Small Businesses

There are a slew of rules set by federal, state and local governments imposed on employers, and we’d better comply or face costly and time-wasting consequences. Make sure you know what the rules are in your locality, and that your company is up on them. Here’s a checklist for you.

Important Employment Compliance Issues

Minimum Wage

While the federal minimum wage remains at $7.25 per hour in 2017, there have been increases in a number of states and cities. The higher rates control. For example, the rate in New York City for small employers is $12 per hour on December 31, 2016, but it’s $10.75 per hour for companies with fewer than 10 employees. On December 31, 2017, it’s set to rise to $13.50 ($11.75 for small employers). Check the prevailing rate in your location so you can stay in compliance.

Overtime Rule

A final rule from the U.S. Department of Labor had been set to take effect on December 1, 2016, but was put into limbo by the issuance of an injunction by a federal court. This rule greatly increases the wage threshold at which an executive, administrative, or professional employee is exempt from the overtime rule. An employee who is not exempt must be paid time-and-a-half for working more than 40 hours in a workweek. Will the injunction be lifted in 2017, allowing the rule to go into effect? Will a new Administration reset the wage threshold? Monitor any developments so you can stay in compliance.

Medical Coverage

Did your workforce in 2016 have on average per month at least 50 full-time and full-time equivalent employees? If so, then you are treated under the Affordable Care Act (ACA) as an applicable large employer (ALE). As such, you must provide affordable minimum essential health coverage to your full-time employees in 2017 or pay a penalty. Find more details from the IRS.

Wellness Programs

The EEOC issued final rule for wellness programs back in May 2016, which apply for programs starting in 2017. The rule makes it clear that the ADA and Genetic Information Nondiscrimination Act (GINA) generally prohibit employers from obtaining and using information about an employee’s own health or the health of family members and that wellness programs should be reviewed to make sure they’re in compliance.

Reporting About Medical Coverage

ALEs explained earlier must provide information returns (Form 1095-C) to their full-time employees about their offer of health coverage. Non-ALEs with self-insured plans (e.g., health reimbursement arrangements) must file Form 1095-B. The returns for 2016 had been due to employees by January 31, 2017, but the IRS delayed this for 30 days (March 2, 2017). Transmittals are due to the IRS on February 28, 2017, if filing by paper, or March 31, 2017, if filing electronically through a special AIR system. File by the due date to avoid late filing penalties.

Small Business Deals

Mandatory Retirement Plans

Some states are now requiring businesses that don’t have qualified retirement plans to enroll employees in state programs. For example, California’s Secure Choice program goes into effect on January 1, 2017, although it does not immediately apply to very small employers. Other states with programs set to take effect some time during 2017 include Illinois, Oregon, and Washington. Check with your state labor department.

Ban-the-box Interview Questions

If you’re hiring new workers in 2017, you may be barred by state law from asking about an applicant’s conviction record before making a hiring decision. Connecticut’s ban-the-box law takes effect on January 1, 2017; Vermont’s law becomes effective on July 1, 2017. Check with your state’s labor department to see if it has a ban-the-box law.

FMSA Rules

The FDA’s Food Modernization Safety Act (FMSA) is designed to ensure that the U.S. food supply is safe. Revised rules for Current Good Manufacturing Practices (CGMP) and preventive controls for human food went into effect for large companies in 2016. For small businesses (fewer than 500 employees), the rules take effect on September 18, 2017. However, for very small businesses (based on revenues for certain types of sales), there’s an additional year. Find a list of effective dates here.

Workers Compensation

Generally, you’re required to carry workers compensation coverage for all your employees, including owners. There are some exemptions and it’s permissible in some states for owners to opt out. California changed the definition of excluded employees, effective January 1, 2017. Changes to Colorado’s medical treatment guidelines also take effect on this date. Check with your state insurance department or carrier for any updates.

Workplace Posters

Make sure you’re displaying the required posters. Federal posters are available from the DOL. Check with your state labor department for any posters that are required in your state.


With a new federal Administration, some of the federal regulations may be rolled back, modified, or replaced. Changes in employment rules at the same and local level are also possible. Be sure to monitor these changes. I’ll be following developments and writing about them, too.

Compliance Photo via Shutterstock 3 Comments ▼

Barbara Weltman Barbara Weltman is the Tax Columnist for Small Business Trends. She is an attorney and author of J.K. Lasser’s Small Business Taxes and The Complete Idiot’s Guide to Starting a Home-Based Business. She is also the publisher of Idea of the Day® and monthly e-newsletter Big Ideas for Small Business® and is a trusted professional advocate for small businesses and entrepreneurs.

3 Reactions
  1. It is nice to have these all in one place. If you’re busy with your business, it is really easy to forget one of these.

  2. I’d add to this list misclassification of workers. Most employers do not understand the rules pertaining to exempt and non-exempt employees for minimum wage and overtime compliance. there are many urban myths that lead business owners to violate state and federal wage rules. Business owners — violations of wage rules 1) are your personal liability and your LLC/corporate shield won’t protect your personal assets and 2) if you’re sued by a former or current employee and lose, most wage laws require you to pay the winners attorneys fees. Don’t go to sleep on properly classifying employees. Have an attorney conduct an informal audit of your wage practices. You might be (probably will be) surprised by the results.

  3. Aira and Michael,

    Many thanks for your comments – greatly appreciated!