Saturday, July 23, 2016

Employment Laws

There are federal employment laws and every state has its own employment laws. Wherever one is doing business within the United States, there are a lot of employment laws to know about and follow. Large businesses can afford the overhead of a conglomeration of departments to keep track of all the laws and to comply with them. Small businesses are unlikely to even know about some of the laws until some unfortunate incident brings a complaint or investigation, and then penalties follow.

Now, a couple of facts to contemplate: First, the government grants business licenses in various industries as a way to monitor those business activities and, of course, collect additional revenue. Second, there are companies that specialize in accounting and employment laws, filing forms on behalf of businesses, and helping businesses stay in compliance with the law.

Assuming that most employment laws are actually "good" in that they require businesses to follow procedures for the benefit of employees, we should make it easy for businesses to be in compliance with such laws. Here is how government could be a lot more useful:

First, require every business to obtain a business license, regardless of industry. We don't need special cases for this or that. Every business must have a license to operate, which involves registering the business activity with the government. The government office receiving such registrations must make them available to all other branches of government. The revenue service can then know where to collect taxes, and various industry-specific departments like energy and food can follow up with businesses that are in their area of interest. Businesses must not be required to register separately with every government department -- there must be only one registration that is shared.

Second, the government can use the business license to help businesses learn about the laws and follow them. One of the questions in the license application must be about the nature of the activity, so that relevant government departments can find the business license and follow up with the business. One of the items in the license application must be to note the contact information of the company that will be tracking employment laws and compliance on behalf of the business. The business could write its own company name and contact information for its personnel officer there, or the business could hire another company, and these exist today, to do this work. Either way, the business owner, at the time of applying for the business license, through the course of completing the license application, learns that there are employment laws that must be followed and has an opportunity to hire someone and write their information, or to contemplate doing it "in house". The item on the form must be annotated with a reference where the business owner can see a summary of the "start up laws" like registering new employees, getting a tax identification number, obtaining insurance, and so on.  That information should help the business owner decide to do it "in house" or to hire an external company, and if doing it "in house" it should help with getting started.

Third, the government can require "HR" businesses to obtain an employment compliance license, which must involve demonstrating knowledge of all applicable laws for the jurisdictions in which they offer services, and also their internal controls that would be used to ensure that businesses stay in compliance. Any business offering "HR" services or doing "HR" itself would need to apply for and obtain the employment compliance license. This step will help ensure that whoever the business designates as its employment compliance representative in the business license form will be competent to perform that work.

The combination of these three steps means that the education to business owners can be very simple:

Every business must obtain a business license.  The process of applying for the license and obtaining the license will then inform the business about other legal requirements. One of these is employment compliance, and by choosing a licensed employment compliance representative, whether in house or outsourced, the business can be built on a solid foundation of following the employment laws and taking good care of its employees.