In the dynamic world of running a small business, understanding and adhering to hiring laws is not just a legal necessity but a keystone of ethical operations. As we look at the legal requirements for hiring employees—from minimum wage to new hire reporting to Americans with Disabilities Act accommodation—we’ll explore federal and state laws that directly impact your hiring process. If your organization develops a reputation for being fair and law-abiding, attracting and retaining top talent may be easier.
Key Federal & State Laws
As soon as you begin any recruitment process, you need to be mindful of the critical hiring laws that exist through the US Department of Labor (DOL) and your state labor bureaus. To give you the best resources, we have compiled a list of websites that include state law office contacts and other important information.
The DOL administers and enforces more than 180 federal employment laws that govern workplace activities for about 150 million workers and 10 million workplaces.
A list of each state and their labor office contact information to assist with state-specific hiring laws.
Highlights different minimum wage laws from state to state.
Employment/Age Certification issuance practice under state child labor laws.
The Wage and Hour Division (WHD) tracks state legislation on 34 labor-related topics.
Keeping abreast of a multitiered legal landscape may seem daunting. Laws evolve, and staying updated is paramount to maintaining compliance. The following is a brief discussion of legal requirements for hiring employees. Be sure to include these items in your new hire paperwork and employee handbook.
An at-will employment arrangement refers to both the employee and employer maintaining the freedom to end the employment relationship at any time, with or without advance notice, and for any reason (or no reason). Employment relationships are presumed to be “at-will” in all US states, with the exception of Montana and fast-food industries in the state of New York.
Notations of your at-will employment status should be included in your employee handbook and any employment contracts and offer letters. This protects both your rights as the employer and the rights of the employee to end the relationship at any time.
Although at-will employment is a standard expectation, there are times when at-will legal status is diminished. If you enter into a signed employment contract with an employee, depending on how the employment contract is constructed, the employer is usually not allowed to simply end the employment without cause or advanced notice.
Depending on the restrictions of the agreement or contract, the employer must adhere to the parameters it has agreed to with the employee. We advise seeking legal counsel when constructing employment contacts with any team member because they tend to be more legally binding and challenging to dispute.
Equal Employment Opportunity Commission (EEOC)
The EEOC is responsible for enforcing federal hiring laws that make it illegal to discriminate against a job applicant or an employee because of their race, color, religion, sex (including pregnancy, gender identity, and sexual orientation), national origin, age (40 or older), disability, or genetic information. (We cover these specific laws in more detail below.)
It is also illegal to discriminate against a person because they complained about discrimination, filed a charge of discrimination, or participated in an employment discrimination investigation or lawsuit.
Most employers with at least 15 employees are covered by EEOC laws (20 employees in age discrimination cases). The laws apply to all types of work situations, including hiring, terminating, promotions, harassment, training, wages, and benefits.
Employee Wage Laws
There are many laws a business must abide by that benefit the employee. These include laws that state how and when employees should be paid. For new hires, these laws should be adhered to from the start of their employment. Plus, in almost all cases, you’ll need to follow the law that provides more protections or benefits to your employees.
Fair Labor Standards Act (FLSA)
There are a number of provisions that the FLSA covers, including minimum wage, overtime pay, recordkeeping, and child labor standards affecting full-time and part-time workers in the private sector and federal, state, and local governments.
It is important to think about the type of position you’re recruiting for and whether the position (not the employee in the position) qualifies as exempt or nonexempt, as this often determines if you pay the employee a salary or hourly wage.
Additionally, as you help prepare your new employee for their job, be aware that deductions made from wages for employer-required uniforms or tools aren’t legal if they reduce employee wages below the minimum wage required by the FLSA or the amount of overtime pay due.
State Minimum Wage Laws
Understanding the minimum wage laws in your state prevents you from underpaying employees, which could lead to repayments, penalties, and fees. Some states have a separate or higher minimum wage than the federal minimum wage (currently $7.25 per hour).
The following states have adopted a minimum wage higher than the federal required minimum. If you have employees in these states, even if you don’t have a business presence there other than a worker, you’re subject to those state laws, including minimum wage.
$10.25 if offered benefits; $11.25 if no benefits
*Rates as of July 2023.
Some states follow the federal minimum wage guidelines, set at $7.25 per hour. These include: Georgia, Iowa, Idaho, Indiana, Kansas, Kentucky, North Carolina, North Dakota, New Hampshire, Oklahoma, Pennsylvania, Texas, Utah, Wisconsin, and Wyoming.
NOTE: There is no set minimum wage in the following states: Alabama, Louisiana, Mississippi, South Carolina, and Tennessee. By default, these states follow the federal minimum wage of $7.25 per hour, a rate that’s been stagnant since 2009.
Be aware of industries and job types that are exempt from federal minimum wage requirements.
Interview & Background Check Laws
During the interview and candidate screening process, there are specific laws to keep in mind—those that prevent you from asking about previous salaries and those that require you to remove criminal history questions from your applications and interviews. Staying abreast of these interviewing laws can help you avoid legal issues.
Ban the Box Law
“Ban the Box” laws require employers to remove criminal history questions from employment applications and their interviews. The law further states that you may not legally inquire about criminal convictions with job applicants until you have extended at least a verbal offer of employment.
As of 2023, over 150 cities and 37 states have enacted some form of ban the box laws. Some only apply to government employers, but many apply to private employers. Hence, you need to review the local laws where you’re hiring workers to ensure your hiring practices are compliant.
Salary History Requests Ban & Pay Transparency
There’s also a regulation many states and cities have implemented that bans companies from asking candidates about salary history. The idea behind this movement is that employers may be tempted to reset offers of annual pay at a rate that matches the candidate’s pay history and not the level of position the employer is filling.
As of 2023, 16 states and many cities have implemented salary history ban laws. While some of these laws only apply to government employers, it’s vital you know the laws where you’re hiring workers so you can stay compliant.
Related, pay transparency laws have seen a rise recently in an attempt to resolve a lack of pay equity. These laws require employers to disclose wage ranges for open positions, either in job ads or upon request by a candidate. As of 2023, eight states and multiple cities have implemented these laws. Remember, if you’re located in a state without these laws but accepting candidates from a state with pay transparency laws, you must comply with those laws.
Throughout the interview process, do not ask candidates about pay history. Instead, inquire about their salary expectations moving forward and consider sharing what your open position pays.
Fair Credit Reporting Act (FCRA)
Under the FCRA, employment background checks are oftentimes allowed and may include a copy of the candidate’s credit report.
The FCRA does not require employers to conduct employment background checks, but the law sets a national standard that employers must follow when doing employment screening. In some states, laws may give an employee more rights than the FCRA.
We recommend only running background checks when absolutely necessary and only including an employment candidate’s credit profile if the job you’re considering hiring them for merits such action (such as an accountant or IT professional role).
Illegal Interview Questions
When conducting interviews, there are illegal questions you should avoid. These questions can be considered discriminatory and could result in potential lawsuits. They include asking questions on protected class topics such as race, religion, sex, or nationality.
New Hire Laws
When hiring new employees, there are specific laws and regulations related to their employment that must be followed. You must verify an employee’s eligibility to work in the US, report new hires to your state, and post workplace posters.
I-9 Employment Eligibility Verification Form
Under federal law, employers are required to verify an employee’s eligibility to work in the US by completing an I-9 Employment Eligibility Verification form within three days of the employee’s start date.
The I-9 confirms your employees are eligible to work in the US. This form should be completed and kept in a separate file, away from regular employee files.
New Hire Reporting
The Office of Child Support Enforcement requires that all employers report basic information on new and rehired employees within 20 days of hire (note that some states require it sooner). Private sector employers report to the State Directory of New Hires. Federal agency employers report to the National Directory of New Hires.
The state and federal government utilizes the new hire reporting process to assist with mandates such as child support payments, garnishments, and so on. All employers, regardless of size, must comply with their state’s new hire reporting requirements.
Statutes and regulations enforced by the DOL require that notices be provided to employees and/or posted in the workplace. The DOL provides free electronic copies of the required workplace posters, and some of the posters are available in languages other than English.
Post labor posters in conspicuous places for all employees to see and ensure that electronic ones are made available to those who need them (remote employees). Be sure to post any required state posters, as well.
Employee Rights Laws
Employees are guaranteed certain rights. Be sure you understand and follow the employee laws surrounding these rights. These include retirement benefits, workers’ compensation, and child labor laws.
Employee Benefit Security
The Employee Retirement Income Security Act (ERISA) regulates employers who offer pension or welfare benefit plans for their employees. Title I of ERISA imposes a wide range of fiduciary, disclosure, and reporting requirements on businesses administering pension and welfare benefit plans.
Under Title IV, certain employers and plan administrators (those offering healthcare and retirement benefits) must fund an insurance system to protect certain kinds of retirement benefits (defined benefit and contribution plans), with premiums paid to the federal government. You’ll need to be aware of what you’re responsible for paying before offering such benefits to new employees.
There are also reporting requirements for the continuation of healthcare benefits after employees leave the company under COBRA (Comprehensive Omnibus Budget Reconciliation Act of 1985) and preventing the disclosure of sensitive patient health information under HIPAA (Health Insurance Portability and Accountability Act).
If you choose to offer benefits, including 401(k) and flexible spending accounts (FSA), as well as several other qualifying benefits, ERISA’s requirements may impact how you offer and govern these benefits.
Although the requirement to have workers’ compensation insurance comes from the federal government, the enforcement and guidance employers receive is from state labor offices. If you work for a private company or a state government, you should contact the workers’ compensation program for the state in which you live or work each time you hire a new employee. If they are located in a state that you haven’t previously employed anyone, let your workers’ compensation provider know because they will have to register that state under your policy.
There are a number of industry-specific programs and resources available:
- The Longshore and Harbor Workers’ Compensation Act (LHWCA), administered by the Office of Workers’ Compensation Programs (OWCP), provides for compensation and medical care to certain maritime employees (including a longshore worker or other person in longshore operations and any harbor worker, including a ship repairer, shipbuilder, and shipbreaker).
- The Energy Employees Occupational Illness Compensation Program Act (EEOICPA) is a compensation program that provides a lump-sum payment of $150,000 and prospective medical benefits to employees (or their survivors) of the Department of Energy and its contractors and subcontractors in the event they are afflicted with cancer caused by exposure to radiation or other work-related illnesses.
- The Federal Employees’ Compensation Act (FECA) establishes a comprehensive and exclusive workers’ compensation program that pays compensation for the disability or death of a federal employee resulting from personal injury sustained while in the performance of duty.
- The Black Lung Benefits Act (BLBA) provides monthly cash payments and medical benefits to coal miners totally disabled from pneumoconiosis (“black lung disease”) arising from their employment in the nation’s coal mines.
Child Labor Laws
When bringing on employees under the age of 18, there are certain stipulations you need to know before making a job offer. Further, there are only certain jobs 16-year-olds, for example, can perform with limited hours per day to work.
Child labor provisions under FLSA are designed to protect the educational opportunities of youth and prohibit their employment in jobs detrimental to their health and safety. FLSA restricts the hours that youth under 16 years of age can work and lists hazardous occupations too dangerous for young workers to perform.
There are laws put in place to protect employees from discrimination. These employees are part of a protected class of individuals that may not be discriminated against due to race, religion, age, sex, nationality, disability, and genetic information. It is imperative that you follow these anti-discrimination laws during the interview and hiring process.
Title VII of the Civil Rights Act of 1964 prohibits employment discrimination based on a number of protected classes. Although you can deny employment to someone because you have found another candidate who is more qualified, you may not deny employment for any reason due to race, color, religion, sex, or national origin, as well as a host of other protected classes. A violation of this law will occur if an employer refuses to hire a qualified candidate because of their genuinely held religious beliefs or practices.
The Civil Rights Act (CRA) of 1991 was an amendment of the original 1964 law, but did not replace its main tenets. It further defines that the burden of proof resides with the employer in most cases and also refines the severity of action available to courts when ruling on monetary remedies for plaintiffs. This Act provides for monetary damages if employers intentionally discriminate when making employment decisions. A violation of this law will occur if an employer allows a hostile work environment to persist, where an employee is subjected to offensive comments or actions based on their protected status.
The EPA (Equal Pay Act of 1963), which is part of the FLSA and administered and enforced by the EEOC, prohibits sex-based wage discrimination between men and women in the same establishment who perform jobs that require substantially equal skill, effort, and responsibility under similar working conditions.
The protection of wage equality is essential for a healthy workplace. This Act protects all workers who perform substantially equal work as their colleagues in the same establishment from sex-based wage discrimination. An employer could violate this law by paying a woman less than a man for the same or similar job duties based solely on their gender.
The Age Discrimination in Employment Act (ADEA) protects certain applicants and employees 40 years of age and older from discrimination on the basis of age in hiring, promotion, discharge, compensation, and in regards to terms, conditions, or privileges of employment. A violation of the ADEA will occur if an employer refuses to hire a qualified applicant solely because they are over the age of 40.
Titles I and V of the Americans with Disabilities Act (ADA), which is effective for employers with 25 or more employees, prohibits employment discrimination against qualified individuals with disabilities. It also highlights employers’ inability to discriminate against otherwise qualified individuals with disabilities, both in the private sector and state and local governments. A violation will occur if an employer fails to provide reasonable accommodations to a disabled employee, such as adjusting a work schedule for someone with ongoing medical treatments or providing a sign language interpreter for a deaf employee.
Under Title II of the Genetic Information Nondiscrimination Act (GINA), employers cannot utilize genetic information when making employment decisions. This rule strictly prohibits employers from requesting, obtaining, or disclosing genetic information, including family medical histories that determine if an individual is at risk for certain diseases or conditions. A violation of GINA will occur if an employer decides to fire an employee after learning they have a genetic predisposition to a particular disease.
Certain laws related to specific industries or groups of workers need to be followed by all employers when hiring these types of employees.
Government Contracts, Grants, or Financial Aid
Although specifically relevant for companies that receive government funding, do not ignore regulations that companies you may partner with have because once you conduct business with them, you may also be required to adhere to the same stipulations.
Recipients of government contracts, grants, or financial aid are subject to wage, hour, benefits, and safety and health standards under the following:
- The Davis-Bacon Act requires payment of prevailing wages and benefits to employees of contractors engaged in federal government construction projects.
- The McNamara-O’Hara Service Contract Act sets wage rates and other labor standards for employees of contractors furnishing services to the federal government.
- The Walsh-Healey Public Contracts Act requires payment of minimum wages and other labor standards by contractors providing materials and supplies to the federal government.
Uniformed Services Employment and Reemployment Rights Act (USERRA)
Certain people who serve in the armed forces have a right to reemployment with the employer they were with when they were called to report for service. This includes those called from the reserves or National Guard. It is important to know this during the recruitment process if a returning service member requests their position or a similar one back.
Several agencies administer programs related solely to the construction industry. The Occupational Safety and Health Administration (OSHA) has special occupational safety and health standards for construction; the Wage and Hour Division, under Davis-Bacon and related acts, requires payment of prevailing wages and benefits.
The Office of Federal Contract Compliance Programs enforces Executive Order 11246, which requires federal construction contractors and subcontractors, as well as federally assisted construction contractors, to provide equal employment opportunity; the anti-kickback section of the Copeland Act precludes a federal contractor from inducing any employee to sacrifice any part of the compensation required.
Migrant & Seasonal Agricultural Workers
The Migrant and Seasonal Agricultural Worker Protection Act (MSPA) regulates the hiring and employment activities of agricultural employers, farm labor contractors, and associations using migrant and seasonal agricultural workers. The Act prescribes wage protections, housing and transportation safety standards, farm labor contractor registration requirements, and disclosure requirements.
The FLSA exempts agricultural workers from overtime premium pay, but requires the payment of minimum wage to workers employed on larger farms (farms employing more than approximately seven full-time workers).
The Act has special child-labor regulations as well that apply to agricultural employment; children under 16 are forbidden to work during school hours and in jobs deemed too dangerous. Children employed on their families’ farms are exempt from these regulations.
The Immigration and Nationality Act (INA) requires employers that want to use foreign temporary workers on H-2A visas to get a labor certificate from the Employment and Training Administration certifying that there are not sufficient, able, willing, and qualified US workers available to do the work.
Frequently Asked Questions (FAQs):
During a job interview, you can ask questions about the applicant’s skills, experience, and ability to perform the job. This could include their education, previous job responsibilities, and how they would handle hypothetical work situations. It’s also permissible to ask about the applicant’s eligibility to work in the US, though you cannot ask if the person is a US citizen.
However, avoid questions that could be considered discriminatory or violate Equal Employment Opportunity Commission (EEOC) laws. These include questions about race, color, religion, sex (including pregnancy status), national origin, age (40 or older), disability, or genetic information. For example, asking if an applicant plans to have children or about their religious practices is inappropriate.
If you wish to conduct a background check on a prospective employee, you must comply with the FCRA. Here are some steps to follow:
- Get written consent: Before conducting a background check, you must inform the applicant in writing and get their permission.
- Provide pre-adverse action disclosure: If you plan to reject a job application based on the background check, you must give the applicant a copy of the report and a “Summary of Your Rights Under the Fair Credit Reporting Act” before you take the adverse action.
- Send an adverse action notice: If you decide not to hire the applicant based on the background check, you must send them an adverse action notice.
Pre-employment testing can be useful for evaluating a candidate’s suitability for the job. However, these tests must be relevant to the job and not used to discriminate. In the advancing age of artificial intelligence (AI), employers are also held liable for AI screening software that may discriminate against applicants.
Non-compete agreements are contracts that prevent an employee from working for a competitor or starting a competing business for a certain period after leaving your company. The enforceability of these agreements has recently been brought into question, even at the federal level. Some states, like California, have stated that non-compete agreements are simply unenforceable.
Internship programs must comply with the FLSA. According to the Department of Labor, there are six criteria for when an intern is considered a learner/trainee and not an employee (thus not subject to minimum wage requirements). These include the internship being similar to training given in an educational environment and the internship being for the benefit of the intern, not the employer. Many employers mark workers as interns to get around paying them, and, in many cases, the worker is not an intern.
Employers that know about and follow employment laws during the interviewing and hiring processes make better hiring decisions resulting in a stronger team. The fundamental goal of employment law is a continued effort to ensure workers have fair equity and work-life balance, and job candidates have fair access to employment opportunities of interest.