Hiring is a fundamental part of business, and the right hires can determine an organization’s success. While bringing on new employees can be an exciting indicator of growth, employers should approach this process with caution. When hiring employees, there are many legal requirements and risks an employer may face.
Requirements
Here are certain steps employers should take in order to successfully and legally onboard its first employees:
- File with the Federal Government. An employer must obtain an Employer Identification Number (EIN) before it can hire employees. In addition, employers must require all employees to complete a W-4 form, and retain each W-4 for at least four years.
- File with the State. Employers may be required to register its employees for the purposes of tracking child support obligations, state taxes, workers’ compensation and unemployment insurance.
- Understand Immigration Issues. Employers must not hire or employ workers not legally authorized to work in the US. Employers should require all employees to complete Section 1 of a Form I-9 the day they begin work, and Section 2 of Form I-9 within three days of starting work. An employer should retain each employee’s Form I-9 for the longer of three years after hiring or one year after employment ends. In North Carolina, employers with 24 or more employees are required to use the U.S. E-Verify system. Throughout the hiring process, employers should ensure they are not discriminating based on national origin or citizenship.
- Comply with Insurance Requirements. Employers may be required to maintain or support insurance programs to protect their workers, such as Workers’ Compensation Insurance, Unemployment Insurance and State Disability Insurance.
- Workers Compensation. Workers Compensation Insurance is generally the exclusive remedy for employees who are negligently injured as a result of an accident the course and scope of their employment and it functions to protect employers from employees who might otherwise take legal action against them. Unemployment Insurance is paid into and funded by state and federal taxes paid by employers and is available only to employees, not to independent contractors.
- Other Insurance. Employers should also consider maintaining other forms of insurance relevant to their business, including Commercial General Liability Insurance, Directors and Officers Insurance, and Employer Practices Liability Insurance.
Risks
In addition to the requirements listed above, employers should be aware of and understand the risks found at every stage of the hiring process. And employer could face employment discrimination claims or even break federal, state and local law by performing a background check incorrectly. For this reason, it is important to note these common sources of risk and how to handle them:
- Protect Yourself from Employment Discrimination Claims. These claims can be triggered by many aspects of the recruiting process, including: advertising and job description; the interview process; rejecting an applicant; accepting an applicant; and setting salaries and wages. To minimize the risk of such claims, employers should: determine applicable federal, state and local laws related to protected classes; ensure those involved in the recruitment process are properly trained; identify the essential qualifications and functions of each position, and focus on objective criteria in the interview and selection process.
- Conduct Background Checks Properly. Background checks are important to ensure new hires will mesh well with your work culture but they can expose employers to substantial legal and financial risks if the employer fails to follow federal, state or local procedure.
- Consumer Reports. Before conducting a consumer report for employment purposes, an employer must notify the applicant in writing; obtain the applicant’s written consent; and certify to the consumer reporting agency that it has complied with the FCRA. Additional requirements are imposed on an investigative consumer report.
- Criminal Background Checks. Employers should also understand the risks involved in criminal background checks. Federal discrimination laws prohibit pre-offer criminal background checks. In addition, treating job applicants with the same criminal record differently based on their race, color, religion, sex or national origin is forbidden under federal law. Even if an employer applies criminal record exclusions uniformly, if its actions disproportionately impact a certain group, the employer may be violating the law. In North Carolina, an employer is prohibited from inquiring about expunged criminal histories and in some local municipalities such as Carrboro, employers are prohibited from making any inquiry into criminal backgrounds until after an initial interview or conditional offer of employment.
- Beware Social Media in Hiring. Social Media in hiring has become an increasingly prevalent tool because of its low cost and ease of access. Many employers search social media for information about prospective employees, even if not officially part of the formal hiring process, but doing so may violate the law. Social media sites can help an employer gather information relevant to an employer’s hiring decision, but it may also provide personal information that an employer would otherwise not be legally permitted to inquire about in a formal interview. Such information that an employer may find on social media but may not use in making its hiring decision includes religious affiliations, genetic conditions, sexual orientation, national origin or age. The law on permissible use of social media during the hiring process are still developing, but an employer can still minimize its legal liability by either refraining from conducting social media searches as a matter of practice, or using a human resources professional to conduct the search.
At Manning Fulton, we have seen many employment issues that could have been avoided if employers had been better informed of the laws surrounding the hiring process. Please let us know if you would like us to put our experience to work in helping you avoid the many legal pitfalls of hiring a new employee.
