PRE-EMPLOYMENT SCREENING AND LEGAL HANGUPS
Many small businesses today are finding it necessary to perform pre-employment screening as a necessary hiring practice in order to avoid lawsuits and costly hiring mistakes. Regardless of the size of your business, it is important to avoid certain pitfalls so that you can safely and systematically ensure that your workforce is both healthy and motivated.
Before delving into thorough background checks, there are potential legal landmines that need to be avoided. First, it is important that as a small business you comply with the Fair Credit Reporting Act and the Americans with Disabilities Act. Under the Fair Credit Reporting Act, your small business is required to have an employee sign a disclosure form granting authorization to perform a background check. This applies to all “consumer reports”. In some states, certain aspects of a criminal record are prohibited from use during a background check. It is important to consult with legal counsel before instituting a new policy of performing background checks.
Under the American with Disabilities Act, employers are restricted from using medical or disability data in the hiring process. This applies to all businesses with 15 or more employees, including both state and local governments. A disability is defined as a physical or mental impairment that substantially limits one or more major life activities. It is important that this category of information not come into play in the hiring process.
One option that many small businesses have chosen is to employ the services of a background checking company. This allows you to obtain accurate and complete information on all candidates while limiting your liability through the use of a third-party background screening company.
HOW TO REDUCE EMPLOYMENT PRACTICES LIABILITY CLAIMS
Employment Practices Liability or EPL claims hit a record high amongst downsizing firms in 2010. Nearly 100,000 discrimination claims were filed with the Equal Employment Opportunity Commission. This is the highest number of cases brought in the EEOC’s history.
The EEOC estimates that the average tally for one of these cases can exceed $235,000.00, which constitutes a substantial drain on both time and resources for small or midsize businesses.
One way to combat this issue is to obtain EPL insurance which is generally avialable through various insurance companies. EPL insurance can protect your business from the financial costs incurred as a result of employment-related lawsuits.
Another protection against EPL lawsuits are improved internal policies and procedures with both anti-harassment and anti-discrimination policies. It is important also that these policies be reduced to writing in an employee handbook which is then distributed to all employees and periodically updated. Regardless of how you protect your business against these types of claims, it is important to note that they are the rise and that a proactive approach to defending them is much more cost-effective than a reactive approach.
SEC STUDY RECOMMENDS MORE OVERSIGHT OF STOCKBROKERS
A study commissioned by the Securities and Exchange Commission indicates that stockbrokers should be subject to the same fiduciary standard of conduct (i.e., placing a customer’s interests above their own) that investment advisors have always been subject to. It is important for a small business owner to understand that your investment advisor has a duty to put your interests above their own. However, a stockbroker is only required to ensure that the products they sell are suitable for their clients. The intention of the SEC is to increase investor protection and decrease confusion in the most practical and least burdensome manner for both investors and brokers/advisors. This higher duty would require that stockbrokers and their firms take a more personal interest in their clients and maintain their clients’ best interests in lieu of their own.
SHIFT IN PAYROLL TAX WILL BOOST TAKE-HOME PAY
New cuts in payroll taxes have altered the take-home pay that most employees will see and most employers will document in 2011. The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 has cut Social Security tax withholding two percentage points from 6.2% to 4.2% of wages paid. New withholding tables are now available from the Internal Revenue Service. Given the lateness with which this change was implemented, employers were asked to start using the new tables as soon as possible in 2011 and no later than January 31st. If indeed any offset is appropriate for the month of January, and employers are unable to make that change until January 31st, offsetting adjustments should be made as soon as possible and no later than March 31, 2011. No new W-4 is required from your employees and in all likelihood, if you use a payroll company, they will ensure that the proper withholding changes are effectuated.
TAX BREAKS FOR SMALL BUSINESSES
With the passage of the Small Business Job Act in the fall of 2010, many new business tax breaks have been introduced which could benefit your small business.
Under Section 179 of the Tax Code, business expenses can be claimed in the year in which they were made rather than depreciating the cost over several tax years. The Small Business Jobs Act of 2010 allows for up to $500,000.00 in business expenses to be written off under Section 179 for both 2010 and 2011. That doubles the prior limit allowing the average small business to write off all of its asset and equipment purchases in the year of purchase.
Healthcare costs can also be included on Schedule SE rather than solely on Form 1040 to allow for self-employed taxpayers to subtract medical insurance costs from their gross income to get a lower, adjusted gross income. Also, the Small Business Act has de-listed cell phones and other similar telecommunications equipment, effectively removing the requirement that phone users keep updated logs of business versus personal use. This allows the phone to qualify as a business deduction much easier. There are also many good tax breaks which many people forget including expenses related to the business use of your car, out-of-town travel expenses, seminars, classes and training to improve your knowledge and skills in your current profession, as well as membership fees in trade organizations, professional groups and chambers of commerce. Finally, internet access charges related to business use can be deducted for tax purposes.
Prepared by John M. Coyle