Running a small business isn’t just about managing finances and growing your brand—it’s also about treating your employees fairly and following labor laws. Many small business owners don’t intentionally break employment laws, but ignorance isn’t a defense when the Department of Labor comes knocking. Failing to comply with worker protections can lead to lawsuits, fines, and reputational damage that could sink your business.
I have spent my career standing up for the underdog—whether that’s a small business owner navigating complex regulations or an employee fighting back against exploitation. I believe the law should be a force for fairness, not a tool for those with power to abuse those without it. That’s why small business owners must understand employee rights and labor laws—not just to protect themselves but to ensure their employees are treated with dignity and respect.
Understanding Wage and Hour Laws
One of the most common legal issues small businesses face is violating the Fair Labor Standards Act (FLSA), which governs wages and overtime pay. Too often, businesses misclassify employees, fail to track work hours properly, or assume salaried workers are exempt from overtime when they are not.
The FLSA requires that non-exempt employees be paid at least the federal minimum wage and receive overtime pay at 1.5 times their regular rate for any hours worked over 40 in a week. State laws often go even further, mandating higher minimum wages or additional worker protections. If you’re not sure whether your employees are classified correctly or whether you owe them overtime, you need to find out—before a complaint is filed against you.
Misclassifying workers as independent contractors is another dangerous pitfall. Just because you call someone a contractor doesn’t mean they legally are one. The IRS and Department of Labor look at the level of control you exert over the worker’s tasks, schedule, and responsibilities. Get this wrong, and you could face massive fines and be required to pay back wages and benefits.
Preventing Discrimination and Harassment in the Workplace
Every business—no matter its size—must comply with federal and state anti-discrimination laws. The Equal Employment Opportunity Commission (EEOC) enforces laws that prohibit workplace discrimination based on race, gender, age, disability, sexual orientation, religion, or national origin. Employers who fail to provide a workplace free from harassment and discrimination open themselves up to lawsuits that could cripple their business.
It’s not enough to simply avoid discrimination—you need to actively prevent it. This means implementing clear anti-harassment policies, conducting regular employee training, and establishing procedures for reporting and addressing complaints. Employees need to know that if they experience discrimination or harassment, their concerns will be taken seriously and addressed without retaliation.
Small businesses often operate like close-knit families, which can lead some owners to believe they don’t need formal policies. That’s a mistake. Workplace discrimination lawsuits don’t just happen at large corporations. A single complaint from an employee—valid or not—can lead to a legal battle that drains your resources and damages your reputation.
Understanding Employee Leave and Benefits Requirements
Many small business owners assume that because they have a small staff, they don’t have to provide benefits like paid leave or health coverage. While it’s true that some labor laws apply only to businesses of a certain size, others apply regardless of how many employees you have.
The Family and Medical Leave Act (FMLA) requires businesses with 50 or more employees to provide up to 12 weeks of unpaid leave for serious medical conditions or family caregiving. But even if you aren’t covered by FMLA, some states have their own family leave laws, and failing to comply can result in serious legal consequences.
Paid sick leave is also becoming a legal requirement in many states and cities. Even if your business isn’t legally required to offer it, providing paid time off can improve employee retention and morale. A workforce that isn’t afraid to take sick days is healthier, happier, and more productive—making it a good investment, not just a legal obligation.
Avoiding Wrongful Termination Claims
Small business owners often assume they can fire employees at will, but wrongful termination lawsuits are a growing risk. Even in at-will states, you cannot fire someone for illegal reasons, including discrimination, retaliation for whistleblowing, or exercising their legal rights.
Retaliation claims are particularly dangerous. If an employee complains about workplace conditions, harassment, wage violations, or discrimination, and you fire them shortly after, they may have grounds for a lawsuit. Employers often claim they had other reasons for termination, but if the timing looks suspicious, you could be in trouble.
To protect your business, document everything. Performance reviews, disciplinary actions, and employee complaints should all be recorded in writing. Having clear records showing that an employee was fired for legitimate business reasons—not as retaliation—can make the difference between winning and losing a case.
Building a Business That Respects Workers’ Rights
Owning a business comes with responsibilities—not just to your customers, but to your employees. Ensuring that workers are treated fairly isn’t just about compliance with the law—it’s about building a business that values integrity and fairness.
Taking the time to understand labor laws, implement proper policies, and treat employees with respect doesn’t just help you avoid legal trouble—it helps your business thrive. Employees who feel valued and protected work harder, stay longer, and contribute to a stronger workplace culture.
The law exists to protect people—both business owners and workers. By understanding and respecting employee rights, you don’t just protect your business from lawsuits—you build a company that people want to work for. And in the long run, that’s what makes businesses successful.
About the Author: Nick Harrison is an attorney, advocate, and public servant who has dedicated his career to fighting for justice. He has gone head-to-head with powerful institutions, challenging discriminatory policies, defending veterans, and standing up for those who have no one else in their corner. From taking on high-profile legal battles to helping small businesses and nonprofits navigate complex legal issues, he brings both fierce advocacy and unwavering support to those he represents. His work has not only changed lives—but changed laws. With experience in litigation, policy reform, and leadership under pressure, Nick is committed to using the law as a force for good and ensuring that no one is left behind.
