Are there legal requirements to hiring an employee? (Employee Series)
Our team will be the very first to tell you that we are not attorneys and cannot offer legal advice, but we’re here to point you in some helpful directions so you can get started on your journey to hiring an employee!
We highly recommend speaking to your attorney to see if there is anything you need to be aware of for your company.
If you’re jumping into the mid-point in our series and you haven’t started from the beginning, please be sure to check out our intro to get started!
There are just a few things we’d like to point out that can help you jumpstart your research on what hiring requirements are necessary for your company.
You’ll first want to know where your employees are going to work. Once you know that, you’ll need to look up the State Department of Labor in addition to applicable City pages that will provide additional workplace information.
In general, if you fall under multiple jurisdictions (federal, state or city), the more “generous” law is going to prevail. This means if the state minimum wage is $12 but your city says it’s $15, you’ll need to pay your employees a minimum of $15/hour. “Generous” means in terms of the employee, not your company.
Minimum Wage Laws
Each state and many larger metropolitan cities have minimum wage laws that differ from the federal rate. Minimum wage means that if you’re hiring someone (hourly, salary, commission, piece work, etc.), you have to calculate how much they’re paid and divide it by the number hours they worked. That number has to be above the minimum wage requirement. Hourly and salaried individuals are easy to calculate. It’s only when individuals are paid commission or piece work that it can get complicated.
For employees who are paid by commission or piece work, you must calculate their rate on an hourly basis each pay period. If their pay doesn’t meet minimum wage requirements, they will need to be paid enough to reach the minimum wage.
Some states update their minimum wage requirements every year, so it will be important for you to continue monitoring your state for updates.
Age Requirements (Child Labor)
If you’re thinking of hiring youth, it’s important to look up what the age and hourly requirements for the area where they’ll be working.
There are certain requirements for teenagers, which are different for younger pre-teens. Different rules also apply during the summer months when there is no school, for weekends vs weekdays, and affect how late they can be at work and how many hours per day they can work. There are also regulations on the type of work that can be performed by individuals under 18 years old.
Another thing to consider is hiring your children to perform work.
There may be different rules in each state, but in Minnesota, for example, a child of any age can work for a parent if one or both of the parents are the only owners of the business. If you are the sole owner of your business and you want to hire your 10-year-old to help with an age-appropriate task, you can pay them on your payroll (and there are some payroll tax exemptions you can claim when you hire your child)! But if you’re in a business with a non-parent, the child must be at least 12 years old to begin working in Minnesota.
Overtime Laws
Most people think of overtime as anything over 40 hours per week. That is accurate according to the federal overtime law, but of course there are states that like to change things up.
For example, in California, overtime is based on “hours per day.” That means if you work 9 hours one day but 7 hours the next, you’ll receive 1 hour of overtime in California. Employees will receive time and a half (x 1.5) for all hours in excess of 8 in one day, and they are eligible to receive double pay (x 2) for all hours in excess of 12 in one day.
In Minnesota, there is a slight difference for small employers, where employees are eligible for overtime over 48 hours instead of 40.
Rest and Lunch Break Laws
Another item you’ll want to look up is “required breaks for employees.” This means both paid and unpaid breaks. You can usually find this information in the same section of your state website as overtime. For example, this is on Minnesota’s state website >
Exemption Status
One thing to know about these laws is that it doesn’t apply to only hourly individuals. It can also apply to some employees who are paid salary or even commission, depending on their role. You’ll need to determine whether each of your employees is “exempt” or “non-exempt.”
What’s the Difference Between Exempt and Non-Exempt?
Exempt employees are “exempt” from the Fair Labor Standards Act's (FLSA) overtime laws, minimum wage requirements, and/or child labor laws.
Non-exempt employees are, you guessed it, not exempt from FLSA.
You also cannot choose whether your employees are exempt or non-exempt. The definitions of these are determined by the role the employee is performing. They are listed in the FLSA’s Exemption Criteria. There are also some changes looming to the criteria, so keep an eye out for future updates.
The roles are generally defined for exempt employees in executive, administrative, or professional positions who are paid a salary.
Employees who perform technical or manual tasks are generally considered non-exempt.
State Mandated Sick Leave
Beginning in 2023, many states and some cities implemented a mandatory sick leave for employees who work in certain areas. There are complexities to these rules so it’s important to research what is required for the specific city and state where your employee is working.
In general, most employees will be eligible to earn sick time, even if it’s only part-time. This sick time/leave is usually only able to be used for sick and safe time (safety from abuse) away from work. Note: this is not a mandated vacation policy for your employees.
We wrote about this new law in a blog about Minnesota’s Earned Sick and Safe Time (ESST) earlier. This is specific to employees who work in Minnesota, so if your employee works in another state, we encourage you to look up the requirements in that location.
Handbooks & Other Notices
We’ll wrap up this section by recapping a few other employer requirements.
Based on the MN Wage Theft Law, employees must receive a written offer letter before they start work. This can be a form provided by the Department of Labor, or you can create a letter that includes all of the information required on the form.
Examples of what this offer letter should include begins with the employee’s agreed upon wage rate or salary, exempt or non-exempt status, eligibility for time off or benefits, who they will report to, contact information of your company, and more.
The MN Wage Theft Law also lets you know what you will be required to list on your employee’s paycheck. This would specificaly include things like your company’s contact information, the employee’s rate of pay and total pay earned, all withholdings, net pay received, and any time-off accruals, including the new MN ESST.
While it’s not required to provide an employee handbook, it is recommended. Some payroll software options can help you create one for your location, or you can reach out to an attorney or HR company for assistance. In addition to a handbook, there are other workplace posters that are required to be posted and visible to employees where they work.
Most of the time, hiring an employee is straight-forward and simple, but sometimes it can get confusing. We want to help point you in the right direction when you have questions.
We hope this prepares you for hiring employees either now or in the future, and we wish you the best on your business journey!
No assurance is given that the information provided in this blog is comprehensive in its coverage or that it’s suitable in dealing with each individual’s particular situation. This blog article exists to provide general information only and does not constitute tax or legal advice, and cannot be used or substituted for tax or legal advice. Savvy Bird Consulting, LLC is not responsible for the implementation or outcomes this material may have.