More Employees, More Laws: Employment Law and Growing Employers

Over the past year, I have spoken to many employers that fit into two categories – (a) were once small and are now much larger, or (b) were once local and now employ workers in multiple states.  Besides their success, what all of these employers have in common is the need to evolve their human resources practices to ensure employment law compliance for their changing workforces.

There are two essential considerations for understanding the application of employment laws to your workforce:  (1) location of the worker; and (2) size of the workforce.  Why?  Because different laws apply in different jurisdictions, and different laws apply to different-sized employers -- and the laws keep changing. 

Employment laws exist at the federal level, the state level, and the local level (and there is also non-statutory common law dealing with employment that is created by courts).  Where employment laws cover the same basic subject matter (such as overtime or civil rights), the employee is entitled to the benefit of the law that provides the greatest protections in the location in which the employee works, if the employer is covered by that law.  Change in work location – across county lines or across states lines – may result in additional coverage, even if the size of the business does not change. 

Examples:

• If your company is located in Maryland, your company is most likely subject to the Fair Labor Standards Act and the Maryland Wage and Hour Law, both of which require the payment of overtime compensation to nonexempt employees at the rate of one-and-a-half times the regular rate for hours worked over 40 in a work week.  If you also have nonexempt employees working in California, they will be entitled to the benefits of California’s (more generous) wage and hour law (computing overtime on a daily and weekly basis; requiring double-time in certain circumstances, etc.).

• If you have employees in Maryland and California, and your vacation policy in Maryland is a “use it or lose it” policy, this policy would not work in California.  Unlike in Maryland, “use it or lose it” policies are not allowed in California.  Therefore, you will need to either change your policy for all of your employees to satisfy the more generous requirements of California, or establish separate policies for employees in different states.

• If you moved your business and all of your employees from Maryland to D.C., you would no longer be subject to applicable Maryland and local laws, but D.C. (and federal) laws would then apply.

  In terms of the size of the workforce, every employment law is based on a threshold number of employees that is required for coverage.  Here is a sample of Maryland and federal employment laws applicable to private sector employers with employee thresholds (list is not exhaustive):

In addition to the state and federal laws listed above, there are many others that have been enacted at the county and municipal level. 

Changes in business practices may also lead to new compliance requirements.  During the recession, many employers saw government contracting as the key to steady business and changed their business to focus on government contracting.  Of course, this was not the boon that some of those employers anticipated, and this additional work came at a price because government contractors are heavily regulated and are often subject to employment laws and reporting requirements that do not apply to private sector employers, such as affirmative action.

How Do Employers Manage This Situation? 

1. Take the time to educate yourself about the laws that apply to your company based on the size of your workforce and the location of your workers, and periodically review for legal updates.

2. Regularly review and update your personnel practices, operating procedures, and handbooks to comply with new or changing legal requirements.  Changes in the law may also impact the enforceability of confidentiality, non-disclosure, non-competition and non-solicitation agreements, severance and release agreements, and employment agreements, so forms should be reviewed and updated regularly.

3. Regularly provide training to managers and supervisors to ensure that they are equipped to comply with ongoing requirements and changing personnel practices and procedures.

4. When planning business changes such as growth in your workforce, expansion into other states or other jurisdictions within the state, or transition to government contracting or other regulated fields, make sure that your due diligence includes learning about new employment laws that will apply when such changes take place (and update and train accordingly).

Melissa Calhoon Jones, chair of the Labor and Employment Group, counsels companies on employment, labor, and immigration issues.  For more information about employment laws affecting your company and other employment concerns, please contact Ms. Jones at 410.752.9765 or via email.

This alert has been prepared by Tydings for informational purposes only and does not constitute legal advice.