Ep. 86: Your Guide to Federal Employment Law

Get expert tips on wage and hour law changes in 2026 and other employment laws to keep in mind. NFIB’s Beth Milito, Vice President and Executive Director of the Small Business Legal Center, and Associate at Foster Swift Collins & Smith, Tony Dalimonte discuss the importance for small business owners to know their rights and the current employment laws to protect their business. Listen to the full podcast for more information on best practices to handle employee situations and avoid lawsuits. 

• NFIB’s federal employment law legal guide provides information on federal labor, discrimination, and job-protection laws. 
• NFIB’s webinar with Tony Dalimonte, New Year, New Laws: How to Protect Your Business from Employee Lawsuits 

 To submit your questions or requests for future podcast topics or guests, please email podcast@nfib.org.  

Transcript

SPEAKER_00 0:00

I really sympathize with small business owners because they have so much going on, and employment law sometimes isn't at the forefront of their priorities. And so financially, lawsuits and litigation and investigations they impact small businesses so much more than, again, the Ford or the General Motors, because a$50,000 lawsuit, you know, could put a company out of business if you're just starting up.

SPEAKER_02 0:24

The Small Business Rundown is the official podcast of the National Federation of Independent Business, the member-driven voice of small business. Every two weeks, a new episode offers resources for small business owners and information on relevant laws and regulations. NFIB and our members advocate to keep U.S. small businesses strong and independent in Washington, D.C., all 50 states, and the nation's courts.

SPEAKER_01 0:52

I'm Beth Molito, Vice President and Executive Director of the NFIB Small Business Legal Center. The legal center provides small businesses with a variety of resources and webinars to help them operate their business. Joining me today to discuss employment law and ways to protect your business from lawsuits is Tony Delamante, an associate at Foster Swift Collins and Smith. His practice focuses on counseling employers on best practices and handling general business-related litigation. Thanks for joining me, Tony.

SPEAKER_00 1:22

Thanks so much, Beth. Glad to be here. I'm an attorney in Michigan at Foster Swift, and always appreciate the opportunity to talk about small businesses, you know, because this is what I do on a daily basis, and their issues really impact them directly. And so always have fun talking about it.

SPEAKER_01 1:39

So Tony recently joined me for a webinar on the topic of employment law and human resources and the challenges that small businesses face in these areas. And I'm excited that today we're going to answer some of the questions that we were unable to answer during the webinars live event QA. And we did receive dozens of questions. You were a very popular speaker, Tony, and thank you so much for taking time out again to join us for this follow-up podcast.

SPEAKER_00 2:06

Glad to hear that. I'm glad everyone enjoyed it.

SPEAKER_01 2:09

So, like many of your clients, NFIB members, because they are small, I think most NFIB members, and we say our average member has between five to ten employees. And because of their size, they don't typically have a dedicated human resource professional. So more times than not, HR matters are handled by the business owner, which can be challenging, particularly as employment laws have gotten more and more complex. And I think all this puts businesses at a greater risk. To start off, Tony, can you just talk a little bit about why you think small businesses are at risk of an employee lawsuit?

SPEAKER_00 2:48

Yeah, absolutely. And like you said, in large companies, you have HR teams and you have in-house counsel and compliance officers. In small businesses, it's usually the owner or, you know, a couple employees handling the payroll at night and managing the employees at lunch and reviewing contracts while also trying to run the business. And, you know, a lot of times when you have small businesses, that sort of flexibility is how you succeed and how you sort of operate when you just have a couple employees. But the reality is employment law doesn't necessarily, you know, scale down depending on you know your number of employees. And so you guys put out a great resource that has all the federal laws in there. And there's a range of thresholds where you know certain laws apply if you have 15 employees or 20 employees or 50 employees. But if you reach those thresholds, you have to comply just like Ford Motor Company or just like General Motors. And so, you know, the lawsuits I see aren't because a business owner was negligent or is trying to violate the law. They start because policies are unclear, or you didn't have good documentation, or you're just doing too many things at once, and there's some oversight, or you have a manager who's handling two different situations differently. So it's usually not malicious, but I really sympathize with small business owners because they have so much going on, and employment law sometimes isn't at the forefront of their priorities. And so financially, lawsuits and litigation and investigations they impact small businesses so much more than, again, the Ford or the General Motors, because a$50,000 lawsuit, you know, could put a company out of business if you're just starting up. So it's really important. And, you know, that's why I like to try to get ahead of things and give uh small business owners the tools to sort of spot risk and protect themselves.

SPEAKER_01 4:54

That's great advice, Tony. And you mentioned policies too, and and then your conclusion there, last statement with the tools. So policies can be very important tools, and I know you talked about that during the webinar too. Are there any recommendations you have for a small business owner who is looking to create or possibly update an employee handbook? And I guess you know, if I could break this down to two questions, do you recommend that small businesses have an employee handbook? And if so, are there some must-have policies or any do's or don'ts when it comes to drafting the handbook?

SPEAKER_00 5:28

Yeah, absolutely. It's a really good question. Yes, I do recommend that small businesses have a handbook in terms of updating. If you do already have a handbook and it's one that was created 25 years ago and it's stuck under a cabinet somewhere and it's collecting dust, it's always good to pull it out and have an attorney look over it. I would caution against finding one online somewhere or you know, using AI to create one just because, you know, depending on what state you're in, there's you know, certain laws that may or may not be applicable to you. So you just want someone who's experienced in employment law to be able to give you that advice. And a lot of times it's a relatively inexpensive process. So, yes, I would definitely recommend that you have a handbook, update your handbook. If you already have one and you've sort of had it updated the last couple years, I generally recommend that once a year pull it out and maybe send it to your lawyer or an employment lawyer. Just be like, hey, you know, can you do a quick once-over? Let me know if there's anything that needs to be updated or anything that needs to be changed. In terms of things that should be in the handbook, there's a couple really important policies that I always recommend that you have in there, or and those are uh an at-will disclaimer. So telling all your employees that they're at-will and you know, nothing creates a contract, and the employee handbook doesn't create a contract with employees. That one's really important. Having an anti-discrimination and an anti-harassment policy, that's really important to the extent you get into litigation. It's always good for me or your employment counsel to be able to point to that handbook that says, no, you know, this company has a policy of not discriminating against its employees. You want to have a complaint procedure just to allow employees to voice concerns and sort of show that you have an open door policy and that's good for just general culture so that you can listen to your employees and you can respond to their concerns. Uh, it's always good to tell employees how to request accommodations, tell them, you know, what the wage and hour policies are, who's considered full-time, is overtime required to be approved beforehand. Make sure you tell employees the leave policies, so how much PTO you get? Do you have sick leave? Is there maternity or paternity leave? Discipline policies. So is it sort of a general discipline policy or is it progressive discipline? Is it, you know, one strike and you get a verbal warning, and two strikes you get a written warning? It doesn't matter either way, but again, I and I think I talked about it on the webinar, just you want to make sure that you're consistent, your managers know what the policies are, and you can have the best handbook in the world, but if you're not following the policies that are actually in the handbook, then it's it, you know, that's not good and it's not going to help or protect you if litigation comes up. So those are kind of the sort of there's lots of other policies you should include, but those are sort of the big ones.

SPEAKER_01 8:34

That's all very helpful and really good information. We'll be right back with some frequently asked questions from the webinar.

SPEAKER_02 8:46

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SPEAKER_01 9:17

Welcome back. NFIB support line often receives questions about different employment laws, and we heard many of these on the recent webinar we hosted with Tony. So I'm excited today to go through a few of these questions that we were unable to answer during the webinar. And I have grouped some commonly asked questions together. And we received several on wage and hour and specifically related to overtime. So here, Teen, the common question that we get and we receive during the webinar too what do we do when we've received a claim from an employee claiming that we owe them overtime?

SPEAKER_00 9:52

First is don't ignore it, right? So uh take it seriously and don't assume that the employee is wrong. So wage and hour laws are very technical. If it's a misclassification issue, just because someone is salaried doesn't necessarily mean that they're exempt from overtime. So, you know, there's tests that you have to satisfy in order for uh an employee to be salaried. But if an employee comes to you and says, hey, I was looking at my paycheck and my hours, and I think you owe me overtime, take it really, really seriously. The worst that happens is you overpay, in which case you may save yourself from a lawsuit. Now, I'm just talking if this is sort of an informal complaint. If there is a formal complaint from either a state or a federal agency, again, definitely don't ignore it. Engage legal counsel, make sure that you keep your time records around. Whether the issue is unpaid overtime or a misclassification, you know, I think I mentioned it on the webinar. The wage and hour issues can become really expensive. They come with attorney's fees for the plaintiff's attorney bringing the lawsuit, and they can come with sort of penalty damages as well, and they can escalate really quickly. So I think the biggest sort of takeaways are respond quickly, do a review of your payroll records, see if you owe the employee overtime, if that's what they're claiming. The thing that comes up a lot is an employee works overtime when they weren't authorized to do so, or you have in your handbook that says, hey, I need to approve it first. That's fine. And you can discipline an employee for violating those particular policies, but you have to pay them for any time worked. That's sort of the overall theme on wage and hour issues is that employees must be paid for the time that's worked.

SPEAKER_01 11:40

Thank you for that advice and that information. That was very helpful. And I can also, if it's okay, I'm going to do a plug for NFIB's wage and hour handbook, which runs through Tony. You mentioned the tests for determining whether an employee is exempt or non-exempt. And you are correct, Tony. That is an area where I know it's easy to get tripped up on because an employer will call an employee salaried and assume they are not entitled to overtime. So check out NFIB's wage and hour handbook for more information on that. Second topic that we received questions on during the webinar was leave. And there was a question from an employer who had an employee who had requested four months off for surgery. Is a small business owner required to give that much leave, Tony?

SPEAKER_00 12:23

So it depends. If you have 50 or more employees, the Family and Medical Leave Act will apply, in which case that employee can take FMLA leave up to 12 weeks. I mean that usually runs concurrently with your PTO. So that's sort of one piece. If you have less than 50 employees, then there's a couple other considerations that come into play. First is the Americans with Disabilities Act, is the employee requesting an accommodation, in which case you have an obligation to engage in the interactive process and determine if there is an accommodation that you can provide. And reasonable is kind of the key word here. And so four months of leave might be reasonable in some situations. In other situations, it might create an undue hardship for the business. It just kind of depends. You know, if you're Boeing or General Motors, four months of leave, if it's unpaid leave, for example, is probably not going to create an undue hardship on Boeing. But if you only have 15 employees and you can't really have an employee go out for that long, then maybe it would create a hardship on your business. It's really a fact-specific situation. And then the other aspect of it is do you allow any sort of personal leave in the handbook? A lot of companies they'll add after your PTO and your vacation and your sick leave, some sort of general policy that says, hey, subject to the company's discretion, we'll review any requests for personal leave. My recommendation would be four months is not that long. If an employee is having surgery, if you don't have to provide FMLA and the leave is just unpaid, then you know what's the harm? I don't see any harm in letting them go off. And I think you're saving yourself from a potential disability issue or, you know, any other legal issues there. So I would recommend that you allow that sort of four-month leave. The mistake businesses make is automatically saying yes or automatically saying no without sort of taking a step back and reviewing, be like, hey, you know, is this that big of a deal to let them out for a couple months for surgery? So those are kind of the considerations that I would go through.

SPEAKER_01 14:38

Thank you, Tony. And thank you also for reminding the listeners too the importance of having a leave policy, because this can provide some, you know, very helpful information for the employees so they know when they're going in and asking, too. Sort of everybody knows the ground rules, if you will. And I think that's very important. Okay. So terminated employee lawsuits, not a fun area for a small business owner to deal with when they're hit with a complaint from a former employee who's coming back and saying they were wrongfully terminated because of X, Y, and Z, right? So do you have some general tips for employers when it comes to terminating employees, particularly if it's for you know misconduct or the employer just suspects that, you know, this is not a situation where the employee voluntarily quit. This is the employee was terminated for say misconduct or poor performance. And so the employer in the back of their mind might be thinking, this employee, this might not end well. So any tips that you would recommend in those situations?

SPEAKER_00 15:37

When you're terminating an employee um, you know, in the at-will states like Michigan, where I am, you know, you can terminate an employee for any reason or no reason at all, so long as it's not an unlawful reason. And I deal with termination decisions all of the time. And there always is a reason, right? So you don't have to give a reason, but there always is a reason that someone is going to be terminated. And so uh we are all human. I think it's bad practice to not give an employee a reason when you do terminate. And I think it allows the mind to wander, right? So if you just fire someone and they they never hear from you again, they're like, Well, why'd they fire me? Is it because of my race? Is it because of my gender? Is it because of my sex? You know, I think it introduces unnecessary sort of wandering when if they're fired for misconduct or if they were fired for performance, just say that in a termination decision. Now, if you're going to terminate someone for misconduct, for example, um, I always look to the documentation. You know, do you have so what what was the particular misconduct or the policy violation? And I always look at the personnel file. Has this employee been disciplined more than once? Do they have any disability sort of requests or accommodation requests? Have they been on FMLA? You know, what are the potential risks that come with terminating this employee? Now, if you have someone that has been on FMLA for 12 weeks, and then the first day they come back, you're saying that they violated a particular policy and you want them fired. When you don't fire other employees for that same reason, you know, that's one that I would certainly give pause to. Or an employee requests an accommodation, and then the same day you're saying they violated some other policy and you want to fire them. So those are things that definitely give me pause and I think introduce some, you know, real business risk for litigation. But if you do receive a complaint from a former employee, whether that's a lawsuit or a state agency complaint, you know, again, don't ignore it. Call a lawyer. Once a formal complaint is filed, it sort of starts the snowball process of you know, you having to respond, and your response is really important. Make sure you preserve documents, don't delete anything that can turn a case that may be favorable for you into, you know, why did you delete documents? And it's just an unnecessary fight that you'll have to pay for. Don't retaliate. If one of your employees says they're gonna sue you, don't fire them. That's retaliation. Again, review the personnel file. If there are witnesses, if you're saying that an employee you want to fire someone for an inappropriate comment that they made, make sure you investigate it, talk to the people who the comment was allegedly made to, figure out if there are other witnesses, document those investigation notes, talk to the person who allegedly made the statement. All of these things need to be done before you make a termination decision because if you do get in litigation, all of that is going to be fly spec, and all of that is going to be front and center. And what you do allows me or you know, your defense counsel to say, no, no, no, they, you know, they did all of these things, they documented it throughout the entire process. It's very obvious that this employee was terminated for this reason. Now, if none of that's there, it doesn't necessarily mean that you will lose your case, but it opens the door to a sort of he said, she said, and uh can make things more uh a credibility determination rather than, you know, this is this is what the company did. So those are kind of my best practices and things that I think about when these issues come up.

SPEAKER_01 19:24

That was incredibly helpful. And we really appreciate your insight into these complex employment laws. I know you covered a lot today, but is there anything else you want to highlight or mention before we go?

SPEAKER_00 19:36

I I've said it a couple times. I think just documentation is really important. You know, review your handbook. If you're using independent contractors, make sure that they are truly independent contractors and they're not employees. Um, make sure you pay all your employees, including for overtime. And just a practical note is we don't live in a vacuum. You can't eliminate all risk. Sometimes business decisions need to be made, but you know, the important thing is managing that risk and managing it intelligently and making sure that you're reviewing and um when you're going to make one of these decisions, you understand the sort of exposure and potential risk, and you're sort of walking through that process and you know, you're thinking about this decision-making process. So those are sort of my best practices, and I think we've covered everything, and you've heard me ramble on long enough.

SPEAKER_01 20:31

Not at all. That was not all rambling. It was great tips, great information, and thank you also for highlighting some of the resources that we have available for NFIB members on our website, our handbooks, a great resource for anyone who is interested. So thank you again, Tony. Today's show notes will include a link to our January webinar if you'd like to hear more from Tony on this topic. If you're a small business owner with questions, the Small Business Legal Center is here to help. Please contact our support line at 800 552 NFIB or email us at info at nfib.org. The Small Business Legal Center also offers a series of PDF legal guide booklets, which cover a broad collection of common topics we hear about from small business owners. Several of our guides, like the guide to creating an employee handbook and the guide to federal employment law, can be helpful additional resources related to today's conversation. And you can find links to them in this episode's show notes as well.

SPEAKER_02 21:28

Thanks for joining us for this week's episode of the Small Business Rundown. Your continued support helps us amplify the issues that matter most. If you liked this episode, please help small business owners find the podcast by giving it a rating, like, or review. You can find us at nfib.com and on YouTube, X, LinkedIn, Instagram, and Facebook.