Management December 15, 2016 Last updated September 18th, 2018 1,642 Reads share

Businesses and Local, State, and Federal Laws

Image Credit:

Wells Fargo’s

In order to avoid the potential financial and brand reputation fallout, small businesses should have an individual (or group of individuals) that have the time to research, comprehend, and ensure the implementation of practices that ensure that the company adheres to state and federal business laws. (Depending on the business that individual or group might be the business owner, a manager, a member of human resources, or an employee in charge of payroll.)

Upholding the Law: A Never Ending Task

In a perfect world, following the law as an entrepreneur would be a one-time task. You could set up rules and regulations that ensured the company adhered to the law; and then, you could focus on expanding your business while working within the policies that have been enacted.  

Life isn’t that easy. Business owners should expect the need to continually ensure they are operating within the law. Why?

Businesses Change. Small and medium sized businesses are often continually shifting in small and large ways. They grow due to financial success; they expand into new geographic regions; they explore new products and services. Growth can be exciting, but it can also mean new legal obligations that the business must ensure they adhere to.

Here are a few examples:-

Growth due to financial success can lead to an increase in employees. If the business grows to employ more than 50 full-time employees, they become legally bound by the Affordable Care Act to either: provide affordable health coverage or pay a $2000 fine per employee. Small businesses can be hit hard if they don’t realize they are no longer excluded from the law.

Expansion into new geographic regions can lead to new local, state, or federal laws that must be adhered to. Idaho businesses who pay their employees federal minimum wage ($7.25) will need to set-up new wage policies that adheres to state minimum wage ($9.75) if they set-up a new branch in Oregon. Failure to do so would result in legal fallout.

Expansion into new products and services. Businesses that decide to veer into new territory can expect a few new laws they might need to adhere to. For example, a business that delves into the creation of health and medical apps might be legally required to go through an FDA certification process to ensure that it meets medical device legal requirements.  

The Law is Not Static

Businesses should also keep in mind that local, state, and federal law is not static. Legislative bodies, based on a variety of issues, are constantly introducing new bills and implementing new laws that could affect your business.

For example:

  • In 2014, California implemented the Healthy Workplaces, Healthy Families Act that required all employers to offer paid sick leave almost all part-time, full-time, and seasonal employees.
  • In December 2016, a change to the federal overtime laws will require businesses who employ salary employees that earn less than $47,476 annually to pay overtime.

Failure to implement either of those laws by the allotted due date could result in legal action, fines, and the necessity to back-pay employees. Savvy business owners, so they aren’t blind-sided, should keep an eye on any legislation as it is introduced. (If business owners don’t have the time, they might want to give the duty to an employee).

  • You can keep track of all the bills in the US Congress at GovTrack.  
  • You should also be able to find a website to track state and city bills by conducting a quick internet search.

You can check in every once in a way to determine if the bill has been dismissed or is set to be ratified into law.  

The sooner you know about a bill that will be passed, the more time you will have to create new guidelines and strategies to adhere to the bill. The sooner the company can create a plan, the higher the chance changes can be implemented in a manner that decreases the financial fallout of the new law.

Companies who were forewarned about the change to federal overtime law that will take effect this December had more time to determine if their best financial move was to: pay overtime, hire another employee, or increase the annual salary of their salary employees to $47,476. Companies aren’t aware of the law’s existence until after it takes effect might need to pay overtime or let duties slide until a policy can be put in place that takes the new law into account.  

All small, medium, and large businesses must adhere to a variety of city, state, and federal laws. Failure to adhere to the laws, either through ignorance or a decision, can have far-reaching legal consequences. Wells Fargo’s recent legal drama should be viewed by business owners as a cautionary tale about the legal, financial, and reputation fallout of implementing illegal business practices.

Small and medium business, who can’t afford the fallout, might want to pro-actively ensure the business is and will continue to follow the laws that govern the region and industry that they conduct business within. Adhering to the law will be a continual battle that can save you a lot of money in the long-run.

Image: Law concept. A gavel and legal book.

Samantha Stauf

Samantha Stauf

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