382 - The Legal Risks of Hiring with Kira La Forgia

On today's episode of the podcast I chat with my friend, and HR specialist, Kira La Forgia about how to legally protect yourself when having employees on your team. 

About Kira

Kira is the founder of Paradigm Consulting which serves small business owners and founder-led teams with accessible outsourced HR and growth strategy services.  Kira started Paradigm in 2020 after 11 years working in operations and partnering with a lot of attorneys and accounting firms that couldn’t speak to the laws in all 50 states. In HR, it is the primary expectation to understand the labor laws in all 50 states, so Paradigm offers not only on the compliance side but also on the education side and the strategic way they build out structures of small businesses for efficacy and profitability. The goal is to create systems and foundations for HR compliance that last through the duration of your business with minimal maintenance. So you don't have to have an in-house HR person.

Why the HR/Hiring Topic is Important Even If You Aren’t Ready to Hire

It doesn’t matter how much money you’re making, you’re not qualified to do all the things your business needs you to do, you’ll need to bring in support from other people, especially as you grow. And whether that initial hire is a bookkeeper or an assistant or your friend’s son who helps you on the weekend, it’s important to know the laws on how to treat them without going into a category of misclassification or even exploitation. Understanding what you need before you need it is the best way to confidently move forward, which you may need to do at a moment’s notice if your business grows rapidly. 

What Major Employment Laws Have Changed Since 2020

We had Trump in office 2016 to 2020. A big tax law passed in 2017 and then Biden got in office after the COVID pandemic had already kind of started. Now Trump is in office again. We're talking about laws, laws are passed by politicians and congress members so it has a great deal to do with who's in office at any particular time. Whoever's in office does influence how things are enforced, even at the granular level. The caveat is that when we're talking about the administration that's in office at a federal level, that still isn't really talking about the individual state laws, which most of our companies are going to be a little bit more focused on on the day-to-day. When it comes to your employees, you have to follow three different sets of rules: the IRS, so the tax stuff that comes into play,, the federal laws, and how those things are kind of enforced and not enforced, and then the state laws which are actually going to govern more a lot of your policies inhouse within your business.

HR is based on a federal ruling that came out decades ago, and there is a National Labor Relations Board (NLRB) which enforces all the rules from the Labor Relations Act. At a federal level, this is the major piece of legislation that helps us make decisions about what is legal and what isn't along the way. When the NLRB decides that they are going to enforce certain rules or not that's when you start to see uptick in legal cases. 

There's another entity that we really want to pay attention to, the Equal Employment Opportunity Commission (EEOC). Both of these are independent of the federal government, but the EEOC is going to be a little bit more dictated by what the person in charge is deciding what's important. So with when it comes down to the NLRB, they're going to be enforcing this ruling as a standard legal proceeding. 

The way it works a lot of the time is the federal law sets the floor and then states have their own. For example, minimum wage. What that looks like in action for small businesses is that some of your handbooks are going to have the federal minimum wage as the requirement that's noted while other handbooks will have amendments based on the states that their people live in. You can't just go by one document. You have to make sure that you're keeping track of what happens in other states and industries, too. The states have enforcement within the state with their own labor boards. 

What To Look At If You’re Hiring

Worker Misclassification

The back-and-forthness of misclassification of 1099s to W2s is one of the biggest risks for small businesses. It is really important to make sure that you're auditing that year-over-year based on the location of where that person lives, how you're functioning within the business with that person, and also what's right when it comes to how people are behaving and how we are making sure we're not exploiting other people or other small business owners. If you get audited and your hire was classified incorrectly, that comes around to bite you in the ass because you’ll owe back taxes, penalties, and interest on it

Employment Verification

I-9s and employment verification is another area that is being influenced by politics. It's the bare minimum of hiring employees, making sure that you're following the I-9 process, which is basically documenting and checking to make sure that they're a US citizen which is required within 72 hours of your employee’s first day. The lowest risk is classifying them as an employee and making sure you're educated on how to handle the I-9 process because then you're protected to get them started to work. You cannot rely on your payroll company to do this because they will not assume the risk. You are probably not qualified to go through the E-Verify system which is another reason that you need to have an HR partner on your side to run those checks for you. 

Your I-9s  need to be stored separately from the rest of the documents that you're storing for your employees. If someone were to come in and audit your employment, it would be a discriminatory tactic to have their immigration information in their file. 

Pay Transparency

Depending on the state you’re in, you have to show the range that you’re hiring someone for. If you’re hiring for multiple states, you need to make sure it’s posted publicly when you post the job. If there is any kind of role that you're looking to fill that is remote role eligible to anyone in the US then that means it has to follow all the laws of how you post jobs in the US which primarily comes down to pay transparency because you’re required to have a salary range posted in many states.

Anyone can file a complaint with the EEOC, not just the people who work for you, so you need to have everything together when you post a job listing. 

Bias

We have our conscious and unconscious bias. As business owners we’re trained to look for the ideal candidate, but applying your ideal client avatar to your hiring process is a no go. What candidates do with their time and their work outside of working with us is none of our business. What is our business is their level of qualification, how well you hit it off with them, what your priorities are. Paradigm makes rubrics in order to measure and make sure to reduce unconscious bias.

The Stages of Hiring

Hiring is a multi-phase process. You first make your business ready-to-hire by building foundation on which people are going to work. Make it a profitable hire. Go through the hiring process. Set the standard and tone for who you’re bringing in with an organized, clear, direct, and legal hiring process. And then onboarding them. How we can avoid disgruntled employee issues starts with how we onboard them because it answers their questions right out the gate without leaving them confused. 

Employee Classification

Classification varies state by state. Some basics when it comes to the federal law is there are six different factors that go into this but this most common factor to look out for first is that whatever service that your business provides, if this person is delivering on that service, then they need to be an employee. For example, a copywriting agency hiring a copywriter. 

These laws are trying to prevent larger businesses from exploiting smaller businesses and individuals. For example, if someone is acting as an employee and controlled by the person that employs them, then they do deserve the benefit of getting unemployment if they get let go. This law is trying to prevent that and create competition between businesses so there are fewer monopolies to avoid large businesses buying everything and then the small businesses have to go work for them. 

Legally Protecting Your Business

Kira recommends handling your basic legal first before hiring employees. You don’t need to be expanding and scaling your business if you don’t have good contracts or a trademarked business because they are the things that you’re protecting when it comes to your employees too and we talk about your handbook, protecting the assets you create, etc. 

Get in Touch with Kira La Forgia

Follow Kira on Instagram @theparadigmm
Connect with Kira on LinkedIn
Listen to Kira’s podcast, People on Purpose