Employers' Legal Liability

If you decide to hire or lease employees or use independent contractors, it's extremely important that you become aware of all the federal and state laws that can affect your relationship.

Whether or not a business is subject to specific employment laws depends on how many employees that business has and for how long. There's a large array of federal and state laws and, in some states, it only takes one employee to make you subject to certain employment laws.

So, understanding your legal liability as an employer involves the following:

• understanding the definition of an employee
• knowing your liability under federal employment laws
• knowing your liability under state employment laws
• structuring contracts for nonemployees to minimize liability

What if you're planning to use independent contractors only? Lots of business owners think that the way to get around all of the employment laws is to have no employees and instead to employ leased workers, temporary workers, or independent contractors. In some cases, this works, but how well it works depends on what the worker actually does and how you structure your contracts.