New Rules for a New Day

In the United States, there is a strict legal difference between hiring someone as an employee and using them as an independent contractor. Understanding the difference is essential—misclassifying a worker can lead to fines, audits, and lawsuits.

Employees vs. Contractors

Employees must be paid at least minimum wage, often provided benefits (in some states), and are covered by labour protection laws.

Legal Requirements for Hiring Employees

• Obtain an EIN (Employer Identification Number) – Already needed for your business.
• Check work eligibility using E-Verify: https://www.e-verify.gov/
• Complete Form I-9 for each employee (proof of legal work status).
• Report new hires to your state (each state has its own portal).
• Pay payroll taxes (Social Security, Medicare, unemployment insurance).
• Keep good payroll records and issue a W-2 form at the end of each year.

Legal Requirements for Contractors

• They must sign a contract or invoice you for services.
• You do not deduct taxes—they are responsible for filing their own.
• If you pay a contractor $600 or more per year, you must issue a 1099-NEC form in January of the next year.

Helpful Tools

• Payroll services (make life easier):
  • https://www.intuit.com/
  • https://www.gusto.com/
  • https://www.patriotsoftware.com/payroll/
• Labour rules and protections (U.S. Department of Labour):
  https://www.dol.gov/agencies/whd

Real Example

In 2024, 200 immigrants hired legally through platforms like Gusto, ensuring they avoided $5,000 in fines and audit risks. One couple running a cleaning company classified all workers as contractors—but after a free SBDC consultation, they reclassified full-time cleaners as employees and became fully compliant.

Common Mistakes to Avoid

• Paying staff “under the table” in cash (illegal and risky).
• Calling a worker a contractor to avoid paying taxes—this can lead to audits and back pay lawsuits.
• Not checking legal work status using Form I-9 and E-Verify.

Labour Laws You Need to Know 

U.S. labour laws exist to protect both employees and employers. If you follow the rules, it’s not difficult to stay compliant—and doing so builds trust, stability, and a positive reputation for your business.

Amerikaner refugees may find U.S. rules stricter than in South Africa, but they’re also clearer and easier to enforce fairly—if you know them.

Key Areas of U.S. Labour Law for Small Businesses:

Minimum Wage

• Each state sets its own minimum wage.
• Some cities (like Seattle or San Francisco) have higher local rates.
• Federal minimum wage (as of 2025): $7.25/hour, but many states are higher (e.g., California: $16/hour).

Check by state: https://www.dol.gov/general/topic/wages/minimumwage

Health & Safety (OSHA)

• Employers must provide a safe and healthy work environment, even for small businesses.
• You must:
  • Train workers on how to avoid hazards.
  • Provide safety gear when needed (e.g., gloves, masks, goggles).
  • Post OSHA signs in visible areas.

OSHA Guide for Small Business: https://www.osha.gov/employers

Anti-Discrimination Laws (EEOC)

You cannot discriminate based on:

• Race, gender, religion, nationality, age, disability, or pregnancy.
• You also can’t retaliate if a worker files a complaint.

Equal Employment Opportunity resources: https://www.eeoc.gov/employers

Other Important Laws to Know

• Overtime Pay – If an employee works more than 40 hours/week, they may be owed 1.5x pay unless exempt.
• Youth Labour – Under-18s are subject to special limits on hours and types of work.
• Meal and Rest Breaks – Some states (e.g., California) require employers to give lunch breaks and rest periods.

Real Example

In 2024, one immigrant family running a construction crew in Georgia faced a $3,000 fine for not documenting safety training. After taking a free online OSHA course, they became compliant and avoided further issues—plus, their team appreciated the training.

Practical Tips

• Use free posters and templates from the Department of labour website to stay compliant.
• Document everything: training dates, hours worked, complaints, and discipline.
• Post labour law posters in English and Spanish, especially if hiring locals.

Common Mistakes to Avoid

• State law overrides Federal Law if it’s stricter.
• Ignoring break rules or overtime rules (many small businesses get caught here).
• Failing to post labour law posters (required by law in most workplaces).