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Employee Rights: What Small-Business Owners Need to Know

10. June 2014 08:27

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In the post “Hiring an Employee? Know What Can Go Wrong,” we examined some of the discrimination laws small-business owners must contend with when hiring employees. Most federal Equal Employment Opportunity laws apply to employers with 15 or more employees. However, many states have adapted their own EEO laws so that the state can intervene when small employers are accused of discriminatory practices.

But even if a government body doesn’t take up the discrimination case, your current, former, or prospective employees can always file a lawsuit of their own against your business. To help you comply with employment discrimination laws and avoid costly employment liability lawsuits, let’s explore equal employment laws in more detail.

You Can’t Do That! Discrimination Laws and Small-Business Owners

As an employer, you must take extra care when hiring, promoting, or firing employees. If you’re inconsistent in your practices, an employee or interviewee may question your motivations. Specifically, things can get hairy if they feel your decisions were based on their age, sex, physical limitations, or race.

That’s because both federal and state laws provide legal sanctions for “protected classes” of employees. Protected classes are groups of men and women who may experience discrimination based on their sex, race, religion, color, or national origin. Here are a few of the laws designed to protect them:

In some states, these laws are expanded to outlaw discrimination based on sexual orientation, marital status, and weight. Many states also adapt their laws to hold smaller employers accountable, too. For instance, California law prohibits employers with five employees or more from treating employees unfairly because of their race, color, religion, nationality, age, sex, pregnancy status, marital statues, sexual orientation, or gender identity.


To find out what your state’s employment discrimination laws are, check out’s page Employment Discrimination in Your State.

Common Employment Discrimination Lawsuit Triggers

Regardless of how many employees you have, you should take care to respect their rights and treat them fairly. Here, we’ll discuss some hot-button issues in the workplace that can lead to employment practices liability lawsuits.

Interview Questions

There are certain things employers can’t ask job candidates. For example, you can’t ask a potential hire for their age, religious affiliation, or nationality. Though you can’t ask an interviewee if they have a disability, you can ask if they are able to perform functions essential to the job with or without a reasonable accommodation.

For tips on how to avoid inadvertent mistakes during the hiring process, read “Recruiting & Hiring Tips for Small Businesses: Avoid Discrimination while Hiring.”

Accommodating Disabilities

Whether or not you’re legally obligated to accommodate employees with disabilities depends on several factors, including…

On the federal level, you must have 15 employees before the Americans with Disabilities Act applies to your business (though your state’s laws may kick in at a lower threshold). Also, your employees must be qualified to carry out the essential job functions without or without reasonable accommodation.

You may be required to accommodate an employee’s disability if they have a physical or mental limitation that affects significant life activities, but doesn’t impede with the essential functions of their work. Reasonable accommodation might involve…

However, the law doesn’t demand that you accommodate disabled employees if the change will be too difficult or costly (in relation to your resources).

Maternity and Medical Leave

The Family and Medical Leave Act (FMLA) ensures employees can take up to 12 weeks of unpaid leave without risking their job security. That means you can’t fire or demote employees for taking time off work to:

However, employees must meet certain criteria to qualify for this legal protection. Know that you’ll have to extend this protection to your employees if…

Sexual Harassment

Sexual harassment – the unwelcome sexual conduct of a supervisor, coworker, or client – is a form of illegal discrimination. Naturally, if one of your employees thinks they have been subjected to sexual harassment, they can sue your business.

Be aware that the following actions can be viewed as sexual harassment in the eyes of the court:

Also, know that there are two forms of sexual harassment:

To reduce the likelihood of these lawsuits, be sure you take measures to educate and train your staff on your small business’s sexual harassment policy.

Disciplining and Firing Employees

In almost all states, the law permits you to suspend, demote, or fire your employees at will. You don’t have to provide or need a reason unless your employment contracts guarantee workers good or just reason for termination.

However, there are several exceptions to this rule. For instance, you can’t demote or fire employees based on their age, race, religion, disabilities, nationality, and other personal characteristics. To do so would be considered discrimination.

You also can’t fire or demote employees for reporting your business to the Equal Employment Opportunity Commission or for filing a claim about safety violations. You also can’t retaliate against employees who missed work for jury duty.

Protecting Your Small Business from Employment Discrimination Lawsuits

Though Employment Practices Liability Insurance can’t prevent a discrimination lawsuit or EEOC investigation from happening, the policy can give your business the financial assistance it needs to weather the legal storm. When you are sued for wrongful termination, sexual harassment, or discrimination, this coverage can pay for your small business’s…

To learn more about EPLI, check out our post “What Is Employment Practices Liability Insurance (EPLI)?

This post is part of an ongoing series on Employment Practices Liability Insurance, the high cost of employment discrimination lawsuits, and EEOC laws. Stay tuned for more on what can go wrong when hiring (and firing) employees.

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