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What Should I Know About Forming an LLC?

When opening a small business, there are several steps that an entrepreneur needs to take. A basic step is determining what type of company the person wants to establish. Many decide to form a limited liability company (LLC). The most difficult part about running an LLC from an organizational perspective could be the actual formation of the entity. It might make sense for those interested in going down that route to seek legal advice from an attorney with LLC experience.

What is an LLC?

An LLC is a combination of a partnership and a corporation. It shares some of the same characteristics of a corporation in that it separates an owner’s assets from their personal assets. Meaning, if there is ever a problem with the business, it will not impact the person’s personal finances. An LLC can contain an unlimited number of participants; a participant or owner is called a member and a member can be a variety of entities from individuals, corporations, or other LLCs.

Regardless of the number of members in an LLC, they all share in the profits and losses.

Establishing an LLC

There are several important steps an owner must take when first establishing their LLC and it pays to have an experienced lawyer with them who can help guide them through the process.

Each state has its own set of rules: The first thing an owner must decide is what state they will establish their LLC. They must then speak to a state representative to find out what that state’s requirements might be. Every state is different with varying procedures and requirements. It is best to know ahead of time about the state an owner is planning to set up shop in.

Make sure no one else is using your name: One of the most important aspects of starting an LLC is the name. It must be something that represents what the company does and stands out in a crowd. However, an owner needs to verify that the name is also unique to them and not being used elsewhere. The most efficient way to do that is to check the proposed name with the Secretary of State. An owner should do this before moving forward with a registration or trademark. Neglecting this step means the owner could run the risk of using a name that is already out there, which could lead to legal problems further down the road.

All LLCs must file basic paperwork: Regardless of the state where the new business is located, the owner will have to fill out some type of articles of organization and file it with the state. There are other names for this document, including a certificate of organization or a certificate of formation. Some states may require additional paperwork beyond this, but this is the basic form that all states require. This certificate will include basic information about the business, including the official name of the LLC, the company address, the names and addresses of the members, and the name and address of the LLC’s registered agent. There will be a fee associated with filing this report, which differs according to the state.

Bring in a registered agent: A registered agent (RA) serves as the official liaison between the business and the state. It is their job to accept paperwork on the owner’s behalf and organize it and submit it to the owner. They are an important cog in keeping the business afloat. Some states might not require one, so an owner needs to verify that although having one can still be beneficial to the company. The RA can be an individual, third party, or even the owner.

Put together an operating document: Another aspect of the process that is not a requirement in every state, but a good idea, is creating an operating document. It provides a roadmap with how the owners want to conduct business for their LLC. This establishes that the owners will follow up with how they wish to work together. It is a good idea to create a hard copy of the operating document so that the owners can refer to it should any disputes arise over time.

If you are looking to establish an LLC and need some legal advice on the matter, reach out to the legal team at MacMain, Connell & Leinhauser today. Call us at 484-318-7106 or contact us online for an initial consultation. We can provide you with the guidance you need to start your business on the right track. Located in West Chester, Pennsylvania, we serve clients throughout Philadelphia, Chester County, and New Jersey.

Common Hurdles Faced by Small Business Owners

Small business ownership is risky as many small businesses fail. Knowing what hurdles to overcome and understanding common pitfalls can help owners avoid any negative consequences and ultimately help them flourish. The following are common hurdles that small business owners potentially face when maintaining their business:

Capital

A business needs initial capital to get started, as well as a constant cash flow to continue operations. Sometimes, unforeseen circumstances, such as the current pandemic, can create a shortage of capital. Small business owners need to have contingency plans in place for generating cash to keep their businesses going. It is important to keep in mind that a large initial investment may not always be a good idea, as this may lead to mismanagement of funds and waste. Keeping operations lean may be a good way to minimize waste and focus on the main business goals.

Nevertheless, no matter how lean operations are, emergency situations and unforeseen circumstances are part of owning a business. Sometimes, the sudden need for cash arises. If a business owner is unable to secure funding in a timely manner, they risk losing the business. Business owners must utilize all means of securing capital and explore alternative methods of doing so, such as crowdsourcing. Lately, crowdsourcing apps and other fundraising platforms on social media sites have increased; other potential sources include grants from various organizations, local governments, and entities designed to serve small business owners.

Customers

A business cannot grow without customers. It is important to provide products and services that are of highest quality that meet and exceed standards. Customer reviews can generate new customers and utilization of social media outlets can be a cost-effective method of generating additional business. Other avenues for reaching new customers include using social media advertisements on Facebook and Google. Once customers purchase a product or service, a business can save costs by converting them into a long-term purchaser and building their brand loyalty. This can be achieved by providing rewards, membership benefits, and premium services.

Employees

For a business to succeed, it needs workers that are skilled and customer conscious. A business owner should provide leadership and strive to create a positive work environment that prevents a toxic work culture through policies that are equitable, and merit based. By offering competitive salaries and benefits, owners can ensure employee loyalty, retention, and a good work ethic.

Accounts Receivable

Having an organized manner of accounting of all company financials is of utmost importance to monitor a company’s financial health. Utilizing invoicing and accounting software to keep track of payments and disbursements can provide a seamless way of tracking outstanding revenue. Furthermore, accounting software can increase awareness of company expenses so that actions can be taken to minimize wasteful practices.

Compliance

Owners must comply with federal and state regulations regarding employment and other taxation. Misclassification of employees or harassment complaints can lead to fines and lawsuits. Owners will have to divert financial and time-management resources to fight these battles. It is crucial that owners know and understand regulations and have compliance practices in place.

Small business owners are most vulnerable in a crisis; if an owner is not disciplined with their finances, they may risk losing all their investments. The legal team at MacMain, Connell & Leinhauser aids on a wide range of services related to small businesses, including ongoing operations and day-to-day compliance requirements. For more information regarding these services, please contact us online or call us at 484-318-7106. Located in West Chester, Pennsylvania, we serve clients throughout Philadelphia, Chester County, and New Jersey.

What Should Employers Know About Furloughs During COVID-19?

The economic uncertainty due to the COVID-19 pandemic is forcing many employers to furlough employees in order to save costs. However, employers risk litigation if they do not comply with labor laws. Employers should ensure that they are in compliance with local and national labor laws when furloughing employees. Those who do not follow regulations properly can face penalties and lawsuits. To begin, it is important to be cognizant of the distinction between a furlough, leave of absence, and lay-off of an employee:

Furlough. A furlough is usually a temporary unpaid leave from work. The understanding is that after a certain time period, the employee will return to work. During the pandemic, employers may ask employees to be on furlough until the state lifts the stay-at-home order for non-essential employees. Usually an employer will furlough an entire department because of lack of work or because the business has been forced to close for a certain amount of time.

Leave of Absence. A leave of absence is also a leave from work, which is usually unpaid unless the employee is using their paid vacation time. However, a leave of absence can also occur when an employee requests leave for personal reasons. During the pandemic, an employee who is uncomfortable coming to work when the employer has decided to stay open may request a leave of absence if the employer has a Collective Bargaining Agreement or policy that the covers the leave circumstance requested.  Employers should review their leave policies and Collective Bargaining Agreements so they are familiar with these provisions.  employee is obligated to notify their employer of their request for a leave of absence.

Lay-Off. Employers lay off employees to permanently reduce their workforce. In this instance, the employee has no expectation of returning to work. Employers need to provide notice and comply with requirements that trigger COBRA coverage for health insurance benefits.

Legal Considerations When Issuing Furloughs During COVID-19

Employers should be aware that furloughs may affect employees’ benefit plans. Employers should check with their health insurance providers to ascertain whether the type of furlough designed affects an employee’s ability to maintain their benefits. Also, employers should check with retirement plan administrators regarding the management of monthly contributions. In the event that the employee may risk losing their health insurance, employers should ensure that their obligations under COBRA are met.

Labor Laws

Employers should also be aware of regulations under the Fair Labor Standards Act (FLSA) and the Worker Adjustment and Retraining Notification (WARN) Act. Under the FLSA, employers are not obligated to pay non-exempt employees while they are furloughed. Employers are only obligated to pay for work performed by the non-exempt employee. Exempt employees do not need to be paid if they have not performed work for the full work week. If, however, the employee provided any amount of work, the employer is obligated to pay for the entire work week. Employers may be able to reduce pay and schedules of exempt employees.

Under the federal WARN Act, there is a 60-day notice requirement for furloughs. The WARN Act does not apply if the employer notified the employee that their furlough was temporary, and that they could return to work in six months. If the employer needs to lay-off the employees after the six-month period, the employer will be obligated to pay 60 days of pay and benefits for each employee. Typically, small business employers with less than 100 full-time employees are not subject to WARN Act requirements and not all employees may be included in the count of employees depending on when they were hired and in what capacity.

The WARN Act also provides an exception for unforeseeable business circumstances, but it is unclear if it will cover the COVID-19 pandemic. Therefore, employers should carefully evaluate the application of state and national laws to the specific policies, benefit plans, and needs of their business before taking action.

The legal team at MacMain, Connell & Leinhauser offers experienced counsel to businesses as to how the state and federal labor laws affect your work force reduction plans during this pandemic. Contact us online or call us at 484-318-7106 for an initial consultation today. Located in West Chester, Pennsylvania, we serve clients throughout Philadelphia, Chester County, and New Jersey.

How Can My Small Business Address Issues Regarding COVID-19?

Owning and operating a small business can be exciting and financially rewarding. Many entrepreneurs enjoy independence, control, and opportunity for financial gain. Rewards come with risks, however, and the current COVID-19 pandemic has exposed small businesses to unforeseen difficulties and challenges. Over the years, MacMain, Connell & Leinhauser has provided counsel to many small business owners. Today, we are prepared to help our clients with very challenging small business issues that many are facing during the current COVID-19 outbreak.

The Face of Small Business has Changed

 The scene along a typical American business district in June 2020 is starkly different than it was just a few months ago. In many business districts, foot traffic is way down, and some long-established shops have closed their doors. Even as some businesses begin to reopen under new restrictions, no one knows when business as usual will return. According to a survey conducted by the Small and Medium Business Group, small businesses employing less than 20 employees have been hit the hardest. They were the first to stop hiring subcontractors, lay off workers, or reduce hours. The survey also reported that the retail, restaurant, and personal service sectors have suffered the most.

The negative impact on the American economy cannot be overstated. According to the Small Business Administration (SBA), businesses with less than 500 employees account for nearly half of the employees in the United States. Main Street America (MSA), a network of over 1,600 commercial districts comprising of approximately 300,000 small businesses, recently conducted a survey that projected millions of small businesses closing permanently if the COVID-19 pandemic continued into the summer and beyond. The survey also revealed that small business owners cite the need for financial assistance and penalty-free extensions on expenses to stay open.

Addressing the Challenges

There are options that businesses can explore to stay afloat temporarily, including deferring tax payments, examining existing insurance policies for clauses pertaining to business continuity/business interruption coverage, and applying for various types of SBA loans and debt relief. SBA-backed programs include the following:

  • Paycheck Protection Program (PPP): Temporarily expands the existing SBA 7(a) program that provides loan forgiveness for retaining employees
  • Economic Injury Disaster Loan (EIDL): Provides up to $10,000 to businesses currently experiencing economic difficulties
  • SBA Express Bridge Loans: Provide up to $25,000
  • SBA Debt Relief: For businesses that currently have SBA 7(a) loans

Because these measures provide only temporary relief, more may be needed for a company to remain afloat. In the long-term, small businesses may want to examine the specific underlying causes of their vulnerability and enlist the help of professionals to restructure the way they do business.

Specific Areas to Address

 The SBA has identified key areas of vulnerability that small businesses may encounter as the pandemic unfolds, including the following:

  • Access to capital. Businesses may benefit from exploring additional options for accessing capital, including SBA-backed loans for different purposes and businesses.
  • Supply chain problems. Strategies for addressing potential supply chain shortfalls include maintaining adequate inventory on hand when possible, renegotiating contracts with suppliers, and diversifying distributor sources.
  • Deep-cleaning and facility remediation. One key to staying in business during the pandemic is frequent and thorough cleaning of surfaces. Businesses need to enlist the use of cleaning services that are qualified to conduct deep cleaning on a regular basis.
  • Compliance with regulations to protect workers. Some states and municipalities are issuing mandates that workplaces provide personal protective equipment (PPE) and institute other measures to ensure the safety of workers as businesses reopen.
  • Formulation of social distancing policies. Small businesses need to make it clear to staff and customers any changes in policies regarding on-site, wearing PPE, the use of breakrooms or bathrooms, and any other measures deemed necessary for compliance with social distancing guidelines.
  • Response to changes in market demand. Depending upon the nature of the business, a company may need to refocus operations and marketing strategies to make a profit in the stay-at-home environment. This may include online ordering systems or using social media or other means to attract customers.

Recent Developments

 America’s Small Business and Development Centers (SBDC) are continually updating a national joint study on the impact of COVID-19 on small businesses. Data from the mid-May 2020 study indicated the following:

  • Nearly half of small businesses that obtained an SBA loan feel they will qualify for loan forgiveness
  • More than half of small businesses are operating at 50 percent capacity or less
  • More than 60 percent of small businesses are concerned about a second wave of COVID-19

If the pandemic continues, small businesses seeking to stay in operation may want to enlist the assistance of a small business attorney to respond to the new environment and institute changes to adapt. Matters in which professional legal counsel can be of great benefit during these uncertain times include the following:

  • Preparing a return to work plan for your staff and a re-opening plan for your customers.
  • Reviewing qualifications required for PPP loan forgiveness
  • Reviewing insurance policies to determine eligibility for business continuity coverage
  • Assisting with employment and human resources matters, such as unemployment insurance for furloughed workers and policies for returning back to work safely
  • Reviewing contracts with supply chain partners and/or cleaning services
  • Renegotiating lease agreements for businesses or retail space
  • Drafting measures to protect the business from liability if workers or customers contract COVID-19
  • Answering questions concerning potential violations of the Americans with Disabilities Act (ADA) in requiring employees with COVID-19 symptoms to leave the workplace

Small business owners may have been hesitant in the past to reach out for legal assistance. Today in the face of COVID-19, the very survival of a business may depend upon skilled legal guidance. We are available to provide the support needed to continue operating successfully.

The small business attorneys at MacMain, Connell & Leinhauser have helped many small businesses in the past with serious legal issues, and we stand ready during the pandemic to help new and existing clients with unforeseen challenges. If you have legal questions arising from the impact of COVID-19 on your business, reach out to us today by calling 484-318-7106 or fill out our online form for an initial consultation. We are able to conduct meetings via phone or videoconference. We serve clients throughout New Jersey and Pennsylvania, including Philadelphia and Chester County, from our office in West Chester, Pennsylvania.

Leasing Commercial and Rental Properties in Pennsylvania

The lease agreement is the governing document of the relationship between the owner of the property and the tenant. There are risks involved for both landlords and tenants when entering a leasing arrangement. Often, the rent payment is the largest expense incurred in a business. Therefore, it is prudent to obtain counsel of experienced attorneys to ensure the terms of the agreement are clear and comprehensive.

In general, a lease agreement must state the term of the occupancy, the amount of rent expected, the amount of the security deposit, rules regarding whether pets are allowed and whether the lease may be assigned, and property sublet.  Due to the nature of this relationship, the Pennsylvania legal system regulates some aspects of rental agreements. According to state laws, the following terms ensure protections for both parties.

Security Deposits. A security deposit is the amount of money the tenant is required to pay to the owner to cover unpaid rent, damages to the property, costs of repairs and cleaning charges once the lease ends. However, according to Pennsylvania’s laws, the security deposit may not be more than two months’ rent for the first year and it must be returned within 30 days after the lease ends. The deposit also incurs interest if it is held for more than two years.

Overdue Rent. Landlords are required to provide a grace period of 10 days for payment of overdue rent. However, after the 10 days have expired, if no payment has been made, the landlord can evict the tenant.

Repairs. Landlords are required to make repairs for things that affect the tenant’s habitability of the property, such as plumbing, heating, and roof and window leaks. If the landlord fails to repair issues within a reasonable time, the tenant can lawfully withhold the rent.

Fair Leasing Practices. Landlords are liable for discrimination based on race, age, religion, color, sex, national origin, handicap, disability, family status, and ancestry.

Commercial Leases

A commercial lease is more complicated than a residential lease. Most residential leases are standard agreements that require little negotiation. However, commercial leases are negotiable and hold fewer standard agreements to work from. There are also less state law protections for commercial lease agreements.  Commercial tenants should work carefully to define the relationships with the owner to ensure that each is aware of their responsibilities. The following terms are unique to commercial leases:

Improvements. Lease agreement should address whether the tenant can make improvements and modifications to the property and whether tenant must return the unit in its original condition when the lease ends.

Description of Property. Lease should clearly state whether the bathrooms, hallways, and parking are included in the rent payment.

Exclusivity. An exclusivity clause may be important in a commercial lease to prevent the landlord from renting another space in the lot to a competitor.

Signage. Considers whether the agreement prevents the use of signage.

Americans with Disabilities Act. A business that is open to the public and has over 15 employees is subject to the American with Disabilities Act, which requires that the premises be accessible to the disabled.  A lease agreement should determine the party responsible for compliance with the law.

When considering leasing a commercial property, rely on the trusted and experienced small business lawyers at MacMain, Connell & Leinhauser. Our attorneys will listen carefully to your needs and negotiate a lease agreement that protects your business interests. For an initial consultation, call us at 484-318-7106 or contact us online. Located in West Chester, Pennsylvania, we serve clients throughout Chester County and Philadelphia.

Protecting Your Small Business from Cyber Threats

Small business owners can reach wider networks of customers, suppliers, and distributors thanks to the internet and its conveniences. It is no secret that small businesses are conducting most of their business online. The price for conducting business online has increased vulnerability to data breaches and cyber attacks from hackers.

Providing employees with email, ability to work remotely, interfacing with customers, and conducting financial transactions online has increased the potential risk of exposing one’s confidential business information to strangers and criminals. Many hackers can purchase passwords on the dark web and find small businesses an easy target for their attacks. As a small business owner today, it is a business necessity to be aware of the risks of maintaining an online business and put strategies in place for cyber security. Strategies that can be implemented with ease are as follows:

Create a Password Policy

Changing and creating unique passwords regularly every three to six months is recommended. If a password is not changed frequently, it can make its way to the dark web where it can be purchased by hackers for a nominal price. Although it is a hassle to change passwords and remember them, it is an essential practice to provide a layer of protection against cyber-attacks. Create a password policy that clearly outlines requirements for password creation for the business.

Utilize a Password Manager

Utilizing a password manager may be a good way to help manage passwords. Employees must juggle several passwords for various devices they use and keeping track of the passwords can be overwhelming. A password manager generates, retrieves, and keeps track of unique passwords for all accounts while the user keeps track of one password to unlock the password manager.

Utilize Two-Factor Authentication

Requiring a two-factor authentication is another layer of protection that can be easily implemented. This type of authentication requires another form of identification validation, such as a code or PIN number. Also, the authentication request is made via text message to verify the owner of the password. Some companies rely on a multi-factor authentication that requires additional forms of identification, such as an iris or fingerprint scan.

Firewall Protection

Utilize a firewall to prevent outsiders from accessing data on the private business network. Install firewall on employee’s home computers and laptops.

Limit Employee Access to Data and Information

Provide employees access to information that they require to perform their jobs. Limit their access to information they do not require. Also, prevent employees from installing software on work-related computers and laptops.

Mobile Devices

Employees increasingly access email and other information through their mobile devices, creating additional sources of security threats. Require password protection on their mobile devices and install encryption and security apps on them to protect the business network.

Cyber criminals take advantage of human error and vulnerability through phishing tactics. Conducting regular cyber security seminars that alert employees to the risks and threats of their online behavior is a good way to increase awareness.

The small business lawyers at MacMain Connell & Leinhauser provide advice on a broad array of services related to small businesses, including protecting your business from cyber-attacks. For an initial consultation, contact us online or call us at 484-318-7106. Located in West Chester, Pennsylvania, we serve clients throughout Philadelphia and Chester County.

Small Business Defenses to Defamation Lawsuits

Small business lawyers at will knowledgeably defend your business against defamatory statements.Defamation occurs when false statements are made against another that damages their reputation. When false statements are made in writing, it is libel, while slander occurs due to verbal false statements. Plaintiffs who bring defamation lawsuits must demonstrate that they suffered monetary losses as a result of the defamation. Therefore, to establish a cause of action in defamation, the plaintiff must demonstrate the following:

  • The statement was communicated to another either in writing or verbally
  • The statement was false
  • The statement caused harm and injury to the plaintiff’s reputation
  • The statement was not otherwise privileged

Defenses to an Accusation of Defamation

  • Truth. For a statement to be deemed defamatory, the statement must be false. If the statement was true, then it does not constitute defamation. By proving truth of the matter, a defamation accusation can be successfully defended.
  • Opinion. If the statement is an opinion, it cannot be defamatory, even when it is harmful. Editorials or critiques are examples of statements that may be harmful but do not constitute defamation.
  • Consent. When a statement is made with consent, it cannot be defamatory. However, unless the consent was given in writing, it may be hard to prove that the statement was consented.
  • Absolute Privilege. Political speech, advertisements, and spousal communications are privileged communications. Legislators are also protected for statements they make during legislative sessions.
  • Qualified Privilege. This is a privilege for making statements under a legal, moral, or social duty. The person must show that the statement was made without malice, in good faith, and with belief that the statement was true.

Small Business Employers

Small business employers may fear a defamation lawsuit from former employees for providing references. Another example may be found in instances where employers make fair criticisms in review of the employee. However, what employers say about their former employees may be subject to a qualified privilege defense. If the employer can demonstrate that the statements were made without malice, in good faith, and believing it to be true, there may be no finding of defamation. Employers should obtain consent forms from employees about providing references and information regarding them on their behalf. These consent forms can later be used as a defense to a defamation lawsuit.

Trade Libel

Small business owners may be accused of or subject to trade libels. Negative comments by customers or competitors can be detrimental to small business owners. Trade libel occurs when defamatory statements are made about a business’ services or products. The same defenses outlined above apply in a trade libel suit.

If your business was subjected to defamatory statements or your business was accused of making such statements, contact our legal team at MacMain, Connell & Leinhauser for expert advice on such litigation matters. Contact us online or call us at 484-318-7106 today for an initial consultation. Located in West Chester, Pennsylvania, we serve clients throughout Philadelphia.

Small Business Strategies for Employee Retention

West Chester employment attorneys can help small business employers with employee retention.Employees in the current job market are always looking for better employment. Employee retention is a priority for small businesses as costs of hiring and training new recruits is time consuming and costly. Small businesses need to have effective strategies in place for employee retention. Employee retention is not entirely dependent on employment compensation. Thankfully, small business organizations can implement practices that can increase employee engagement without incurring huge costs. The following simple strategies will boost employee engagement and retention.

Allow Flexibility

Employees are often struggling to balance work with personal life. Recognizing that employees have commitments to family and home and allowing them flexibility in dealing with these issues will increase their loyalty. Allow them to take time off to volunteer, book appointments for medical and other reasons through flex time. Additionally, consider allowing them to work remotely one or two days a week to minimize time spent commuting. Supporting employee needs outside of the workplace will help to prevent their seeking of alternative employment.

Offer Benefits

Health benefits, including health insurance and health savings accounts that assist employees to meet medical expenses will also boost employee retention. When an employee is able to take care of their health and afford medical care with the help of their employer, they may be more reluctant to jump ship.

Encourage Personal and Professional Growth

Encouraging employees to improve their skills also fosters loyalty. An employee is more engaged when they are always learning and improving. Providing training, seminars, leadership courses and tuition assistance will increase employee job satisfaction and thus retention.

Recognition is Key

Positive recognition of employees’ accomplishments will increase job satisfaction. Recognizing employee achievements does not cost much, yet it is an effective way to boost employee retention. Creating a positive work environment where good work is recognized and praised promotes overall health and culture of a small business. When employees feel like they are being recognized for their hard work and rewarded fairly, they will be happier and thus more loyal.

West Chester Employment Attorneys at MacMain, Connell & Leinhauser Represent Small Business Employers in a Variety of Employment and Labor Matters

The employment and labor law attorneys at MacMain, Connell & Leinhauser provide human resource counseling and human resources support for private and public sector employers. To schedule a confidential consultation, contact us online or call our office at 484-318-7106. We serve clients in Philadelphia and Chester County from our office is located in West Chester, Pennsylvania.

Small Business Owner and Overtime Law

West Chester employment lawyers provide counsel and representation for small business owners.Minimum wage and overtime laws carry significant penalties when business owners fail to compensate their employees for time worked over 40 hours per week. For small business owners, failure to comply with federal and state overtime laws can be financially devastating to the fiscal well-being of their company.

Federal Overtime Laws

The U.S. Department of Labor sets the laws for overtime pay in accordance with the federal Fair Labor Standards Act (FLSA), specifically determining which employers are mandated to pay overtime, how workers accrue overtime, and which employees will be exempt from overtime pay. It is the business owner’s responsibility to understand the law and comply with its mandates.

The Department of Labor requires employers to pay employees one and one-half times the worker’s normal pay for hours worked in excess of 40 hours in one week. The federal guideline for defining a work week is any seven consecutive days, or 168 continuous hours. The law does not place limits on the amount of overtime hours worked but holds employers responsible for paying them accordingly.

Employers are also responsible for keeping accurate accounting of all hours worked by employees. This can get tricky when considering the number of employees that work remotely. Employers must design an accounting system where employees can log their work hours. Many employers now rely on internet logging systems that confirm hours logged on and logged off for business purposes.

How Overtime Laws Affect Small Business Owners

Proposed changes to existing federal laws on overtime pay would increase the number of employees eligible for overtime pay. This could put a significant burden on small business owners. In addition to changes in federal standards, individual states are also coming up with their own changes that would expand the pool of employees eligible for overtime pay.

The current federal threshold for employees exempt from overtime pay is set at $23,660. As minimum wage increases across the country rising to up to $15.00 per hour in some areas, many states are increasing their state overtime threshold amounts. California has raised its threshold to $49,920 and is expected to increase the threshold to $62,400 in the year 2022 when the minimum wage across the state will be $15.00 per hour.

New York City and Washington are following California’s lead by raising their overtime threshold to $58,500 and $49,000 respectively. Washington is expected to raise its minimum threshold again to $80,000 by the year 2026. Massachusetts and Pennsylvania are also expected to raise their minimum thresholds as well.

Small business owners are responding to the new thresholds by reducing the number of employees working 40 hours per week and offering starting salaries above the minimum threshold to avoid having to pay time and a half for overtime. Some smaller business owners are actually lowering the starting salaries for new employees to offset the rising costs of overtime.

As minimum wage and overtime laws continue to increase costs to employers, consumers will eventually start feeling the effects. In California, several businesses are holding customers liable for increased wages by imposing a three percent tax on services to offset the rising costs of minimum wage and overtime. As for now, this practice is legal and binding.

West Chester Employment Lawyers at MacMain, Connell & Leinhauser Provide Counsel and Representation for all Your Business Needs

If you are a business owner in need of employment law services, call the employment lawyers at MacMain, Connell & Leinhauser at 484-318-7106, or contact us online to schedule a consultation today. Our West Chester, Pennsylvania offices serve clients throughout Philadelphia and Chester County.