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Legal Requirements for Hiring Your First Employee

By Christopher Coble, Esq. on January 19, 2017 2:56 PM

Most of us are entrepreneurs so we can be our own boss. But if you're successful enough, your company may have hit the stage where you need some help. Now that it's time to bring someone else aboard, do you know the legal ins and outs of onboarding employees?

Here are a few things to think about before hiring your first employee:

Paperwork and Prep

Before you hire anyone, you'll need an Employer Identification Number (EIN) in order to report taxes to the IRS and state agencies. You'll also be required to maintain comprehensive records of employment taxes, submit W-4s for each employee, and report how much you've paid in wages and withheld in taxes by filing a W-2. And make sure your office is ready, with necessary accommodations for employees with disabilities and a required posting of legal rights for employees.

Ads and Applications

The biggest legal concern during your candidate search is discrimination -- make sure your ads aren't targeted to or biased against candidates based on race, color, religion, sex, or national origin. And know that you can't screen candidates based on those criteria either.

Interviews and Inquiries

Once you've got a prospective employee in the door, be careful what you ask. There are illegal interview questions, so stick to the qualifications necessary for the job and avoid exaggerations or misrepresentations about responsibilities, job security, or the current or future health of your company.

Yes, you can drug test prospective employees, but you must have a clear and consistent testing policy and stick to it. You can also require skills or aptitude tests, but be wary of extensive personality or psychological testing during the hiring process and by no means should you give applicants polygraph -- that's prohibited under federal law. And if you're looking to do background or credit checks on prospective employees, make sure you have their consent first.

Contracts and Contractors

Once you've decided to hire someone, you may still be faced with a few more choices. Is this person going to be an employee or an independent contractor? Is he or she going to sign an employment contract? If so, what are the specific provisions of that employment contract going to be?

Make sure you've got all your legal ducks in a row before you begin your hiring search. You're more likely to find the right candidate for the job and protect your small business in the process.

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