Myth #1: Employees are 'exempt' if they are paid a salary.

Payment of a 'salary,' however, is only one of many requirements to create an 'exempt' employee. So, while state and federal rules regarding overtime, meal & rest periods, and similar wage/hour laws do not apply to 'exempt' employees, don't assume that someone paid a 'salary' is exempt. Mistakes are expensive - unpaid overtime, interest, penalties, and more!

Myth #2: Employees on 'probation' can be terminated easier.

Many employment laws apply on the first day of employment. Since at-will employees are always on probation, having a defined 'probationary' period actually hurts the employer and can limit its right to terminate a poor performer.

Myth #3: You don't have to pay an employee who works from home, after hours, without being asked to do so.

A non-exempt employee must be paid for all hours worked whether you authorize the time or not. Therefore, a non-exempt employee who works 40 hours per week and extra hours at home answering emails may have a legitimate overtime claim. Even if their work at home doesn't result in overtime, they would have an unpaid wage claim.

Myth #4: If I hire someone on a short term basis, I can "1099" them.

1099 refers to the IRS form used to document monies paid to an independent contractor. If you pay someone to fix your roof, they are an independent contractor. However, an employee is just that, an employee, and must be paid through payroll and issued a W-2 at year end. Misclassifying someone as an independent contract can result in substantial penalties, back taxes and benefit plan implications.

Myth #5: My employees are like family...They would never sue me.

Even if your employees feel a part of your family, family members sue each other all the time. Employers assume their employees (or former employees) would never file a lawsuit against them. This assumption is not based on fact. The fact is that small employers are vulnerable to employment claims. Recent statistical data shows that a plaintiff will win an employment lawsuit filed in state court about 67% of the time. While verdicts exceed $1 million frequently, the most likely verdict will range from $41,250 to $197,500. This may cripple a small business.