9 Labor Law Risks That Business Setups Must Avoid

The primary concern of most entrepreneurs is to find new ways for expanding the business. Preoccupied with production plans and marketing strategies, employment law is usually the last thing on their minds. This can prove to be a costly error as all labor law consultants agree that violation of these regulations attracts harsh penalties. Business setups, therefore, must pay extra attention to the adherence of the applicable laws and ensure that their policies, no matter how employee-friendly are breaking any rules. All existing entrepreneurs or those in the process of setting up a business in India or anywhere in the world must take care to avoid the following risks:

1. Treating Employees As Independent Contractors

Many employers convert all their employees into independent contractors on paper. This will free their enterprise from the obligation of complying with labor laws as they are not applicable. The employees are also happy as they get an independent working status. Problems will arise when government authorities start asking the “independent contractors” to fulfill their tax obligations. The staff member will also feel cheated when monetary benefits like the workers’ compensation claim, paid family leave etc. are not provided. Employment law consultants feel that this is a useless strategy which is detrimental for the business owner as well as the worker.

2. Labeling All Employees As Exempt Irrespective Of Their Status

Exempt employees are not entitled to the rights and benefits such as minimum wage, overtime and fixed breaks which are enjoyed by non-exempt workers. They are also paid a fixed amount of money rather than hourly wages. Some companies classify all members of their workforce as exempt irrespective of whether they qualify for the status or not. They feel that this gives them legal cover for not providing employee benefits. This is another impractical tactic which must be avoided if the business owner wants to steer clear of legal hassles.

3. Failing To Provide Anti-Discrimination And Harassment Training

Authorities around the world are strictly enforcing laws which regulate harassment of any kind in the workplace. There are specific laws in most jurisdictions which dictate the manner and amount of training that must be provided to the staff members by the company. A failure to provide this sort of training can prove to be extremely harmful for the organization. An untrained executive will not know about the necessary steps to be taken in case an issue is reported. Labor law consultants in India and most countries of the world advise that it will result in serious legal consequences if the aggrieved party takes the matter to court.

Must Read:  How Can I Buy the Best Concealer?

4. Allowing Staff Member To Fix Their Working Hours

Employment laws stipulate the number of hours a worker can devote to an organization without the payment of overtime fees. Many organizations offer a flexi-time scheme to workers which involves longer working hours but for fewer days in a week. Flexible timing is seen as an employee-friendly initiative but it is governed by some specific set of rules. Companies must find about all the applicable regulations in this regard before offering the scheme to the workforce.

5. Terminating Employees For Taking Leave Of Absence

Experts working with reputable labor law firms in India say that employees are provided protection under the law for various eventualities including absence from work. A person who is on protected leave cannot be fired by an employer. Any organization which terminates a worker for taking a protected leave must prove that its action was valid, non-discriminatory and unrelated to the availed leave. A failure to do so can have harsh legal consequences forcing the company to pay hefty compensation to the worker.

6. No Fixed Lunch Hours

Some business setups introduce flexible lunch hours and allow their employees to take a break whenever they wish to or take no break at all if they so desire. They feel that leaving early by skipping lunch can be a good incentive for the staff. No matter how noble the intentions may be behind such a move, it can violate labor laws. There are regulations clearly stating the duration of a lunch break and the period of time after which a worker must take a scheduled break. Companies must ensure that their time-keeping records can prove that the staff was taking scheduled breaks as per legal guidelines.

7. Enforcing A Non-compete Agreement

Non-compete agreements were devised to prevent competitors from accessing valuable information about a company. Many organizations while hiring for high-value projects made the employees sign such agreements which barred them from joining a rival firm for a fixed period of time. Authorities in many jurisdictions have banned the practice and companies must know whether they are allowed to employ such agreements or not.

Must Read:  Fundamental Reasons For You To Invest In Various Kinds Of Lands

8. Deducting Employee Loan Installments From Their Salary

Many corporations provide a facility for giving loans to their staff members. It is a very beneficial scheme for the employees as they do not have to approach any other agency for the purpose. Problems may arise if the employer starts deducting the loan installment amount from the wages of the worker. It is prohibited by the law in most locations and must be avoided.

9. Not Paying Appropriate Overtime Amount

Laws regulate the hours for which an employee can work each day for an employer. Any extra time spent by the worker must be compensated by the business owner according to the legal guidelines. Employers who fail to pay the appropriate amount are at risk of legal action. They must have efficient timekeeping systems at the workplace to maintain proper records which can be used to assess the correct overtime amount due to a worker.


Business setups must engage legal consultants before introducing a new human resources policy to ensure that it is in accordance with all the applicable employment laws. This will protect themselves from facing any labor law violation case in the future.

Written by
Amy Jones is a versatile legal expert working with Ahlawat & Associates for last 3 years and specializing in property cases. A&A is a law firm providing a specialist property dispute lawyers where you can discuss legal problems with experts.

Have your say!

0 0

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>