Legal Issues for Small Businesses

small business legal issues
Small business laws
If you own or operate a small business, you probably have a lot on your plate. Chances are, you’re thinking about making payroll, marketing your business, and hiring new employees, among other practical considerations.

It’s unlikely that you’ve spent much time worrying about the legal issues associated with running a small business, however.

If this is the case, it’s probably a good idea to familiarize yourself with the legal issues that small business owners can face. Having a basic understanding of the legal issues common to small businesses will help you avoid encountering legal problems in the first place, and leave you better equipped to deal with them if they do come up.

This article will provide a basic overview of some of the most common legal issues that small businesses face.

Employment Discrimination

Under the Civil Rights Act of 1964, it is against federal law for employers in the United States to discriminate against employees on the basis of race, color, national origin, religion, or gender. Additionally, under the Americans with Disabilities Act, it is unlawful for employers to discriminate against employees on the basis of physical disability, if the disability doesn’t interfere with the employee’s ability to perform the essential functions of the job with reasonable accommodation.

In addition, the laws of many states have additional protected categories, including sexual orientation, gender identity, or participation in lawful political activities.

Discrimination lawsuits can be very costly, in terms of money, time, and customer goodwill. It is important to have strict anti-discrimination policies in place at your business, and make sure they are strictly enforced. You should have a zero-tolerance policy toward harassment and discrimination by any of your employees, as well.

Wage and Hour Disputes

All employers are required to pay their employees at least the minimum wage. The federal government, as well as the majority of states, have minimum wage laws. Even if your state does not have a minimum wage law, you are required to comply with the federal minimum wage law. Furthermore, if your state’s minimum wage is higher than the federal wage, you are required to comply with the higher wage.

Failure to comply with the minimum wage can lead to lawsuits by employees, in which they may be able to collect back pay and other compensation.

Accommodation of Disabilities

Under the Americans with Disabilities Act, employers are required to make “reasonable accommodations” for employees with physical disabilities. The law does not define “reasonable accommodation,” so it has fallen on the federal courts to fill in the blanks. Over the years, the courts have established some fairly clear and commonsense rules concerning what accommodations are reasonable, and therefore required.

For example, if an employee who uses a wheelchair requires their desk to be lowered, providing the employee with a shorter desk would be a reasonable accommodation.

Likewise, allowing an employee with limited mobility to work from home, if the job does not strictly require the employee’s physical presence in the office, would also be reasonable. Failure to make reasonable accommodations for disabled employees can be treated as unlawful discrimination against persons with disabilities, and lead to a costly lawsuit.

Employees vs. Independent Contractors

There are two basic categories of paid workers in the United States: employees and independent contractors.

There are major differences between employees and independent contractors, which have practical consequences for employers. For example, with employees, employers are required to make payments to contribute to Social Security, Medicare, and unemployment benefits. Independent contractors, however, do not create this obligation.

In general, a worker is an employee if the employer exercises significant control over when and how they do their job. If the employer exercises little such control, and the worker provides his own tools, etc., the worker is usually treated as an independent contractor.

Some unscrupulous employers will simply label their employees as independent contractors for the tax benefits, but then treat them as employees for all practical purposes. Such misclassification of employees can have serious legal consequences for employers.


As you can see, there are a wide range of legal issues that the owners of small businesses can face. As you might have guessed, this article is by no means a comprehensive guide to the legal issues that a small business might face. It is simply meant to impress upon small business owners the importance of having a basic understanding of the legal issues that they might face, and it is certainly not a substitute for the advice of a qualified attorney.

About the Author

John Richards is a writer for and the Law Blog. The above article is for general informational purposes only, and should not be construed in any way as legal advice relevant to your particular situation. The only person qualified to give you legal