American Chamber of Commerce Resources Lists 10 Common Mistakes Small Business Owners Make

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American Chamber of Commerce Resources issues a list of common mistakes small business owners make to alert them to the potential penalties they can face for failure to comply with necessary state and federal employment laws.

In Illinois, many small business owners might be surprised to learn that if they employ just one person, there are eight state and federal laws with which they must comply.

As National Small Business Week is celebrated May 23-29, the U.S. Small Business Administration’s statistics point to a sobering fact: one out of two small businesses won’t make it to its fourth year.

One area that can stop a small business in its tracks are the penalties associated with failing to comply with employment laws. Many employers think because they are so small, that the laws don’t apply to them. But in Illinois, many small business owners might be surprised to learn that if they employ just one person, there are eight state and federal laws with which they must comply, such as the Fair Labor Standards Act, Workers’ Compensation and Unemployment Compensation.

Below is a list of 10 Common Mistakes Small Business Owners Make. The list is provided by American Chamber of Commerce Resources, a Chicago-based publisher of employment law manuals and online content.

ACCR publishes the Illinois Human Resources Manual, a 400+ page guide for Illinois small businesses on everything from hiring employees to discipline and termination. The book, written by employment law attorneys at Baker & McKenzie, is available at or by calling 312-960-9400

Ten common mistakes small business owners make

1. Failure to post required notices
Essentially every employer in Illinois is required to post state and federal posters (such as the federal minimum wage, Employee Polygraph Protection Act and OSHA’s Job Safety and Health Protection). There are at least 10 posters required.

2. Storing medical records in personnel files
A lot of employers don’t realize that they are required by law to keep any paperwork pertaining to medical information in a separate file. What about keeping a doctor’s note for an excused absence from work in the file? If it contains medical information, keep it in a separate file. An excused absence can be documented with a notation “written note provided.”

3. Failure to report newly hired employees
As of 1997, Illinois employers are required to report all new hires to the state’s Department of Employment Security within 20 days of hire. The Illinois law followed on the heels of the federal Personal Responsibility and Work Opportunity Reconciliation Act. These laws were enacted to help state and federal officials track “deadbeat” parents who were not meeting child support obligations.

4. Not stating that employment is “at will”
One of the best ways an employer can protect itself from potential liability is as easy as stating on employment applications, contracts, and handbooks that the company has an “at-will employment” policy (meaning, either the employer or the employee can terminate the employment relationship at any time for any lawful reason).

5. Discriminatory job advertisements
Only job-related functions should be listed on a job advertisement. Even seemingly innocent phrases like “young and energetic” can be grounds for a discrimination suit. Employers should avoid phrases that imply characteristics of age, gender, national origin, race, etc. Also, ads should state that the employer is an “equal opportunity employer.” Several federal laws apply to such discrimination, probably the best known being Title VII of the Civil Rights Act of 1964.

6. Asking the wrong interview questions
There are many things an employer should not ask in an interview. To avoid potential discrimination, interview questions should be carefully reviewed beforehand. For example, an employer should not ask someone, “How old are you?” Instead, ask “Are you at least 18 years of age or older? If not, please state your age.”

7. Failure to create and follow company policies
The most important part of having an employee handbook is consistently and uniformly applying to all employees. A handbook offers no protection to an employer who enforces it sporadically or unfairly. Common pitfalls of a poorly drafted handbook include: not having employees sign an acknowledgment of receipt, failing to reserve the right to change or modify the terms in the employer’s exclusive discretion, or failing to confirm that the handbook is not intended to be a binding contract.

8. Not conducting background checks
Small businesses might not know that they can be liable for the actions of an employee whom they reasonably should have known had the potential to harm others. So, make sure to do a thorough background check of all new hires within the parameters of applicable law.

9. Misclassifying employees as independent contractors, interns
Many companies routinely classify employees as independent contractors or interns. Last November, the Illinois Department of Labor fined a home improvement company $328,500 for misclassifying 18 workers and not providing the pay and benefits owed to them.

10. Failure to pay for compensable work time
Illinois has requirements for meal and rest periods, on-call time and travel time. Note that a non-exempt employee who fields a business related phone call on their lunch break may need to be compensated for that time.

American Chamber of Commerce Resources has more than 50 federal and state employment law manuals available. For a list of available publications, go to    

About American Chamber of Commerce Resources:
American Chamber of Commerce Resources, based in Chicago, produces employment law manuals and online human resource and employment content for employers throughout the U.S.

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