I know there are some of you business owners who think you can wait to worry about HR until you’re a little bigger. My question is, “what are you waiting for?”
Recently I had a business owner call me in a panic. He was a one-person business who happened to be using an unemployed friend once in a while for the past few months. The friend was paid in cash.
One afternoon the business owner had to run home for an emergency and had his friend hold down the shop while he was gone. As luck would have it, a rep from the Labor Board stopped by and learned the friend was working for this company… off the books. The business owner returned to his office to find a $1,000 fine for not having workers’ compensation insurance and a stop-work order, preventing him from using his friend until he was legit.
I was able to give the business owner the advice he needed to deal with this situation and to prevent future problems. Sadly, I also had to let him know that he should expect a visit or call from EDD and the feds regarding the unpaid payroll taxes, plus fines and penalties for not hiring legally in the first place. (Make a note that state and federal government offices are real touchy about not receiving their share!)
This particular business owner was lucky. Because he had only used his friend on occasion and for only a few months, the total he’ll owe will probably be fairly low (under $2,500) between the state and federal government offices involved. In some cases, you can be hit with four years’ worth of unpaid overtime, missed meal or rest breaks and, of course, the money and interest the state and feds should have been receiving all that time. That’s before the fines and penalties.
The really bad news is that his business is now known to those government offices and he’ll have to be sure to be legit going forward. This was a wake-up call for him and an expensive lesson.
So, in the words of Dirty Harry… do you feel lucky?
