Compliance Essentials for New York Small Business Employers

Running a small business in New York comes with unique legal responsibilities, especially regarding employment compliance. From hiring your first employee to handling payroll and ensuring proper workplace conduct, small business owners must navigate a broad range of federal and state employment laws. Overlooking even minor compliance details can result in costly fines, lawsuits, or investigations.

Understanding Employment Classification

Before onboarding anyone to your team, it is essential to correctly classify workers as either employees or as independent contractors. Misclassification is one of the most common legal mistakes made by small businesses. It can trigger investigations from the Internal Revenue Service (IRS), the New York Department of Labor (NYDOL), or the U.S. Department of Labor (DOL). Both federal and state laws impose significant penalties for failing to correctly identify the nature of a working relationship.

The Fair Labor Standards Act (FLSA) and New York Labor Law § 190 et seq. provide guidelines for distinguishing between employees and independent contractors. While employees are entitled to minimum wage, overtime, unemployment insurance, and workers’ compensation, independent contractors are not. Small businesses must be especially careful when hiring freelancers or part-time help, as these roles often fall into grey areas.

Key differences between employees and independent contractors include:

• Degree of control: Employees are subject to direct supervision and control over how work is performed, while contractors typically decide how to complete their tasks.
• Nature of the relationship: If the worker receives benefits like health insurance or paid time off, they are likely an employee.
• Economic dependence: If the worker relies on the business for the majority of their income, supporting classification as an employee.
• Tools and materials: Employees usually use the employer’s equipment, while contractors provide their tools.

Failing to classify correctly can lead to back pay liability, tax penalties, and lawsuits from workers seeking unpaid wages and benefits. 

Wage and Hour Laws You Must Follow

Every small business owner must comply with both federal and state wage and hour laws. In New York, employers are subject to the stricter of the two sets of regulations. The FLSA sets the federal minimum wage and overtime rules. At the same time, New York Labor Law § 652 establishes state-specific requirements, which are typically more employee-friendly.

New York’s minimum wage is higher than the federal standard and varies depending on region and employer size. 

For example, as of 2024:

• NYC: $16.00 per hour for all employers
• Nassau, Suffolk, Westchester: $16.00 per hour
• Rest of New York State: $15.00 per hour

Overtime is required at 1.5 times the employee’s regular rate of pay for hours worked beyond 40 in a workweek. Employers must also comply with New York’s tip credit rules if they employ workers in service industries. Under these rules, businesses may pay tipped workers a lower base wage, provided that tips bring the employee’s total hourly earnings up to or beyond the full minimum wage. However, detailed recordkeeping is mandatory to claim this credit legally.

Small businesses must also pay close attention to the spread of hours pay, meal breaks, and call-in pay requirements under New York law, which offer protections not covered by federal law. 

Required Notices and Posters

Federal and New York laws require employers to post specific workplace notices and provide written information to employees about their rights. These requirements are not optional, and failure to comply can result in enforcement actions from the NYSDOL or U.S. DOL.

One of the most critical compliance mandates is the Wage Theft Prevention Act (WTPA), which requires New York employers to provide a written wage notice to every new hire. 

This notice must include:

• Rate of pay
• Overtime rate (if applicable)
• Payday
• Employer’s name and contact information
• Any allowances claimed against minimum wage (like tips or meals)

In addition to WTPA disclosures, small businesses must post the following notices where employees can easily see them:

• FLSA minimum wage poster
• Equal Employment Opportunity (EEO) poster
• NY Paid Sick Leave notice
• Unemployment insurance rights
• Workers’ compensation and disability benefits coverage

These postings must be updated whenever wage laws change, and some must be in both English and the employee’s primary language. 

Anti-Discrimination and Harassment Rules

Federal and state laws strictly prohibit workplace discrimination and harassment, and small business owners must ensure their policies align with these legal obligations. Even businesses with just one employee must comply with New York Executive Law § 296, which extends protections far beyond the scope of federal law.

Under Title VII of the Civil Rights Act of 1964, it is illegal to discriminate against employees based on race, color, religion, sex, or national origin. The New York Human Rights Law expands these protections to include additional categories, such as:

• Gender identity and expression
• Sexual orientation
• Domestic violence victim status
• Arrest and conviction records
• Reproductive health decisions

In 2019, New York also passed a law requiring every employer to implement a written anti-harassment policy and provide annual sexual harassment training to all workers, regardless of company size. These training sessions must meet specific content requirements and be interactive.

Employers who fail to address complaints or who do not have formal reporting procedures in place risk significant liability, including punitive damages and reputational harm. 

Paid Leave and Time Off Requirements

New York mandates several forms of paid leave, and business owners must build these obligations into their scheduling and payroll practices. The New York Paid Sick Leave Law, found in New York Labor Law § 196-b, requires most businesses to provide between 40 and 56 hours of paid sick leave per year, depending on employer size and income.

Key elements of New York’s paid sick leave include:

• Accrual begins at the start of employment
• Employees earn one hour of sick leave for every 30 hours worked
• Leave may be used for personal illness, caring for a sick family member, or attending to domestic violence-related needs

In addition, the Family and Medical Leave Act (FMLA) requires covered employers (those with 50 or more employees) to provide up to 12 weeks of unpaid job-protected leave for qualified family and medical reasons. While most small businesses may fall below the FMLA threshold, they still must be aware of the eligibility rules and their intersection with New York’s Paid Family Leave (PFL) program, which covers many smaller employers. 

Maintaining Personnel Files and Records

Sound recordkeeping is critical for legal compliance and business continuity. Federal and state laws outline specific types of records employers must maintain and for how long. Failure to produce these records during an audit or investigation can lead to fines and penalties.

According to 29 CFR Part 516 and New York Labor Law § 195, employers must keep accurate and up-to-date records on:

• Employee names, addresses, and Social Security numbers
• Wages paid and hours worked
• Job titles and pay rates
• Overtime payments
• Deductions and benefits
• Wage notices and acknowledgments

Payroll records must be maintained for at least six years in New York, while federal law generally requires three years of retention. Additionally, employers must retain employment applications, interview notes, and disciplinary records in a confidential and secure location. Employers should also consider maintaining documentation of employee evaluations, leave requests, and termination details to help defend against future claims. 

Get Legal Guidance from Fisher Stone, P.C.

Complying with employment laws in New York requires diligence, attention to detail, and a firm understanding of both federal and state requirements. Whether you’re hiring your first employee or expanding your team, it pays to have legal support to ensure every part of your employment process is compliant. 

For personalized guidance that protects your business and your workers, call Fisher Stone, P.C. at 516-908-9519.