Three employment law hot spots every leader should know

Executive overview

Most leaders don't think about employment law until they're already in trouble. Three areas — social media ownership, worker classification, and wage-and-hour compliance — carry serious legal and financial risk that most employers underestimate.

Good policies deter violations. They also create better workplaces.

Getting classification and wage practices right costs far less than the audits, penalties, and lawsuits that follow getting them wrong.

Social media ownership and employee rights

• The central question when an employee leaves: who owns their LinkedIn contacts?
• If the company funds the account and it's tied to a company email, ownership is easier to assert.
• Mixed-use accounts — where an employee merges pre-existing personal contacts with new company contacts — create a genuine gray area; case law is unsettled.
• A standalone social media policy (preferred over a handbook addendum) should spell out what happens to data on departure.
• Even a signed acknowledgment is largely a deterrent; enforcement after the fact is difficult.
• The NLRA Section 7 protects employees discussing wages and working conditions on personal social media — firing someone for those posts is a violation, even if the posts are critical of the employer.
• Posts that are purely individual complaints, with no collective employee activity, are generally not protected.

Worker misclassification: independent contractor vs. employee

• Misclassifying a worker as a 1099 independent contractor strips them of overtime, discrimination protections, and workers' comp.
• It also means the employer pays no employment taxes — making it a high-value target for agencies.
• A terminated contractor who files for unemployment can trigger cross-agency reporting: the Department of Labor can notify the IRS, which can audit every worker in that category.
• California estimated misclassification costs the state over $7 billion in lost payroll tax in a single year; civil penalties run $5,000–$25,000 per violation.
• The Department of Labor has named misclassification its top enforcement priority.

The six-factor economic realities test (used by the IRS and DOL) determines true classification:

1. Integral to the business — if the work is core to what the employer does, the worker looks like an employee.
2. Managerial skill and profit/loss — does the worker's own business judgment affect their profit or loss?
3. Relative investment — does the worker supply their own tools and equipment, independent of the employer?
4. Skill and initiative — does the worker exercise independent business judgment, not just trained skill?
5. Permanency — a multi-year set-hours arrangement looks like employment; project-based, finite engagements look like contracting.
6. Degree of employer control — who controls schedule, tools, and work method?

A classic independent contractor: a graphic designer working in her own studio, using her own equipment, for multiple clients simultaneously.

Wage and hour compliance

• The Fair Labor Standards Act covers almost all W-2 employees; independent contractors are excluded.
• Non-exempt employees must be paid at least 1.5x their regular rate for all hours over 40 in a work week.
• FLSA cases filed in federal courts have risen over 400% since 2000; more than 8,000 cases were filed in a single recent year.
• The DOL has significantly expanded its wage-and-hour investigator headcount.
• Individual/personal liability is possible under the FLSA — not just corporate liability.

Common employer missteps:

• Employees attending after-hours company events (even charitable ones) while visibly representing the employer may be "on the clock."
• An employee answering questions or emails during an unpaid lunch break has worked through that break — that time counts.
• Failing to provide or strongly encourage required rest and meal breaks (California law requires at minimum that employers make breaks available).

Minimum wage considerations:

• Federal minimum wage is $7.25/hour; states and cities set higher floors (Arizona $8.05, San Francisco upwards of $15 at the time of recording).
• Minimum wage increases ripple into overtime calculations and can affect whether salaried employees still meet the exemption threshold.
• Audit salary-exempt classifications regularly to confirm employees still meet applicable economic thresholds.

What to do now

• Draft a standalone social media policy — even a five-person company benefits from clear expectations.
• Review every 1099 relationship against the six economic realities factors before the next audit cycle.
• Audit timekeeping practices: meal breaks, after-hours events, and remote-work boundaries are common exposure points.
• Consult an employment attorney in your jurisdiction; good upfront counsel is cheaper than defending a class action.