Hiring the right team is crucial for any small business, but navigating the legal landscape can be tricky. Missteps in hiring can lead to costly fines, lawsuits, and compliance issues.

In this webinar, CareerPlug’s Chris Igou and GoSmallBiz’s Anna Grantham sit down with labor and employment lawyer, Jeremy Schneider from Jackson Lewis to discuss the critical hiring mistakes small businesses make—and how to avoid them. With extensive experience helping employers manage legal risks, Jeremy shares insights on best hiring practices to prevent costly lawsuits and compliance violations.

The panel covers essential topics such as:

• How to classify workers correctly and avoid misclassification penalties
• Interview tips to stay compliant with employment laws
• The risks of asking the wrong questions during hiring
• How to properly onboard employees to minimize legal exposure

Watch the full webinar recording here:

A business needs workers to grow 

The webinar starts with this introductory tip: As a small business owner, you have to know when it’s time to hire. Your business won’t grow, unless you grow your team. 

However, hiring and retaining new employees can be a huge challenge. Not only is it difficult to find and keep good people, you also have to be mindful of illegal hiring practices that could put you at risk for litigation. 

This leads us to the simple but important “Do’s and Don’ts” to consider when hiring. 

Do: Classify workers correctly

“The world of independent contractor vs employee classification is a growing and evolving one in employment law,” says Jeremy Schneider. Understanding the difference between an independent contractor and an employee is key to avoiding legal trouble. 

Employees are entitled to protections like overtime, minimum wage, workers’ compensation, and unemployment benefits—while independent contractors are not. Misclassifying a worker can lead to penalties, back taxes, and legal disputes. As Jeremy explains, “If you misclassify someone as an independent contractor when they should be an employee, you could be liable to the government or that employee for income taxes that were never withheld and for overtime and minimum wage compensation.” 

There are several tests you can use to determine how someone should be classified. These involve asking questions about the employment situation and terms. Some considerations that can help you determine if someone is an independent contractor are: 

• Are they a highly skilled/experienced professional?  
• Did they approach your company seeking “contract work”?
• Did they negotiate and sign an “Independent Contractor Agreement”?  
• Is it common in their industry for workers of this type to be contractors rather than employees?  
• Are they paid on a 1099?

Don’t: Assume a contract defines status

Simply signing an “Independent Contractor Agreement” doesn’t automatically make someone a contractor. Courts and regulatory agencies will look at how the worker operates within your business. If you provide training, tools, office space, or dictate their work schedule, they may legally be considered an employee—even if they agreed to work as a contractor.

Do: Follow fair and legal interview practices

Creating a fair and comfortable interview experience is important and can help you make a better impression on top candidates. 

“You want to prepare for the interview. Sit down, review the functions of the position, really know what it is the person is going to need to do in order to be successful,” said Jeremy. By taking the time to prepare, interviewers can ensure they ask insightful, fair questions that reveal a candidate’s true potential (and follow legal practices, too.)

Jeremy also recommends letting the candidates do most of the talking. This will help you learn more about them, “The less you talk, the less risk there is. Also, the more the candidate talks, the more you will get a sense for who they are and what they’re about.” 

Don’t: Ask prohibited questions in interviews 

Small businesses care about a candidate’s fit with their company, and interviews are how they determine that fit. This could lead to them asking the wrong types of questions. As Jeremy shares, “Interviews are another significant area of risk.” 

Interviews should focus solely on a candidate’s ability to perform the job. Prepare questions in advance and structure them around the essential functions of the role. Stick to behavioral and open-ended questions, such as:

• Tell me about a time you had to manage multiple deadlines.
• What part of your current role do you excel at?
• What challenges do you anticipate in this position?

Avoid questions related to protected characteristics, such as:

• Age: Refrain from asking about birthdates or graduation years.
• Race or Gender: Don’t assume interests based on race or gender.
• Marital/Parental Status: Don’t ask about childcare arrangements or future family plans.
• Pregnancy: Never ask about current or future pregnancies.

Do: Use an offer letter, not a contract

Once you’ve selected a candidate, provide an offer letter rather than an employment contract unless required otherwise. The offer letter should outline salary, start date, job duties, and any pre-employment conditions, such as background checks or drug testing.

Offer letters allow you the flexibility to add your wants and needs for your potential hire. An offer letter provides flexibility and minimizes legal obligations, whereas an employment contract can create binding commitments that may be difficult to modify or terminate. 

“When you give them an offer letter and you want to hire them, you explicitly say in your offer letter that this offer is contingent upon successful completion of a background check and a drug test, if you want to put that in there,” said Jeremy. 

Don’t: skip pre-hire considerations

Before an employee starts, confirm they meet all requirements, including performing reference checks and verifying eligibility to work in the U.S.

Many business owners also want to conduct background and drug screenings. The growing trend in the country is that you can’t perform a criminal background check until after you give what’s called a contingent offer of employment. Avoid putting language around background checks in your job descriptions to stay compliant. And as Jeremy recommends, “Try to make all of this stuff conditional—meaning, you can have the job, but you need to clear this first.” 

For both background checks and drug screens, you’ll need to determine if both are necessary for your business. For example, if someone is going to be working with heavy machinery or around children, drug tests are easy to justify. However, you’ll need to know the rules in your state and look into what they allow (or don’t allow) you to test for. 

Hire more confidently with CareerPlug and GoSmallBiz

Hiring the right way helps small businesses grow while staying legally compliant. By following these best practices, you can build a strong workforce while avoiding costly legal pitfalls. 

“You are only one person,” says Jeremy. Managing a small business can be overwhelming, but by following these do’s and don’t’s, you’re on the right track to creating a successful, legal-trouble free business! 

About GoSmallBiz: Since 1996, GoSmallBiz has provided services and tools to help small business owners and entrepreneurs turn their dreams into reality and reach new levels of success. Whether you’re looking to attract more customers online, seek expert advice, or ensure you’re compliant with employment laws, we’ve got you covered.

CareerPlug and GoSmallBiz have partnered to give CareerPlug users exclusive access to the comprehensive solution of legal, tax, and tech services designed to streamline operations and supply you with the tools needed to hire and manage your team confidently and effectively.