Sketchy Employee Situation?
September 13, 2024
by a searcher from Harvard University - Harvard Business School in Alpharetta, GA, USA
I talked to a business owner who says that all of his employees have social security numbers, but he's never had to verify them because he has 10 or less employees. He also doesn't pay them overtime, just a commission of some sort in addition to their hourly wage. Sounds very sketchy. Any ideas?
If I buy the business and they turn out to be illegal, I assumed I'd just have to fire them (and the problem is replacing them at once and likely at a higher wage). Do you e-verify the employees in diligence?
from The University of North Carolina at Chapel Hill in Atlanta, GA, USA
from North Park University in Orlando, FL, USA
Additionally, overtime is not optional. https://www.dol.gov/agencies/whd/overtime. This sounds like the owner might also have the employees misclassified as contractors, not w2s.
This employer, and then you as the buyer, can be liable for not following the I9 requirements, not properly paying overtime wages and misclassifying employees. This may be the tip of the iceberg on a long list of additional bad practices this seller is doing. The consequences can include fines, backpay and jail time. You have enough to worry about when buying a business then to have to deal with the consequences of these terrible employment practices.
I agree with Leigh's suggestion of seeing the 941s to ensure the seller has been paying payroll taxes. I would also check against the minimum wage requirements of the state the employees work in. If you want any help with HR diligence, I'd be happy to help. Just let me know!