Once you have a single employee, you've entered a regulatory environment that scales much faster than your team does. Most route owners learn the hard way; you can learn the easy way.
Federal compliance baseline (employees):
- EIN (you should already have).
- Federal income tax withholding + FICA (Social Security & Medicare): collected from employee, matched by employer.
- FUTA (Federal Unemployment Tax): paid by employer.
- Form W-4 for each employee at hire.
- Form I-9 verifying work authorization within 3 days of hire (KEEP THESE; fines for missing I-9s start at hundreds per employee).
- Form W-2 issued each January for prior year wages.
- OSHA general duty obligations (chemical handling SDS sheets, PPE, training documentation).
State compliance baseline:
- State income tax withholding (where applicable).
- State unemployment insurance (SUI) registration and premiums.
- Workers' compensation policy (covered earlier).
- New-hire reporting to the state directory within (typically) 20 days of hire.
- State-specific labor postings in the workplace (or accessible if remote).
- State-specific paid sick leave (CA, WA, AZ, OR, MA, CO, etc., have mandated policies).
Wage & hour basics that bite new employers:
- Minimum wage: federal floor is $7.25/hr but most states are higher; some cities (SF, NYC, Seattle) are much higher.
- Overtime: time-and-a-half over 40 hours/week (federal). Some states have daily overtime (CA: over 8 hours/day).
- Misclassification: as covered earlier, calling an employee a 1099 contractor to avoid payroll tax usually fails the legal test and triggers back-pay + penalties + interest.
- Independent contractor tests vary (ABC test in CA/NJ/MA, common-law test in many others). Default to W-2 unless an employment attorney has confirmed otherwise.
Hiring documents every new employee gets:
- Offer letter clarifying at-will status (where applicable), pay, benefits, start date.
- Employee handbook acknowledgment.
- W-4, state W-4, I-9, direct-deposit authorization.
- Workers' comp notice (state-specific).
- Confidentiality / non-solicitation agreement (talk to an attorney; non-competes for hourly employees are restricted or banned in many states, a non-solicit is usually safer and more enforceable).
Termination:
- Final paycheck: many states require it within 24–72 hours of termination (CA: same day for involuntary). Late pay can trigger waiting-time penalties.
- COBRA notification (if you offered group health and have 20+ employees; smaller employers have state mini-COBRA rules in some states).
- Unemployment response: the state will ask for documentation when the former employee files; respond truthfully and on time.
Payroll provider, use one.
Paying employees correctly without a payroll provider is possible but a poor use of your time. Gusto, ADP Run, Paychex Flex, OnPay, QuickBooks Payroll all handle the mechanics for $40–100/month. They calculate withholding, file federal/state returns, generate W-2s, handle direct deposit. Worth every penny.
Final disclaimer. Employment law is the most jurisdiction-specific area of small-business operation. Federal, state, and local rules vary, change, and overlap. Hire an employment-savvy attorney and a payroll provider before you make your first hire. The cost is trivial relative to a single misclassification or wage-and-hour audit. We are not employment lawyers and this is not legal advice.