One of the reasons I left the Big Firm world many years ago and took up working with small businesses is that I really like the people — as a rule, they´re hard-working, creative optimists with independent spirits. That mile-wide independent streak is one of my favorite characteristics of small business owners, but sometimes it can get them into trouble.
I saw an article online recently about Jude Doty, who had a house moving business in Washington State. Mr. Doty allowed his young sons to help him in the business. He thought he was doing a good thing, spending time with his kids, teaching them the work ethic, helping them to develop useful skills. But the State of Washington Board of Labor thought otherwise and repeatedly fined Mr. Doty for violating Washington´s child labor laws. The size of the fines resulted in Mr. Doty losing his business and his home. At the time the article was written, he and his family had moved to Idaho, which has less stringent child labor laws than Washington. They were getting back on their feet, preparing to go into business again. I couldn´t help but wish that the Doty family had studied up on the child labor laws and moved to Idaho in the first place if they wanted the kids to work in the family business. It would have saved everyone a lot of grief. ‘One Father’s Labor of Love’ Idaho Spokesman Review
Many of my clients hire their kids to work for them, especially during summer break, and when they call to ask me if it´s OK, the first thing I want to know is the son´s or daughter´s age and what sort of work he or she will be doing for the business.
As the Doty family discovered, child labor laws vary from state to state — you can find out about your state´s child labor laws from your Department of Labor or comparable state department or agency. The federal labor law applies in all states; if the state and federal law differs, the stricter one must be followed. You can see a summary of the federal child labor law here: Federal Child Labor Law
The office manager for client of mine called the other day and wanted to know what they needed to do to set up the owners´ 15-year-old daughter, Kerry, as an employee. The company publishes regional weekly newspapers, and Kerry was going to be helping with advertising layout.
The job Kerry will be doing for her parents´ newspapers will not violate any child labor laws. Texas law is similar to federal — it’s OK to hire kids over the age of 14, as long as the job is not hazardous. If Kerry´s parents owned, say, a highway building business and planned to hire Kerry to operate a dozer, we would have had something to worry about.
There´s another aspect to hiring your kids — taxes. When a business owner hires her child who is under 18, the child is exempt from Social Security and Medicare taxes, provided the wage paid is reasonable considering the work being done (in other words, you can´t pay your kid $100,000 a year for a part time job as a file clerk), and your business is not incorporated. Kerry´s parents´ business is a Limited Liability Company taxed as a sole proprietorship, so they do not have to withhold or pay Social Security or Medicare tax for Kerry. They will want to withhold for income tax, if Kerry´s income is high enough.
I called over there today to see how things were going, and Kerry answered the phone, sounding very grown up and professional. She said she´s having a great time and is already planning how she´ll spend the money she earns.