Employment Law Compliance in 2025: A CEO’s Guide to Hiring and Managing Legally
As your online business grows, so do your legal responsibilities. Managing a remote team across multiple states, hiring quickly, and letting go of underperformers can all become legal landmines if you’re not careful. In this month’s Answers with Autumn legal training, attorneys Autumn Witt Boyd and Michelle Coakley dive deep into the complexities of employment law compliance in 2025 so you can lead your team with confidence, not confusion.
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Why Employment Law Compliance Matters More Than Ever
The rules are shifting fast. From overtime regulations to DEI-related lawsuits and updated paid leave requirements, the employment law landscape has seen seismic changes in early 2025. What protected you last year may not protect you now. And if you’re managing a distributed team, your compliance obligations depend not just on where you’re based—but where your team members live and work.
Failure to keep up can lead to:
- Employee lawsuits
- IRS or state audits
- Penalties for misclassification
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Reputation-damaging HR mistakes
Key Legal Changes in 2025 Every CEO Should Know
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Reversal in DEI Enforcement
In March 2025, the EEOC issued new guidance making it easier for employees—particularly those in majority groups—to bring discrimination claims based on diversity programs. This is a major shift and could create unexpected legal exposure.
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New State Leave Laws
Missouri, Nebraska, and Alaska have added paid sick leave laws. If you’ve hired in these states, your employee handbook must reflect those changes.
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Increased Contractor Misclassification Audits
Agencies like California’s Employment Development Department are conducting random audits with no complaints filed. Misclassifying employees as contractors can lead to back taxes, penalties, and a whole lot of stress.
Common Hiring Mistakes (and How to Avoid Them)
Misclassifying Workers
It’s still the #1 mistake we see. Just because someone works part-time or remotely doesn’t mean they’re a contractor. Classification must follow strict legal tests and those vary by state.
Weak or Missing Contractor Agreements
If you’re working with legitimate contractors, your agreement needs to reflect that. A missing clause or incorrect IP assignment (especially in states like California) can trigger misclassification issues.
Hiring Without Understanding State Laws
Every new hire in a new state comes with new compliance obligations. You need to know what leave, wage, and privacy laws apply and update your policies accordingly.
Commission-Based Teams: A Hidden Compliance Trap
If you use commission-based setters and closers, you must have clear, signed commission agreements. Without them, former team members could sue for commissions long after they’ve left your company. Some states even allow for triple damages and attorney fees under sales rep protection laws.
A few questions to consider:
- Do commissions continue after a salesperson leaves?
- What happens with renewals or long-term payment plans?
- Is your agreement compliant with the employee’s home state?
The takeaway: If you’re using a sales team, your legal structure matters just as much as your strategy.
Termination Done Right: Avoiding Wrongful Claims
Before you let someone go, legal counsel can help you run through a termination checklist:
- Has this employee taken protected leave?
- Are they part of a legally protected class?
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Has underperformance been documented?
Documenting issues before the termination is critical. Performance reviews, Slack messages, and meeting notes all help protect your business if a claim arises.
And don’t forget final paycheck rules: in states like California, payment is due the same day the employee is terminated.
Whenever possible, offer a severance agreement that includes a release of claims. This gives the employee a soft landing and protects your business from potential lawsuits.
Managing a Remote Team: What Works in 2025
Remote work isn’t going away. To manage performance and compliance, CEOs should:
- Set written KPIs and role expectations
- Document feedback regularly, even informal conversations
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Avoid over-promising multi-step performance improvement plans in handbooks
Flexibility and consistency are key. Your policies should give you room to act quickly when needed, while also protecting against discrimination claims.
The Role of Employee Handbooks
A strong, updated employee handbook:
- Establishes expectations
- Protects the company with documented policies
- Ensures consistent decision-making
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Helps with compliance in multi-state teams
Handbooks must address:
- Leave laws (including state-specific requirements)
- Remote work security policies
- Use of AI tools
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Off-duty conduct, especially in politically charged climates
If you haven’t updated your handbook this year (or ever) it’s time.
Non-Competes, NDAs, and IP Ownership
Worried about a former employee or contractor starting a competing business or using your materials? Prevention starts with the right contracts:
- NDAs protect your confidential information
- Trade secrets must be restricted and protected to be enforceable
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Non-competes and non-solicits vary widely by state and some are unenforceable altogether
If you’re concerned about losing clients or team members to a competitor, a tailored non-solicitation agreement may be your best bet.
Overtime Rules You Might Be Getting Wrong
Not all salaried employees are exempt from overtime. To qualify, they must:
- Earn a minimum salary ($684/week federally)
- Meet specific duties tests involving discretion, decision-making, or specialized knowledge
If you don’t track hours or rely on outdated definitions, you risk major penalties. Even your time-tracking method matters. It doesn’t need to be fancy, but it must be legitimate and consistent.
Where to Start if You’re Feeling Behind
If this feels overwhelming, you’re not alone. Most CEOs didn’t start their business to become employment law experts but that doesn’t change the risks.
The best first step is to schedule a legal audit. At the AWB Firm, we start with a one-hour call to:
- Assess your current team structure
- Identify compliance gaps
- Prioritize what to fix first
From misclassified contractors to outdated handbooks, the goal is to help you make smart decisions and stay out of legal trouble.
What This Means For Your Business
Employment law compliance is not a one-and-done task. It evolves constantly and your policies, contracts, and decisions must keep up. Whether you're hiring in a new state, offering commission structures, or preparing to let someone go, legal oversight is the difference between smooth scaling and costly setbacks.
If your team is growing and you’re unsure if you’re fully compliant, now is the time to act. Employment law is complex, but with the right support, you can manage confidently and grow strategically.
About The AWB Firm
We’re a modern, women-led law firm helping 7-figure online business owners protect their intellectual property, grow compliant teams, and navigate legal challenges with confidence. From trademarks and contracts to legal strategy, we’re here to ensure you can scale without worry. Learn more about our services here.
Not sure where to focus your efforts to make sure all areas of your business are legally compliant and protected? We’re currently accepting applications for our Legal Roadmap Strategy™. Click here to learn more and apply.
Category: Employment Law, Business Compliance, Team Growth
