5 Hiring and Firing Legal Tips for Startups

Now that you have your million-dollar idea, you need a team to carry out your vision. For the startup entrepreneur strapped for cash, consider these tips to avoid any pitfalls you simply can’t afford:

1. Classify your people. First, you will need to determine whether or not your hire is an independent contractor or an employee. You can learn how to make that classification here. If you determine your new hire is an employee, you will then need to classify him or her as either “exempt” or “nonexempt” (from overtime pay). Non-exempt employees must be paid at least minimum wage as well overtime pay. Accurate classification depends on a thorough analysis of the employee’s job functions (based on their job description) and the amount they are paid. Simply labeling your employee “exempt” could expose you to legal liability, so make sure to familiarize yourself with the law. You can check out our resource on the exempt/nonexempt classification here.

2. Avoid entering into employment contracts. As a general rule of thumb, avoid entering into contracts with your employees. Instead, issue a non-binding offer letter with an attached job description. This ensures the employee is “at-will,” which allows you or the employee to part ways at any time without legal repercussions. Learn more about the benefits of using offer letters and job descriptions here.

3. Protect your ideas: In this interconnected age, be vigilant to protect any unique product, service, or technology from ending up in the wrong hands. Consider using:

  • A non-disclosure agreement (NDA) that specifies what is confidential and how information can be used,
  • an intellectual property (IP) and inventions assignment agreement, which defines and assigns all relevant IP,
  • and a (reasonable) non-solicitation provision for new hires who may eventually leave your business.

4. Use an employee handbook to keep you compliant: Use an employee handbook that covers all the basics, including paid sick leave, parental leave, and policies on sexual harassment, discrimination, and equal employment to help keep your business compliant. Perhaps more importantly, an employee handbook is an invaluable source of information to help you (the employer) navigate and bridge any unknowing gaps. Read our resource on employee handbooks here.

5. Prepare for employee exits: Firing an employee is no easy task. When an employee is not living up to expectations, it’s important that you detail their performance in writing and provide a termination notice to the exiting employee. Maintaining documentation regarding how your decision relates to performance or a bona fide business reason may help protect you against potential accusations of discrimination. Check out our resources on Performance Management (here) and Separation Agreements (here) and, as always, feel free to reach out for legal support.

Related Resources:

Disclaimer: Although this article may be considered advertising under applicable law and ethical rules, the information in this article is presented for informational purposes only. Nothing herein should be taken as legal advice and this content does not form an attorney-client relationship. If you would like further information, Wilkinson Mazzeo would love to hear from you, so please feel free to reach out with any questions!

Photo by Phillip Harder

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