Labor and Employment Tips for Startups

By Samantha E. Becker


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Here are 10 employment tips to prevent your start-up from losing ground before it gets started:

  1. Make sure you understand the differences between employees and independent contractors and follow all legal requirements when it comes to wages, benefits and terms of employment. Distinguishing employees from independent contractors is complex and fact-specific (the IRS uses a 20-factor test!) and errors can result in costly litigation down the road.
  2. Don’t classify employees as salaried to avoid paying for overtime and/or other benefits. Most employees in a company should be paid on an hourly basis and even salaried employees can later try to sue for unpaid wages and overtime, penalties, and attorneys’ fees.
  3. You cannot pay equity to avoid paying minimum wages. Make sure you pay employees for their regular and overtime hours worked based on the rates set forth by state and federal laws.
  4. The company’s paychecks and paystubs should comply with state and federal requirements. For example, did you know that California requires employers to list the start and end dates of each pay period on the employee’s paystub?
  5. Interns should be paid. Follow federal, state and local laws when it comes to paying interns for their hours worked – payment, training, and/or college credit are generally required.
  6. Protect your trade secrets. Before sharing any of your confidential and proprietary information with employees or independent contractors, have them sign a confidentiality or non-disclosure agreement that outlines the company’s trade secrets and forbids their disclosure.
  7. It is illegal to publish job advertisements that show a preference for or discourage certain applicants from applying based on their sex, race, age, disability, U.S. citizenship and/or several other factors. Keep this in mind with all job postings.
  8. Prepare an employee manual with clear guidelines about company policies and have your employees sign an acknowledgement stating that they have received and understand your policies. We recommend establishing policies on the following topics right away: discrimination, harassment, equal employment opportunity, disability, reasonable accommodation, investigation and resolution of employee complaints, at-will employment and grounds for discipline.
  9. Consider employment practices liability insurance to cover the type of employment lawsuit that you are most concerned about. It may save you a lot of money in the long run.
  10. When employees leave the company, have them sign a separation agreement and consider offering one or two weeks of salary in exchange for their agreement to comply with restrictive covenants and/or waive their right to bring a lawsuit.


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