Legal Concerns for Every Startup to Remember When Hiring Workers

If you’re looking for workers for your startup, perhaps the first thing you think about is what kind of worker you want to hire. Many startup owners are lured by the prospect of classifying workers as independent contractors — doing so avoid having to pay payroll taxes, or paying salary/wages/overtime, or (if the company is big enough) falling under the requirements of the Affordable Care Act. However, as I have warned repeatedly, misclassifying workers as independent contractors when, in fact, they are employees, can cost your company far more in penalties if caught. The IRS and your state’s department of revenue may have different tests for determining between independent contractors and employees, but utilizing some common sense will answer the question for you most of the time — if you’re looking to control the activities of the worker, he or she is most likely an employee. Some startups also like to utilize interns (of the unpaid variety). However, the standards for unpaid internships are very strict, and courts and government agencies are beginning to crack down on abuses of the practice. Charitable organizations have a somewhat looser set of rules to abide by, but what trips up most for-profit companies is the fact that work done by unpaid interns cannot immediately benefit the company (and in fact having an intern must be a burden to the company). If you absolutely want to bring on unpaid interns, do so through a regulated, established program such as the ones run by universities; otherwise, at least pay your “intern” according to applicable minimum wage laws. If you’re going to hire employees, you should have an employee agreement or handbook in place that address issues such as position responsibilities and requirements, compensation (including raises, bonuses, and perks), vacation/sick day and telecommuting policies, tech and social media policies, workplace rules, grievance procedures, employee review and education, as well as dispute resolution and termination (now is also the time to execute non-disclosure and non-compete agreements if you wish). These guidelines are not only for the benefit of your employees but also yourself as well, so that you know how you will handle various employee situations. It is better for everyone to know the rules in advance rather than wing it — at worst, you may end up with disgruntled employees who are unsure of how they’re going to be treated or feel that they’re being treated differently from one co-worker to the next, or even up with employees with a viable legal claim against your company. Many startups are also unsure of how to go about dealing with problem employees. Your employee handbook or agreement should state the standards and policies for investigating, disciplining, and terminating an employee. However, in smaller startups where roles are more fluid and everyone is often expected to pitch in where necessary, many cases where there is disappointed with employee performance stems from confusion with (or even a lack of) position responsibilities and requirements. As such, it is also critical to have employee review/remediation/education procedures in place. Many times, dissatisfaction can be cleared up by focusing or redefining employee requirements and responsibilities, before having to escalate to disciplinary actions.

Leave a Reply

Your email address will not be published. Required fields are marked *