ModusLaw specializes in helping employers and entrepreneurs navigate complex issues surrounding employment law. They say an ounce of prevention is worth a pound of cure. We don’t know who “they” are, but we tend to agree with them. Here’s a guide detailing our services, plus some tips on how to avoid common employment law mistakes.
Areas of Specialty
1. NEW HIRES
Look out for restrictive covenants and be sure to protect confidential information. Employers often use non-compete and non-solicitation clauses to retain employees. If you’re not careful in the hiring process you could find yourself on the wrong side of the law. Ask potential hires about restrictive covenants. Utilize written agreements with new employees that disclose the clauses they are subject to and affirm they won’t breach prior agreements with previous employers.
Don’t be lulled into a false sense of security. It’s never enough to have employees sign nondisclosure agreements (NDAs). You also need to take appropriate measures to safeguard confidential information because redress often hinges on whether or not you took steps to protect it.
2. EMPLOYEE CLASSIFICATION
One of the biggest mistakes companies make is improperly classifying workers. It’s crucial to get this right though because getting it wrong exposes businesses to serious liabilities.
Independent Contractor vs. Employee:
Federal and state laws differ (how nice!) but a worker’s status is generally dependent on the amount of control an employer exerts. Assign proper classifications (lawyer up if you’re unsure), use appropriate tax forms, and review designations annually.
Exempt vs. Non-Exempt:
Exempt vs. non-exempt classification dictates an employee’s eligibility for overtime pay, and contrary to popular belief, job titles do not indicate exempt status. Rather, very specific salary and duties tests must be met in order for an employee to be “exempt.” Very few employees meet the strict criteria required to be exempt. Ensure proper pay practices by developing and maintaining accurate job descriptions and reviewing them regularly as employees’ roles and responsibilities evolve.
3. EQUITY INCENTIVE PLANS
Many cash-strapped startups attract talent by offering or promising equity in lieu of wages. This can be problematic because providing equity does not always adequately compensate employees under federal and state minimum-wage laws. Wage and hour lawsuits are among the most popular (and most expensive!) to litigate and defend. Avoid this legal landmine by structuring payments as bonus plans with clearly defined terms and conditions.
4. PAID TIME OFF
Under a traditional Paid Time Off (PTO) policy, an employee accrues a certain number of paid days off per year that can be used for sick leave, vacation pay, personal time, or other approved reasons. Under this scenario, when an employee leaves, the employer must pay the employee for all unused accrued PTO. However, this can be extremely costly to the employer. To combat the financial burden of unexpected employee payouts, employers began enacting “use-it-or-lose-it” PTO policies and unlimited PTO policies. Both solutions have pros and cons so businesses should ensure that their policy complies with state leave laws.
5. POLICIES & PROCEDURES
Start-ups and early stage companies are usually not concerned with creating robust employment policies when the number of employees is small. However, no matter what size, all companies should have the following policies in place to comply with laws, protect from potential litigation, stave off bad press, and demonstrate to interested investors that your personnel infrastructure is sound.
Include a reporting mechanism and complaint process.
Equal Opportunity and Non-Discrimination:
Equal opportunity is the law. Businesses cannot discriminate in hiring and promoting based on age, race, sexual orientation, religion, pregnancy, or disability.
Computer and Social Media:
State that employees have no expectation of privacy and be very clear on who is allowed to make official statements on behalf of the company.
It’s impossible to avoid every risk. Paying attention to these areas will result in less headaches and hassles. When in doubt, call us – we provide free consultations and can help you successfully overcome any problem areas currently in your business.
Disclaimer: The following is for general information purposes only and should not be construed as or used in place of legal advice.
To learn more about our employment law services, or to speak with us directly
My main practice is employment law which is a super broad area encompassing all aspects of the employer-employee relationship.