Are you getting ready to take your startup idea to the next stage of development? It’s probably been a whirlwind of work putting together a business plan, lining up investors, adjusting that business plan, and then sealing the deal for capitol. At this point, your business is looking pretty good on paper. Now, you’ve got to step up and implement your plan. That means understanding the sometimes complicated, but also necessary, aspects of employment law.
Even though you might have what’s considered a small staff, you still need to follow the many federal, state, and local regulations with regard to their employment. Here are the five things that every entrepreneur should know about employment law:
- Employee vs. Independent Contractor
As the owner of a startup, you’ll be keeping a constant eye on the bottom line, but the work still needs to get done. Hiring independent contractors is often an effective way to accomplish your business goals while keeping overhead costs at a minimum. The big plus with hiring an independent contractor is that you don’t have to carry them on your company’s medical insurance plan or worker’s comp insurance. Upon hearing that, many employers wonder, “Why not just make everyone an independent contractor?” The government is way ahead of you on that one.
From a regulatory standpoint, an independent contractor is someone who performs a task that is not directly related to your company. For instance, if you are an exterminator, you might hire an independent contractor as a content writer to promote your website. The independent contractor uses their own “equipment.” In the case of a content writer, that person will be working at home on their own computer. These are specialized workers who are usually hired to take on a specific task. When the job is done, they move on.
With employees, you will provide direct supervision for a wide variety of tasks that they will perform on an ongoing basis. They will be using your “office equipment” and working at your “office space,” even if that space is your home. An employee is also someone who earns their money based on time, whether you measure it in hours, days, or weeks. As the employer, you also have the right to terminate your employee.
Understanding the distinction between employees and independent contractors should help you make an informed decision about your staff hires.
- State Guidelines Governing Overtime, Sick Leave, Maternity Leave, and Vacation
Depending on the circumstances, some of your employees could be exempt from things like overtime pay or maternity leave. Those exemptions vary from state to state. For instance, here’s one of the recently enacted amendments to New York City Earned Sick Time Act:
“Effective April 1, 2014, employers with 5 or more employees must provide 5 paid sick days to all of its employees; for employers with fewer than 5 employees, the sick leave can be unpaid. Initially, employers of 15-20 employees were not required to offer paid sick time under the Act until October 2015 and employers with less than 15 employees were not required to provide paid sick time at all under the Act.”
There’s yet another set of guidelines if you’re hiring for a federal contract. This is a clear indication of why consulting with an experienced employment law attorney is advantageous.
- Put Your Workplace Policies in Writing
As with all things in business, your workplace employee polices need to be put forth in writing. This is something that every employee should have a copy of, and it should be posted in the office. These written policies will go a long way towards protecting your interests. There can’t be a squabble if the point of contention is clearly spelled out in the policies.
Not only should these policies cover things like overtime and vacation but also workplace procedures. If you want your employees restricted from using social media on office computers, then spell that out in your policies.
- Protect Your Trade Secrets
If you’re opening a fast food franchise, you might not have a lot of trade secrets to protect. However, you would probably be signing a confidentiality agreement provided by the parent company that protects their trade secrets. This agreement is a good thing to have in any type of business startup. It can cover things like client lists and non-compete clauses. That can prevent an employee from learning everything from you and then going off to start their own version of your business.
It will be your responsibility to deem something a trade secret for your company. Once an item has been given that distinction, you have to make the effort to keep that information secure. That can be on a password-protected computer or even as a hard copy file.
- Health Insurance Regulations
The Affordable Care Act has changed the way health insurance and healthcare are handled in this country. As an employer, you are on the front line when it comes to implementing a lot of those changes. Whether you are required to provide health insurance for your employees depends on the size of the staff and how long they work. Diving into the ACA can be extremely intimidating. Fortunately, there many agencies standing by to help you navigate through the regulations.
You shouldn’t be discouraged by the amount of potential “red tape” you might have to wade through in order to be in compliance with your employees. Once you understand the basics, you can turn your attention to growing your business and watching it flourish.
