Whether you are currently employing people, or are considering hiring people in the future, it’s crucial to stay one step ahead of employment laws. (To read more about hiring an employee, please visit this post.) Employment law issues are one of the most common ways that small businesses run into trouble, but you can help to protect your business by following the suggestions below.
Tip 1: Understand the employment arrangement
Many work arrangements are flexible, casual and/or part-time, and because if that it can be hard to tell whether you are hiring an employee or an independent contractor. The distinction depends on the degree of control that you have over the person’s work duties and arrangements, but because the definition is fuzzy you may not be sure which side you fall on. Unfortunately it really makes a difference! If you have employees, you have many more reporting and withholding requirements and you have to comply with all state and federal employment laws, including minimum wage laws. If you’re not sure, consult an expert so that you can plan ahead and not get in trouble later.
Tip 2: Get all employment and contracting arrangements in writing
Employment disputes are very common, but a simple way to help avoid such disputes is to get the arrangement in writing, signed by both parties. Include all of the basics – start date or contract term, salary or fee for contract, benefits, duties or project scope, job title – and also include a provision stating that the arrangement is at will. A contract like this should be used even for independent contractors, volunteers or advisors. The contract does not have to be complicated and can really help you avoid disputes down the road.
Tip 3: If you need to terminate someone, document the process and get a release
Even if yours is an at-will state, terminated employees regularly file lawsuits against their employers. To help protect against such lawsuits, you should have a good documented process for disciplining, warning and terminating employees, and you should follow that process in every case. If you have to terminate someone, try to get a release of claims. You’ll probably need to give them some severance or another benefit like vesting acceleration, but it will provide valuable protection for your company.