Employers can minimize employment-related liability by approaching employment matters from a proactive position rather than a reactionary position. He are five common legal mistakes made by start-ups and small businesses.
1) Failing to “put it in writing” early
Before founders do any significant work together, it is essential to put into place a written agreement that outlines the roles and obligations of each party.
2) Failing to implement buy-sell provisions
The decision by one founder to leave the company can lead to internal turmoil, customer erosion and disruption in revenue flow. These issues also could arise in the event a founder dies or experiences long-term disability.
Simply put, failing to plan for the end is planning to fail. A properly drafted buy-sell agreement executed by the founders at the outset can effectively account for how the company will proceed when faced with unanticipated change.
3) Using inadequate employment agreements
It is critical to invest in properly drafted agreements that can serve as the foundation for the employment relationship. Common terms included in an employment agreement should include the length of employment or whether the employment is at-will; the classification of the worker (i.e., employee/independent contractor, exempt/non-exempt); and rights and restrictions upon termination.
Employers should be mindful of the potential liability that exists when disregarding any prior-employment related obligations of job candidates, including any restrictive covenants and/or obligations to return sensitive documents that belong to the prior-employer.
4) Failing to implement reasonable restrictive covenants
Properly drafted restrictive covenants (i.e., non-compete and non-solicit agreements) are powerful tools that protect a company’s goodwill and business relationships. Legitimate restrictions should be put in place based on the particular employee’s position and the business needs of the company.
5) Not implementing and maintaining adequate employment policies and procedures
Setting aside time to develop and communicate employment policies can help manage employees and identify potentially disruptive issues before valuable time and resources as wasted. Employers should formalize employment relationships by creating, implementing and maintaining a customized employee handbook containing company policies that comply with applicable laws and reflect the culture of the company.
[This is an excerpt from an article written by Jayde Ashford Brown and published in The Business Journals on Jan 18, 2018.]