SMITH SHAPOURIAN MIGNANO PC - SAN FRANCISCO LAW FIRM FOR STARTUPS AND SMALL BUSINESSES
  • Home
  • About Us
    • Teela Crosthwaite Smith
    • Neda Shapourian
    • Lindsey S. Mignano
    • Kelly Lawton-Abbott
    • Jason D. Crain
    • Amy Carpio-Bruno
    • Jordan T. Lee
  • Services
  • News
  • Blog
  • DEI Policy
  • Contact
  • Home
  • About Us
    • Teela Crosthwaite Smith
    • Neda Shapourian
    • Lindsey S. Mignano
    • Kelly Lawton-Abbott
    • Jason D. Crain
    • Amy Carpio-Bruno
    • Jordan T. Lee
  • Services
  • News
  • Blog
  • DEI Policy
  • Contact
Search

blog

3 Common Mistakes Startups Make When Hiring (and How To Avoid Them)

1/17/2017

1 Comment

 
Building a team is crucial to a startup’s success, and mistakes can be costly. Selecting the right personalities and skills is difficult enough, let alone navigating the complicated universe of federal and state employment law. Startups routinely get it wrong, and the consequences can be financially devastating. Here are 3 common mistakes startups make during the hiring process that should be avoided at all costs:
 
Misclassifying an Employee as an Independent Contractor
 
Misclassification is the mistake we attorneys see most often, and is one of the hottest topics playing out in the courts today. Startups can save significantly on insurance, taxes, and payroll by hiring independent contractors instead of employees, so there is an incentive to classify the relationship as such. However, simply calling someone an independent contractor is insufficient. A true independent contractor is someone who is brought in to assist with a specific project or role, and who controls when, how, and where his or her work is performed. Often, independent contractors work on a part-time or short-term basis and regularly do the same or similar work for other companies. If this is not the case, the startup likely has an employee, and must comply with the federal and state laws that govern employment relationships.
 
Offering Employees Equity in Lieu of Cash Compensation
 
Restricted stock or option grants can be an excellent way to attract employees willing to work for less salary in exchange for potentially much greater financial gain as the startup grows.  However, equity grants on their own do not satisfy wage and hour laws, regardless of the current fair market value or expected future return.  If a startup hires an employee, that employee must be paid at least the applicable minimum wage (including overtime) or exempt salary on a regular basis, and failure to do so can lead to steep penalties under both federal and state wage and hour laws.  Bootstrapped startups that cannot afford regular payroll should consult an attorney about alternatives, including properly classified independent contractors.
 
Failing to Have New Hires Sign Carefully Tailored Employment Agreements
 
Early stage startups often recruit and hire employees to serve a specific function, but use generic titles such as Chief Marketing Officer, Sales Director, or Executive Assistant. What one company expects from an employee bearing such a job title may vary greatly from what another company expects, and conflicts often arise if those expectations are not clearly defined from the outset of the relationship. Therefore, a new hire should always be presented with an offer letter or employment agreement that contains a well-defined job description, the amount of cash, bonus, and equity compensation that the employee can expect to receive, and the basic terms that will govern the employment relationship. Doing so helps to set expectations and, if necessary, streamline the removal of non-performing employees.
 
Startups should also ensure that every new hire signs a Confidential Information and Invention Assignment (also known as a Proprietary Information and Inventions Assignment), which protects the Startup’s intellectual property and other confidential information in the event the employee leaves the company.
 
By avoiding these common mistakes, your startup can protect itself from costly legal disputes that inevitably arise when an employment relationship sours. Smith Shapourian Mignano LLP is available to answer any questions or concerns you may have regarding these and related employment issues.
This blog does not constitute solicitation or provision of legal advice, and does not establish an attorney-client relationship. This blog should not be used as a substitute for obtaining legal advice from an attorney licensed or authorized to practice in your jurisdiction. You should always consult a suitably qualified attorney regarding any specific legal problem or matter in a timely manner, as statutes of limitations may bar your claim.
1 Comment
hailey link
4/5/2021 11:45:07 pm

this article is really helpful for who want invest in startup ,
I have read this article very carefull,
Order online cake gift etc
wishours.com

Reply



Leave a Reply.

    Archives

    October 2022
    September 2022
    September 2021
    June 2021
    May 2021
    March 2021
    January 2021
    December 2020
    October 2020
    September 2020
    August 2020
    June 2020
    May 2020
    April 2020
    March 2020
    January 2020
    June 2019
    April 2019
    March 2019
    February 2019
    November 2018
    October 2018
    September 2018
    May 2018
    April 2018
    March 2018
    February 2018
    December 2017
    November 2017
    October 2017
    September 2017
    August 2017
    July 2017
    June 2017
    May 2017
    April 2017
    March 2017
    January 2017
    November 2016
    October 2016
    September 2016
    August 2016
    July 2016

    Categories

    All
    83(b) Elections
    Arbitration
    Benefit Corporation
    Bootstrapping
    Business Name
    Buy-Sell Agreement
    Cannabis
    CBD
    Cloud
    Commercial Lease
    Contracts
    Conversion
    Coronavirus
    Crowdfunding
    Delaware Flip
    Dissolution
    Early Hires
    Employers
    Employment Law
    Entrepreneurs
    Entrepreneur Spotlight
    Financials
    Funding/Financing
    GDPR
    Guest Blogger
    Health Care
    HR
    Industrial Hemp
    Insurance
    IT Solutions
    Joint Ventures
    Litigation
    LLC
    LOEN
    Logo
    Marketing
    Non Profits
    Non-Profits
    Partnerships
    Patent
    Pitch Deck
    Privacy Policy
    Professional Corporation
    Raising Money
    S Corp
    Securities
    Settlement
    Small Business
    Sole Proprietorship
    Startups
    Stock Options
    Tax
    Trademarks
    Website

    RSS Feed


​© 2022 Smith Shapourian Mignano PC.  All Rights Reserved.
Privacy Policy 
Terms of Use
Accessibility Statement

Attorney Advertising 
​Client Reviews & Testimonials

​

  • Home
  • About Us
    • Teela Crosthwaite Smith
    • Neda Shapourian
    • Lindsey S. Mignano
    • Kelly Lawton-Abbott
    • Jason D. Crain
    • Amy Carpio-Bruno
    • Jordan T. Lee
  • Services
  • News
  • Blog
  • DEI Policy
  • Contact