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What Start-Ups Need To Know About Employment Law


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by Paige Zandri, Attorney Network Director at Priori Legal

From hiring your first employees to managing an entire staff, employment law runs the spectrum of employer-employee interactions. Labor laws and statutes in the United States are diverse and numerous – some are new while others are long-established.

The sheer volume of employment laws can be daunting. Because of this, many companies inadvertently follow practices that are in fact violations of employment law. If left unaddressed, they can cause trouble.

There are employment laws at every level: federal, state and local.. Often, multiple laws or regulations overlap or address the same area. Regulated areas include the following: hiring practices; discrimination; minimum wages and overtime; family and sick leave; company policies; workplace safety; pensions and benefits; and more.

Besides statutory law, there is also an extensive body of state and federal judicial decisions that must be complied with.

Employee Discussions of Hours, Wages or Working Conditions.

Many companies have policies that prohibit employees from discussing salaries and wages with one another. Some companies even put this policy in writing in their employee handbooks. Few know that even when only implied, these policies are a violation of the National Labor Relations Act of 1935. While a business owner may be unaware of this, ignorance is not an excuse, and they will be liable.

The Act is commonly understood as applying to collective bargaining and union activity. It covers all employers, whether unionized or not, that meet a certain threshold of interstate commerce activity, and provides even non-union employees rights to certain “concerted, protected activities.” These activities include any discussions between two or more employees concerning hours, wages or working conditions, which can encompass a range of topics. An employer cannot interfere with or inhibit these protected activities.

If a policy in an employee handbook is written broadly enough that it covers protected activities, then that policy violates the Act. An example might be a policy that references a prohibition on employees making negative comments about the employer or other employees. If an employer disciplines or terminates an employee based on this policy, the employee may be entitled to reinstatement and back wages.

Understandably, employers want to protect their company’s reputation and employee morale. However, employee handbook policies must be drafted so as not to run afoul of these employee rights.

Misclassification of Employees.

Another area of risk for employers is the misclassification of employees, whether as an independent contractor instead an employee or as an exempt employee rather than a non-exempt one.

A business may be tempted to qualify workers as independent contractors as a way to save money and avoid obligations for minimum wage, overtime, unemployment insurance or medical coverage under the Affordable Care Act. However, some agencies perform aggressive audits, and the misclassification may result in a finding of unreported wages, failure of unemployment insurance contributions, accrued interest, and penalties.

The Department of Labor employs an economic reality” test comprised of the following factors to determine whether a worker is an employee or an independent contractor:

  • The extent to which the work performed is an integral part of the employer’s business
  • Whether the worker’s managerial skills affect his or her opportunity for profit and loss
  • The related investments in facilities and equipment by the employee and the employer
  • The employee’s skills and initiative
  • The permanency of the worker’s relationship with the employer
  • The nature and degree of control by the employer

Another potential issue is the misclassification of an employee as “exempt” or “non-exempt” with respect to the requirement for overtime pay. Only executive, administrative, or professional employees, outside salespeople, and certain computer professionals are exempt. If a misclassified employee sues for unpaid overtime, the company may be liable for back wages and attorneys’ fees.

Protecting Confidential Information.

Protecting confidential information is vital in enabling a business to maintain its competitive advantage. Employers often need to prevent current and former employees from and using or disclosing confidential information and trade secrets. The risks have increased as company technology has become more accessible to employees.

Employers must take adequate steps to protect confidential information and trade secrets. Employers should have all workers who have access to confidential information and trade secrets sign non–disclosure agreements or NDAs. Additionally, employers should implement detailed policies in employee handbooks that clearly describe prohibited conduct when dealing with company information. Employees should be able to understand these policies.

Often, an employer requires new workers to sign a non-compete or non-solicitation agreement when their employment commences. The enforceability of such agreements depends on various factors, including which state’s laws apply, how restrictive those agreements are, and in some cases whether there was adequate consideration.   It is imperative to draft an agreement in a way that is enforceable.

An attorney with a background in employment law can assist with a variety of concerns, from workplace discrimination and harassment to the task of establishing proper expectations in an employee handbook and ensuring that non-disclosure and non-compete agreements are enforceable – all of which can keep a business afloat in murky legal waters.


Priori Legal - Paige Zandri

Paige Zandri, Attorney Network Director at Priori Legal, is responsible for developing the attorney network of high quality lawyers in each of Priori Legal’s operational territories. Paige is a former practicing attorney in NYC and is co-chair of the Solo and Small Firm Practice Committee at the New York County Lawyer’s Association.