Top Employment Law Risks

Top Employment Law Risks –Protect Your Startup!

Karen Reinhold, Esq.Shareholder Hopkins & Carley

Glenn McCraeChief Strategy OfficerEarly Growth Financial Services

#EmploymentRisks

About Us

Why Worry About Employment Law Risks?

Risk 1 – Hiring Key Team Members with Previous Employment Agreements

• Covenants not to compete (limited issue)

• Covenants not to solicit customers

• No-hire agreements

• Liquidated damages clauses

• Covenants not to solicit employees

Standard Non-Solicit Clause

Employee will be called upon to work closely with other employees of XXXX. Employee expressly agrees that during employee’s employment with XXX and for one (1) year thereafter, Employee will not solicit, take away, or assist any other individual or business in soliciting any employee of XXXX.

In addition, all information about such employees, which became known to Employee during the course of Employee’s employment with XXXX, and which is not otherwise known to the public, is a trade secret of XXXX and shall not be used by Employee in soliciting or taking away employees of XXXX at any time during or after termination of Employee’s employment with XXXX.

Case Study: Non-Solicitation Clause

• VP Engineering of NewCo solicits former colleagues from OldCo

• Three key OldCo engineers follow VP to NewCo

• OldCo sues NewCo claiming loss of key engineers caused product line to fail, resulting in a loss of $100M revenue

• Case ultimately resolves favorably for NewCo, but only after eighteen months litigation and $2.5M in legal fees

Reduce your risk: Make sure you have agreement in which you ask employees not to breach any prior agreement.

Risk 2 - Compensation Agreements with Deferred Payment

• Deferred compensation agreements that condition salary payment on funding or other contingencies

• Bonus plans with ill-defined terms and conditions that create vested rights in employee

Reduce your risk: If you want to defer compensation – don’t call it a “salary;” call it a “bonus” with specific terms.

Risk 3 - Classification Issues

• Are you using independent contractors who are really employees?– How serious is this?

• Exempt vs. Non-exempt employees– Salary and job

classification

– Overtime!

– Programmers

Reduce your risk: Proper employment classifications.

Risk 4 - Confidential Information –Are You Protecting It?

• Are documents and a process in place for onboarding?

• Designate point person for tracking/collection

• Do you have any other process/policy in place regarding use of or handling of confidential information during employment

• Exit process Reduce your risk: Put necessary documents in place to protect information that is proprietary to your company.

Risk 5 - Four Written Policies You Should Have Even With Few Employees

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Anti-harassment policy

Equal employment opportunity and non-discrimination policy

Meal period and rest break policy (if you have non-exempt employees)

Computer, PDA and social media policy

Reduce your risk: Written policies as part of onboarding process and posted as necessary.

Takeaways: Simple Steps to Massively Reduce Risk

• Onboarding process that identifies and manages restrictive covenant issues

• Review compensation agreements for pitfalls

• Scrub independent contractors

• Set up simple employee classification system

• Audit confidential information issue-anything needed

• Get the basic written policies in place now

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Thanks and Q&A

•

Hopkins & Carley, A Law Corporation70 South First StreetSan Jose, CA 95113T: (408) 286-9800

@HOPKINSCARLEY

Karen Reinhold, Esq., [email protected]

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Glenn [email protected]

2033 Gateway Place, 5th Fl.San Jose, CA 95110T: (415) 320-5753

@EARLYGROWTHFS