Starting a business is like navigating a vessel through unfamiliar waters. It requires courage, vision and direction. While courage and vision may or may not be within one’s control, start-ups can most definitely secure solid direction by assembling – before launch – a core team of advisors (including its business, financial, and/or legal consultants) who can provide guidance throughout the process. This will help increase potential successes and mitigate risks.
In Michigan, employers with at least one employee are generally covered by numerous laws governing the workplace, including (but not limited to) laws regarding discrimination, disability accommodation, wages and benefits, occupational safety and health, unemployment compensation, and workers’ compensation. Additional laws apply as employee numbers grow. Thus, it is imperative that every start-up, regardless of size, understands and complies with its legal obligations from the very first day of operation.
The following is a list of five steps a startup can take to protect the business and minimize its risk of potential employment-related exposure:
1. Be Prepared For the Selection Process
Actions taken during the hiring process (even before a single employee is hired) may subsequently expose a startup to potential liability. For example, an applicant who is not selected could claim that the job posting, application, and/or interview process screened him/her out based on a protected classification, like race, sex, age, national origin, religion and disability. Thus, a start-up should ensure that its communications with applicants are nondiscriminatory and compliant with applicable laws.
Business owners should work with legal counsel to prepare job postings and descriptions that accurately and objectively describe the essential functions and requirements of their positions. (These documents are helpful down the road for performance management.) Further, the job application should be reviewed to ensure that it requests necessary information without unlawfully eliciting protected information that is irrelevant to the selection process (e.g., misdemeanor arrests not resulting in convictions, marital status, number of dependents, etc.). Finally, the interview and selection process should be vetted to ensure compliance.
2. Be Prepared for Onboarding
Start-ups should work with legal counsel to prepare offer letters that do not contractually bind the business in unintended ways (e.g., certain language can arguably alter the at-will employment status and require just cause to terminate, etc.). If background checks are utilized, offers should be conditional and proper releases should be obtained. Start-ups should also properly complete I-9 employment eligibility verification documentation for each employee within three business days of hire in accordance with federal law. Finally, all requisite postings and trainings, safety or otherwise, should be completed.
3. Properly Pay Employees
Failure to properly pay employees for time worked exposes a business to potential liability every time a paycheck is incorrect or deficient. Accordingly, violations can quickly accumulate if timekeeping and payroll practices are non-compliant. Thus, businesses should work with legal counsel to ensure that they a) comply with minimum wage requirements; b) correctly classify workers as employees or independent contractors; c) properly classify employee positions as exempt or nonexempt in order to determine eligibility for overtime compensation, and d) make all deductions in accordance with applicable law.
4. Develop An Employee Handbook
Start-ups should work with legal counsel to develop an employee handbook that contains all policies necessary to protect their businesses and comply with applicable law. As an added benefit, the policy preparation process helps business owners work through important issues that may otherwise be overlooked until it is too late. Once finalized, the handbook should be used as a reference to guide employee and management action. Employees and management should be trained on handbook policies and should consult the handbook regularly as issues arise.
5. Use Employment, Non-Disclosure, and Non-Compete Agreements When Necessary
Michigan is an at-will employment state,meaning that employees and employers can terminate their employment relationships at anytime, with or without notice, for any lawful reason. There may be situations, however, where businesses would prefer to have an increased level of certainty to protect their investment in key employees. Additionally, start-ups may have valuable trade secrets and confidential information to protect. Thus, where appropriate, businesses should work with legal counsel to prepare employment and/or non-competition agreements for key employees, as well as non- disclosure agreements applicable to the entire workforce.
By taking these actions, start-ups can set out confidently, knowing that smooth sailing lies ahead.
Our start-up experience (Cortney Danbrook, Janis Adams and Lindsay Raymond):
With our former law firm leaving the northern Michigan area, Danbrook Adams Raymond PLC was launched in a total span of approximately two weeks. Our rapid pace did not permit us to dwell on fears or fret about the unexpected. We had trust and a shared vision that enabled us to conquer our tasks without wavering or looking back. We were conscious of who we chose as our professional advisors and service providers, knowing that their knowledge and expertise was crucial to our success. We also knew our approach to the legal profession would set us apart, not only because we are all women, but because we have years of experience in highly focused areas of the law, and we are authentic, down-to-earth and approachable. It is said that it takes a village to do most things in life, and starting a business is certainly one of those things. We simply could not have done it without each other and our staff, business partners, clients and this community.
Advice for the new business owner:
Be sure to partner with people whom you respect, who are like-minded in their dedication to providing the highest quality services to clients, and who hold a similar vision for the organization.
Lindsay Raymond specializes in employment law, represents employers in all aspects of employment-related matters, and defends employers in employment litigation matters. She can be reached at (231) 714-0161 or firstname.lastname@example.org.
This article was featured in the December 2018 issues of the Traverse City Business News.