Employment Law and the Entrepreneur

Since I’m new to entreVIEW, I decided to do some homework, make sure that I knew something about being an entrepreneur (and how to spell the word entrepreneur). So in my own entrepreneurial fashion, I researched my market.

The first place I started was startupsanonymous.com, a blog where anyone involved in a startup can share their stories and ask questions. The first post I read was What Happens After You Fail. Holy moly. This candid picture of failure exemplifies why I admire entrepreneurs so much. The heart this person put in – the courage – is breathtaking.

I next sought information from a friend who works with entrepreneurs. He explained that he’s seen every personality type and motivation for starting a business. But they all share one overwhelming trait – courage.  

Entrepreneurs are willing to take great risk.  While launching a new company, you may or may not know what your risks are or are simply too focused on that launch to see or address the risks. That’s where people like me fit in.

Every attorney is a Negative Nelly to some degree. We have to explain to entrepreneurs all the possible risks – from creating a legal entity to protect their personal assets to making sure they’ve signed up for Minnesota’s unemployment services when their hire their first employee. We explain legal failure, the failure to do or not do what the law says. We repeat, “If you don’t do this, this may happen.” Most of us are not negative people, and we know that no one likes to be told what to do. Instead of telling you what to do, we advise.

When it comes to employment law, the risks for start ups can’t be overcome with perseverance and courage alone. Here are a few:

 Choosing to engage individuals as independent contractors instead of employees. No doubt about it, the independent contractor relationship is much easier from an administrative perspective – no tax withholding, no unemployment reporting, no requirement to monitor hours worked, etc. – however, agencies like the Minnesota Department of Employment and Economic Development (MnDEED) are becoming increasingly savvy at and utterly determined to investigate companies who misclassify workers. Here’s a brief overview of misclassification analysis.

 Doing the paperwork. Once a startup has an employee, the sea of paper is daunting for anyone, especially an entrepreneur focused on a new product or service. Unemployment, worker comp, employee benefits, I-9s, harassment and discrimination policies, overtime, recordkeeping, tax withholding and reporting – forms, fees, and fun! More employees = more paperwork. 

 Protecting the ideas. A startup relies on its new ideas – a new product, service, delivery, etc. By entering into noncompetition, nonsolicitation, and assignment of inventions agreements with workers, entrepreneurs can protect those ideas and their success. While trust is fantastic, a contract has teeth.

Now these issues carry some risk – MnDEED investigation and penalties, a lawsuit, trade secret misappropriation, etc. Even though the risk may be low – you may believe all new staff members are family members – fending off the risk and facing the risk can be costly and will shift time and resources away from business success.

In addition to the courage, drive, and focus, entrepreneurs understand one thing that makes life for employment lawyers easy. You understand that your people are a key to your success. They too share your courage since they too are making an investment in your new business. In fact, some commentators wish all employers would follow suit and create entrepreneur-like workplace culture. Knock on wood, appendages crossed, that investment, courage, and perseverance will all pay off.

A Post by Kate Bischoff, Guest Blogger