5 Ways to Reduce Employment Law Risks for Early Growth Companies
Whether you have 2 employees or 200, there are simple steps you can take to massively reduce your employment risk. This presentation by Karen Reinhold, Counsel and Shareholder for Hopkins & Carley, and Glenn McCrae, Chief Strategy Officer for EGFS, shows startups how to protect their companies by going over the issues of employees vs independent contractors and exempt vs non-exempt employees, essential written policies every startup needs, and more.
Risk 1 – Hiring Key Team Members with
Previous Employment Agreements
• Covenants not to compete
• Covenants not to solicit
• No-hire agreements
• Liquidated damages clauses
• Covenants not to solicit
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
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
• 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
• Case ultimately resolves favorably for NewCo, but
only after eighteen months litigation and $2.5M in
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
who are really employees?
– How serious is this?
• Exempt vs. Non-exempt
– Salary and job
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
• Do you have any other
process/policy in place
regarding use of or handling of
• 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
Equal employment opportunity and non-
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.
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
• Audit confidential information
• Get the basic written policies in
Thanks and Q&A
Hopkins & Carley, A Law Corporation
70 South First Street
San Jose, CA 95113
T: (408) 286-9800
Karen Reinhold, Esq., Shareholder
2033 Gateway Place, 5th Fl.
San Jose, CA 95110
T: (415) 320-5753