Startups and small companies don’t always have dedicated HR resources who can stay on top of employment law or enroll a lawyer to help with HR matters. To help understand common hurdles and trends for startups and small businesses related to employment law, we recently touched base with Rebecca Signer Roche, Senior Counsel on all labor and employment matters for DynCorp International. Previously, Rebecca was a labor and employment attorney at Littler Mendelson, P.C., and at McGuireWoods, LLP.

Lexi Gordon, exaqueo (LG): Thanks for taking the time to chat with us. I think many small and growing companies aren't aware of just how important HR law is when it comes to building a business and managing risk. First things first, when it comes to employment law, what are the most common issues/concerns you see with newer and/or small companies?

Rebecca Signer Roche (RSR): Here’s a list of the most common issues and concerns I’ve seen with those types of companies:

  • Not having an employee handbook
  • Having an employee handbook that does not sufficiently protect the interests of the employer or does not clearly set forth the employer’s expectations for its employees
  • Terminating employees on leave without first evaluating whether the employee is entitled to leave as a reasonable accommodation under the Americans with Disabilities Act (ADA)
  • Relying solely on job title or job description when classifying a position as exempt from the Fair Labor Standards Act (the “FLSA”) instead of evaluating what the employee actually does
  • Having unpaid interns
  • Not having a social media policy
  • Not having a leave policy
  • Not having a policy and procedure for investigating and responding to employee complaints
  • Failing to respond to claims for unemployment insurance benefits
  • Improperly deducting from employee wages and paychecks
  • Entering into unenforceable employment agreements

exaqueo: That's quite a list. But important for growing companies to be aware of even if they can't tackle all of them from day one. What's trending now from your legal perspective?

RSR: First of all, a large number of so-called “millennials” work for startups and present unique considerations for their employers: they can be harder to recruit, retain, and satisfy as an employee. They may insist on (and expect) a flexible work schedule.  Additionally, the “baby boomers” in the workforce continue to present issues concerning health care costs, disability considerations and compliance issues with the Americans with Disabilities Act, the Family and Medical Leave Act and the Age Discrimination in Employment Act.  Finally, recent years have seen a steady increase in whistleblower lawsuits under the False Claims Act (“FCA”), which can result in large settlement payments to individual whistleblowers and government entities.  Increasingly, the whistleblowers have a background in the law or compliance.

Small employers in particular need to ensure they have implemented policies and procedures for the investigation and resolution of employee complaints.  This should include providing multiple channels for employees to report concerns confidentially and policies providing for non-retaliation against whistleblowers.  Small organizations with limited resources and staff may wish to consider contracting with an independent third party for the investigation of such complaints to ensure impartiality.

LG: For startups, what things do you prioritize when guiding founders at the early stage of the company?

RSR: I would start with developing an employee handbook that is compliant with the laws of the states in which you have employees. Then, I would adopt and implement policies regarding standards of conduct, EEO, harassment, anti-retaliation, confidentiality, social media, usage of company electronic resources, leave, disability accommodation and other standard personnel matters. I'd also develop and draft accurate written job descriptions, and finally, I'd carefully vet any employment agreements for compliance with applicable state law.

LG: It's great for founders and CEOs do rely on experts like you, but they also have to have a basic working knowledge, right?  What are the key legal terms important for startup founders and leaders to clearly understand when it comes to employment?

RSR: Here are some key terms I think are important to understand:

  • Employment At-will: either employee or employer can terminate the employment relationship at any time, for any reason, without notice or cause
  • Exempt and Non-exempt: classifications of employment under the Fair Labor Standards Act with implications for minimum wage and overtime pay requirements
  • Protected Activity: certain conduct with legal significance that safeguards the actor from retaliation
  • Protected Class: a characteristic of a person that is safeguarded from discrimination
  • Retaliation: Illegally taking adverse employment action against an employee who has engaged in protected activity
  • Reasonable Accommodation: employment-related adjustment designed to assist an employee with a disability in performing the essential functions of his or her job
  • Undue Hardship: an employer is not obligated to provide a reasonable accommodation if it would be an undue hardship
  • Qualified Person with Disability: an employee who is entitled to a reasonable accommodation under the ADA if there is no undue hardship
  • Legitimate, Nondiscriminatory Reason: defense in a discrimination claim concerning adverse employment action

LG: Hiring is one area where there'a a great deal of risk.  What are the biggest mistakes small companies make when hiring? Specifically, what are the biggest HR risks and why?

RSR: I’ll share two major mistakes I’ve seen. First, failing to manage the process of conducting background checks to comply with EEOC guidance and best practices can have major consequences. And second, failing to determine whether applicants and new hires are subject to existing restrictions concerning solicitation and/or competition is another misstep I’ve seen.

LG: That really underscores the importance of being aware of the risks. We're not lawyers, but when we advise startups and growing companies we remind them how important it is to be aware. Then, they can decide how much risk they're willing to take on. Thanks for sharing your insight.

RSR:  Thank you!

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Editor's Note: This post represents the personal opinion of Rebecca and are not intended to provide legal or other advice or to create an attorney-client relationship.

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Lexi Gordon is a Lead Consultant for exaqueo, a workforce consultancy that helps startups and high-growth companies build their cultures, employer brands and talent strategies. Contact exaqueo to learn more about how we can help you build a workforce that’s aligned with your company culture and develop an employer brand that will allow your business to scale the right way.

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