Starting A Business? Two Employment Law Tips To Follow

Law Blog

It can be very exciting to start a new business. However, in the rush of things, it can be very easy to forget the legality of a few things. There are a few traps that you can easily succumb to that can lead to litigation if you are not careful. With that being said, here are two very important employment law tips that you need to follow as you embark on this exciting journey of becoming a startup business owner:

Tip #1: Understand the Difference Between Employees and Independent Contractors.

It isn't uncommon for companies to make the decision to hire independent contractors instead of employees. This often helps to reduce overhead costs since medical insurance and worker's compensation are not required and there are no wage and hour requirements, which is helpful to startups. However, the problem comes in when companies classify employees as independent contractors to bypass employee obligations. This puts their startup at risk for litigation, which can get very costly.

Therefore, as a startup business owner, it is crucial that you understand how to distinguish an independent contractor from an employee.

Independent Contractors

  • They are not directly employed by your company. Instead, they have their own business.
  • They will provide their own tools and/or equipment to perform the job.
  • They will set their own schedule, including when, where, and how.
  • They are typically paid by the project instead of by the hour.


  • They use your company's tools and equipment to perform their job.
  • They perform the job based on a schedule that is set by your business.
  • They are paid by the hour or on a pre-determined salary instead of by the project.
  • They can be terminated by your company for any reason and at any time.

Tip #2: Make Sure You Have a Non-Disclosure/Confidentiality Agreement.

As a general rule, businesses succeed because of a unique idea – some type of device, program, technique, or process. If this idea gets out to the general public, anyone can sweep it up and claim it as their own. It is important that you protect all of your information with passwords and so on, but you also have to think about your employees. This is where a non-disclosure/confidentiality agreement comes into play, which would require employees/independent contractors to promise to never disclose the company's trade secrets by signing it.

If you have any questions regarding the legal aspect of starting your business or any employment law concerns, don't hesitate to reach out to an experienced employment and labor law attorney in your area like Mohajerian A Professional Law Corporation.


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