There are many legal issues facing new businesses. One of the most prominent involves employment.

Startup companies often attempt to lure new talent by offering stock in lieu of or in addition to wages. Business owners should be careful in making sure that these arrangements adequately compensate employees under federal and state minimum wage law. As a general rule, if you are paying your employees only in stock and not wages, you’re probably breaking the law.

Owners should also be cognizant of whether or not an employee falls into the “exempt” category whereby they are not eligible for overtime. These individuals must make a certain amount per week and fall into one of the mandated exemptions such as executive, administrative and computer professionals.

Often the biggest mistake that new companies make involves the erroneous classification of workers as independent contractors instead of employees. Generally, a worker who performs services for an employer is an employee if the employer can control both what will be done and how it will be done. The key factor is that the employer has the right to control the details of how the services are performed, even if the employee has substantial freedom of action. On the other hand, an independent contractor performs services required by an employer but is not subject to the employer’s control about how the services are performed. State and Federal guidelines delineate the factors which can be utilized to make a determination with regard to whether an individual is an employee or an independent contractor. The consequences for mischaracterizing an employee as an independent contractor can be devastating to the company.

New company owners should review the restrictive covenants contained in their company’s confidentiality agreements, non-compete agreements and non-disclosure agreements to insure that their intellectual and trade secrets are protected from disclosure and theft. The implementation of a sexual harassment and equal employment opportunity policy is also important for many companies.

Planning for potential liability in the business world is one of the keys to success. An experienced attorney at Paulson & Paulson, PLC can assist you in identifying the issues which may affect your business and developing a plan to avoid or reduce the risk associated with those issues.