What Startups Need to Know When You Become an Employer

Starting a business is exciting. There are steps and obstacles taken and followed to get it going. Now, you have grown so much that you have decided to take your company to the next level by hiring or expanding staff. This is amazing! However, an “employer” is more than just a title, so before you extend your first offer, make sure your startup is set up for success.

We will focus on several of the federal and local filings and registrations that new employers will need to make in preparation for their first hires, drafting of job descriptions and their use in determining whether a position should be classified as exempt or non-exempt under federal and local wage and hour laws, and the specifics involved in extending an employment offer.

Federal and Local Filings

Creating a Job Descriptions

A well-drafted job description provides employees and employers with information regarding the necessary qualifications, responsibilities, and pay rate of the relevant position. Drafting the description on its own is a great feat for small companies to think about how they want to distribute their work. Job descriptions can also serve the basis and support for the classification of a position as exempt under wage and hour laws.

The federal Fair Labor Standards Act (FLSA) provides that employees are entitled to a federal minimum wage and an overtime rate of compensation for any week in which he or she works more than 40 hours, among other things. Most states have local wage and hour laws that mirror if not provide more protection than the FLSA. Some employees are exempt from the FLSA’s overtime pay regulations. Although the FLSA identifies a number of exemptions, the most common exemptions are the executive, administrative, professional, computer and outside sales exemptions.

To qualify for any of these exemptions, the position must satisfy the specific exemption outlined in the Department of Labor’s rules and regulations. Most of these exemption tests require that an employee earn a certain minimum salary under the Department of Labor’s rules.

The most trying part of the exemption test involves an analysis of primary duties of the position relevant to that test. This analysis is highly fact-specific and relies on the duties performed by the individual holding that position. The job description is a great starting point for determining if a position satisfies the responsibilities of the position for the exemption test. It is the employer’s job to ensure that the individual is in fact performing the duties and only those duties of the position.

After drafting the job description and determining the appropriate classification under wage and hour laws, you’re ready to start meeting with applicants.

Extending Employment Offer

Whether it’s your first time or your twenty-first time, making a job offer is exciting−you have finally found your ideal candidate and are looking forward to a bright future together!

The start of the employment relationship starts with employer obligations and opportunities. For example, certain states require employers to provide their employees with written notice of job-specific information like pay rate (regular and overtime), notice of employer’s legal name, pay days, and commission plans if applicable at time of hire. These obligations are coded in the applicable state’s Wage Theft Prevention Act.

The offer letter is the best opportunity for an employer to finalize and write out the terms and conditions of the parties’ employment relationship. Nearly every jurisdiction within the United States recognizes a default employment relationship status known as “at-will.” With the at-will doctrine, both the employee and employer are able to terminate the parties’ employment relationship with or without notice or cause, as long as the reason provided for the termination is not discriminatory. All of the employment-related documents by an employer, including offer letters, should reaffirm the at-will nature of the employees’ employment.

In addition, employers are wise to include the following information in an offer letter:

• Title/position
• Full-time/part-time status
• Start date
• Rate/frequency of pay
• Manner of pay
• Any other conditions of employment, such as compliance with federal immigration law obligations (completion of Form I-9), successful completion of background and reference checks (if used), and the execution of a restrictive covenant agreement (if appropriate).

The letter should request that the employee execute and return the letter to the employer if s/he agrees to the terms identified therein.

With executed offer letters in hand, your startup will be well on its way to becoming a booming business!

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