Common Mistakes Startups Make When Hiring Employees: Part 1

While most startups are formed by an individual or a small team of founders, they often plan to hire employees relatively quickly in order to grow their business and increase revenue.  Hiring employees isn’t as cut and dried as it seems.  Failing to comply with employment laws and regulations can have serious consequences for both new businesses and business owners.  Here is the first of four common employment mistakes made by new businesses:

Using Poorly Drafted Employment Documents and Agreements (or failing to use Agreements altogether).  

Often times, as an effort to save on costs and time, startups use improper “form” employment agreements and other related documents.  Worse, some startups fail to have new employees execute certain crucial documents altogether.  These business practices can expose Startups to all sorts of uncertainties and liability.  Proper employment agreements provide protection by clearly outlining the responsibilities and obligations of the employer and employee and by answering specific questions that can lead to future litigation if left unanswered.  For example, can a specific employee be terminated without notice?  Can that employee only be terminated for cause?  If the employee generates work product, who owns that work product?  These details are a few examples of what should be sorted out and clearly defined in a properly drafted employment agreement specifically tailored to your business and industry.

Next week we will examine the importance of an employer doing its due diligence in evaluating an employee’s previous employment details.

This post is not intended to be legal or tax advice.  Formeller & Formeller LLP’s Chicago startup attorneys have helped numerous clients form and operate their businesses.  Our skilled Chicago attorneys can help counsel you with employment issues and assist you with establishing proper employment hiring and employee management procedures .  Please contact our law firm today for a free legal consultation if you would like to discuss employment or operational issues.

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