Employment Law Essentials

EMPLOYMENT LAW PHILOSOPHY

Understanding Employment Law as Protection

EMPLOYMENT LAW FUNDAMENTALS

WHY EMPLOYMENT LAW MATTERS:
☐ Avoid costly lawsuits (avg. defense: $75-125K)
☐ Protect company culture and brand
☐ Enable fair, consistent treatment
☐ Build defensible employment practices
☐ Reduce risk of regulatory penalties

CEO'S ROLE IN EMPLOYMENT COMPLIANCE:
☐ Set tone from the top
☐ Demand consistent processes
☐ Support HR in tough situations
☐ Invest in proper documentation
☐ Model appropriate behavior

HIGH-RISK AREAS FOR STARTUPS:
1. Worker misclassification (contractor vs employee)
2. Exempt vs non-exempt classification
3. Harassment and discrimination
4. Termination without documentation
5. Multi-state employment compliance

EMPLOYMENT LAW BASICS:
☐ At-will employment (default in most states)
☐ Protected classes (race, gender, age, etc.)
☐ FLSA requirements (wages, overtime)
☐ State-specific requirements vary significantly
☐ Documentation is your best defense

THE EMPLOYMENT MINDSET SHIFT:
"Good employment practices aren't about avoiding
lawsuits. They're about treating people fairly
and consistently. If you do that, the legal
compliance largely takes care of itself."

CALIFORNIA VS. OTHER STATES:
California has the most stringent employment laws.
If operating in CA, you need CA-specific:
☐ Offer letters with CA language
☐ Handbook with CA policies
☐ Expense reimbursement policies
☐ Pay stub requirements
☐ Meal and rest break policies

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COMPREHENSIVE EMPLOYMENT COMPLIANCE

Employment Compliance Framework

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EMPLOYMENT LAW ESSENTIALS
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COMPANY: _______________
Assessment Date: _______________
HR Owner: _______________

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SECTION 1: HIRING COMPLIANCE
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JOB DESCRIPTION REVIEW:
Position: _______________
☐ Essential functions clearly defined
☐ No discriminatory language
☐ Physical requirements job-related
☐ Qualifications necessary, not preferred
☐ EEO statement included

INTERVIEW COMPLIANCE:
☐ Interview questions pre-approved
☐ Same questions for all candidates
☐ No questions about:
  ☒ Age/date of birth
  ☒ Marital/family status
  ☒ Religion
  ☒ Disability (before offer)
  ☒ Pregnancy/plans for children
  ☒ National origin
  ☒ Arrest record (conviction may be ok)
☐ Notes documented consistently
☐ Selection criteria documented

BACKGROUND CHECK PROCESS:
☐ Written consent obtained (FCRA)
☐ State-specific disclosures provided
☐ Background check vendor compliant
☐ Adverse action process followed:
  1. Pre-adverse action notice
  2. Wait period (5 business days)
  3. Final adverse action notice
☐ Documentation retained

REFERENCE CHECK PROCESS:
☐ Consistent questions asked
☐ Notes documented
☐ Verify employment history
☐ Verify education if required
☐ Document unsuccessful attempts

OFFER LETTER REQUIREMENTS:
☐ At-will statement (bold/prominent)
☐ Position and title
☐ Start date
☐ Compensation (salary, bonus, equity)
☐ Benefits summary
☐ Reporting structure
☐ Work location
☐ Contingencies (background, references)
☐ Confidentiality/IP agreement reference
☐ Offer expiration date
☐ Signature lines

DAY 1 DOCUMENTATION:
☐ I-9 Form (Section 1 Day 1, Section 2 ≤3 days)
☐ W-4 Federal tax withholding
☐ State tax withholding forms
☐ Direct deposit authorization
☐ Employee handbook acknowledgment
☐ Confidentiality/IP agreement signed
☐ Emergency contact information
☐ Benefits enrollment forms
☐ Policy acknowledgments
☐ Equipment receipt

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SECTION 2: WORKER CLASSIFICATION
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EMPLOYEE VS. CONTRACTOR ANALYSIS:

Worker: _______________
Role/Project: _______________

IRS 20-FACTOR TEST (SIMPLIFIED):

BEHAVIORAL CONTROL:
☐ Company instructs on when to work: EMPLOYEE
☐ Company instructs on where to work: EMPLOYEE
☐ Company provides training: EMPLOYEE
☐ Company sets sequence of work: EMPLOYEE
☐ Worker determines own methods: CONTRACTOR
Score: ___ Employee indicators / ___ Contractor

FINANCIAL CONTROL:
☐ Company provides tools/equipment: EMPLOYEE
☐ Company reimburses expenses: EMPLOYEE
☐ Worker paid by hour/week/month: EMPLOYEE
☐ Worker has unreimbursed expenses: CONTRACTOR
☐ Worker has significant investment: CONTRACTOR
☐ Worker can profit/loss: CONTRACTOR
Score: ___ Employee indicators / ___ Contractor

RELATIONSHIP TYPE:
☐ Ongoing relationship expected: EMPLOYEE
☐ Benefits provided: EMPLOYEE
☐ Work integral to company: EMPLOYEE
☐ Written contract for project: CONTRACTOR
☐ Worker serves multiple clients: CONTRACTOR
☐ No guarantee of ongoing work: CONTRACTOR
Score: ___ Employee indicators / ___ Contractor

OVERALL CLASSIFICATION: ☐ Employee ☐ Contractor
Confidence: ☐ High ☐ Medium ☐ Low (consult counsel)

CALIFORNIA ABC TEST:
In CA, worker is EMPLOYEE unless ALL three:
☐ A: Free from control and direction
☐ B: Performs work outside usual course of business
☐ C: Engaged in independent trade/occupation

MISCLASSIFICATION RISKS:
☐ Back taxes and penalties (30%+ of wages)
☐ Unpaid benefits (health, 401k, etc.)
☐ Overtime liability
☐ Worker's compensation claims
☐ Unemployment insurance
☐ Class action lawsuits

EXEMPT VS. NON-EXEMPT ANALYSIS:

Employee: _______________
Position: _______________
Salary: $_____ annually

SALARY BASIS TEST:
☐ Paid at least $684/week ($35,568/year) federally
☐ Check state minimums (CA: ~$66K)
☐ Paid on salary basis (not hourly)
☐ Salary not subject to deductions for quality/quantity

DUTIES TEST (ONE MUST APPLY):

Executive Exemption:
☐ Primary duty: managing enterprise or department
☐ Directs work of 2+ employees
☐ Authority to hire/fire or recommend

Administrative Exemption:
☐ Primary duty: office/non-manual work
☐ Related to management/business operations
☐ Exercises discretion and independent judgment

Professional Exemption:
☐ Primary duty: work requiring advanced knowledge
☐ Field of science or learning
☐ Knowledge acquired by prolonged study

Computer Employee Exemption:
☐ Computer systems analyst, programmer, etc.
☐ Primary duty: application of computer skills
☐ Paid at least $684/week or $27.63/hour

CLASSIFICATION: ☐ Exempt ☐ Non-Exempt
Documentation: _______________

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SECTION 3: TERMINATION COMPLIANCE
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PRE-TERMINATION REVIEW:

Employee: _______________
Position: _______________
Hire Date: _______________
Termination Type: ☐ Voluntary ☐ Involuntary
                  ☐ Performance ☐ Conduct ☐ Layoff

INVOLUNTARY TERMINATION CHECKLIST:

Documentation Review:
☐ Performance reviews on file
☐ Written warnings documented
☐ Performance improvement plan (if applicable)
☐ Investigation complete (if conduct)
☐ No pattern of discrimination
☐ Similarly situated employees treated consistently
☐ Legal review (if protected class or sensitive)

Final Pay Preparation:
☐ Final paycheck amount calculated
☐ Include all earned wages
☐ Include accrued PTO (check state law)
☐ Check state timing requirements:
  - California: Same day (involuntary)
  - Most states: Next regular pay period
☐ Commission/bonus owed calculated

Benefits/Equity Review:
☐ COBRA notice prepared
☐ 401(k) info prepared
☐ Stock option status reviewed
  - Vested shares: ___
  - Exercise period: ___ days
☐ Other benefits termination

TERMINATION MEETING:

Attendees:
☐ Manager present
☐ HR/witness present
☐ No more than 2-3 people total

Meeting Elements:
☐ Private location secured
☐ Termination letter prepared
☐ Keep brief (5-10 minutes)
☐ State decision (not debate)
☐ Provide brief, factual reason
☐ Explain next steps (pay, benefits)
☐ Collect company property
☐ Have employee sign acknowledgment

Things to Avoid:
☒ Don't apologize excessively
☒ Don't debate the decision
☒ Don't make promises about references
☒ Don't discuss other employees
☒ Don't negotiate (that's separate)

POST-TERMINATION:

Immediate Actions:
☐ Disable system access
☐ Collect laptop/equipment
☐ Collect keys/badges
☐ Forward email (or disable)
☐ Update org chart
☐ Notify relevant team members

Within Required Timeframes:
☐ Issue final paycheck (per state law)
☐ Send COBRA notice (44 days)
☐ Provide unemployment info
☐ Send 401(k) distribution info
☐ Issue W-2 (end of January)

Documentation to Retain:
☐ Termination letter (signed)
☐ Property return form
☐ Final paycheck record
☐ COBRA notice copy
☐ Separation agreement (if applicable)
☐ All performance documentation

Severance and Separation Agreement Framework

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SEPARATION AGREEMENT CONSIDERATIONS
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WHEN TO OFFER SEVERANCE:
☐ Senior employees (VP+)
☐ Long-tenured employees
☐ Layoffs/reductions in force
☐ Claims risk exists
☐ Company culture/policy

TYPICAL SEVERANCE:
1 week per year of service (minimum 2 weeks)
Senior: 2-4 weeks per year of service
Executive: Negotiated, often 3-12 months

SEPARATION AGREEMENT ELEMENTS:
☐ Severance amount and timing
☐ Benefits continuation (COBRA subsidy)
☐ Equity acceleration (if applicable)
☐ General release of claims
☐ Confidentiality obligations
☐ Non-disparagement (mutual)
☐ Return of property acknowledgment
☐ Reference agreement
☐ Cooperation clause
☐ 21-day review period (40+ years old)
☐ 7-day revocation period (ADEA)

AGE DISCRIMINATION REQUIREMENTS:
For employees 40+ years old (OWBPA):
☐ 21 days to consider (individual)
☐ 45 days to consider (group layoff)
☐ 7 days to revoke after signing
☐ Advise to consult attorney
☐ If group layoff: provide unit/eligibility info

Multi-State Employment Compliance

Issue	Federal	California	New York	Texas
Final Pay (Involuntary)	Next pay period	Same day	Next pay period	Next pay period
Final Pay (Voluntary)	Next pay period	72 hrs / Same if 72 hrs notice	Next pay period	Next pay period
PTO Payout	No requirement	Required	Required	No requirement
Meal Breaks	No requirement	30 min / 5 hrs	30 min / 6 hrs	No requirement
Exempt Salary Min.	$35,568	~$66,560	~$62,400 (NYC)	$35,568
Non-Compete	Generally enforceable	Not enforceable	Limited	Enforceable

Employee Handbook Requirements

Policy	Federal Requirement	Common Best Practice
At-Will Statement	No	Yes - required
EEO Policy	Yes (15+ employees)	Yes
Anti-Harassment	Best practice	Yes
FMLA Policy	Yes (50+ employees)	Yes
ADA Accommodation	Yes (15+ employees)	Yes
Overtime Policy	Yes	Yes
PTO Policy	No	Yes
Social Media	No	Yes
Drug-Free Workplace	Some employers	Varies

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