Hiring employees is an exciting time for business owners; the business is taking, you’re growing, you can pass off some responsibilities and your business is headed to the next level. That doesn’t mean there’s no stress involved with bringing on new employees - finding the right person and hiring them can involve a lot of work. Of course, it’s worth it, that’s how you move your business to the next level.
Considering all the time, energy and investment businesses put into employees it’s important to make sure you protect yourself along the way too. There’s no way around it, employees are one of the biggest risks small businesses face - there’s potential theft, injury, legal action and just plain bad employees. But, they’re necessary, so make sure to protect yourself by having your employees sign the proper documents; limiting the risk to your company where you can. With that in mind, here are some documents employees should sign; ideally before they start working for you.
At-will Offer Letter or Employment Contract
Depending on your business or the specific job title you may be hiring someone to work under a contract, or as an at-will employee. In either case you’ll want the employee to sign an agreement, both acknowledging the nature of the relationship and setting out some of the conditions of employment. You should lay out some of the main responsibilities of the position they’ve been hired for, what the salary or pay rate is and any benefits or perks they are entitled to. This doesn’t necessarily need to be a formal document, a simple letter may suffice in some situations, the point is to make sure you’re setting the expectations beforehand.
Handbook/Company Policies
It’s not mandatory for businesses to have a company handbook or employee policies, but they can be very beneficial in terms of reducing potential legal risks and laying the guidelines or procedures for how to handle workplace incidents that will arise. You might want to address any policies around vacation, leave and sick time, or the process for an employee to file a grievance should the situation arise. How about employee discipline? How is that handled and what type of process should the employee expect? The possibilities are numerous and should be crafted to fit the needs of your specific business, but make sure to have employees sign an acknowledgement that they’ve seen and agreed to the employee handbook or company policies.
Non-Disclosure Agreement (NDA)
Every business has some secret information, whether it’s your client list, potential client list, business plan, marketing plan or sales strategy, and a brand they are trying to protect. Whatever it is, it’s valuable information to your company and you’re going to want to make sure it’s protected and not released to anyone outside of your business. Most employees are using some of that information in their job performance and you don’t want to lose important confidential information by having an employee leave and giving it to a competitor. You want to make sure your employees have an understanding of what information is confidential and needs to be kept private. One good way of preventing a lot of potential issues is to have your employees sign an NDA protecting your company’s intellectual property.
Restrictive Agreements
Having employees sign restrictive agreements such as non-solicitation agreements or non-compete agreements can be very beneficial to your business, in one way it’s a measure to cut down on potential competition. However, you have to be very careful when using these, they are disfavored by courts in general, must be drafted very carefully, and you need to make sure your state allows for them (for example, California generally does not allow for non-competes). You use non-solicitation agreements to prevent an employee leaving the company and soliciting other valuable employees or clients to leave as well, and you use non-compete to prevent an employee from leaving and competing with your business.
Necessary forms
There are certain forms that might be required by law so that you can properly classify and compensate employees. The specific forms may vary by state, so you’ll want to make sure to look into the specific requirements based on your location. The most common types of employee forms that will need to be completed are:
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- I-9 Employment Eligibility Verification Form - used for verifying the identity and employment authorization of individuals hired for employment in the United States.
- W-4 Form - let’s you know how much money to withhold in taxes from an employee’s paycheck.
- Any necessary state forms - for example in VA it’s the VA-4, which lets employers know how much to withhold in state taxes from an employee's paycheck.
Employee invention agreements
Your business will probably be hiring people to fill various roles with various responsibilities, some of which will lead to the creation of “inventions” that will be valuable in helping your business grow and move forward. You can use an inventions assignment agreement to make sure that any intellectual property an employee creates, or “invents”, while working for your company is assigned to, and owned by the business. Don’t think of invention in the traditional sense of a physical product that someone comes up with, it could refer to concepts, processes, designs and trade secrets; so it could be marketing strategies, business models, or sales processes that are new and unique, as well as quite valuable to your business.
Have questions about bringing on employees and how to minimize the risk they pose to your company? Contact us for a free consultation.