From time to time when I meet wonderful people in my life, I find myself telling them I’d hire them if I owned a business. To me this is a great compliment because owning a business is very personal, so inviting someone into that company is saying a lot about how you feel about them. Kind of like when I meet terrible people, I tell them I’d fire them out of a cannon into the sun. Hiring the right people for a business is obviously so important. But it is equally important to take steps to protect your business should the relationship with an employee turn into something reminiscent of an episode of Judge Judy or even Maury Povich. The following are some points to consider that will protect you when adding employees to your small business.
First, it is important to determine who is an employee and who is an independent contractor based on the IRS guidelines (See IRS form SS-8). There are a lot of differences between an employee and independent contractor (beyond who gets to attend the company Christmas party). Figure out which relationship works best for your company by differentiating the two roles.
Second, draft an Employee Handbook to establish policies to minimize risk of wrongful termination and discrimination claims. For example, dress codes are a great way to ensure you are sending a clear message that yoga pants are not appropriate for anyone with facial hair.
The third way to protect your company is to post the required employee disclosures at the office. Anything from health and safety postings to minimum wage postings can be required. It is important to figure out what is required of your business so employees know their rights if they wish to report a health or safety issue. For example, as a NICU nurse I learned from my lawyer, Elliott Stapleton, that dirty diapers are not considered a safety violation. Agree to disagree.
A business must protect its assets, which include its people and trade secrets. This is why it is important to create documents such as non-compete and non-solicitation agreements for key employees to make sure other companies don’t steal all of your talent and ideas. I’m sure this is why no one from McDonald’s has left the company to join up with a former Pizza Hut employee in order to create a Big Mac Pizza store, which I think would be delicious.
Hiring the right employees is paramount to running a business. But the aforementioned points are almost as important to keeping your business safe and intact. There is enough to worry about when running a business. Having a lawyer like Elliott Stapleton on your team makes this process so easy you can spend your valuable time deciding who to hire and who to fire (out of a cannon into the sun.)
When starting a business with a unique idea, it is important to limit your disclosure of this idea to those who have signed a non-disclosure agreement (NDA).
The purpose of an NDA is to restrict the type of disclosure a party can make after you provide them with important information about your idea or concept.
Once information is no longer confidential, it can be used by anyone to compete with your company before you have a chance to establish your brand identity. (See post on Trade Secrets). Without an NDA in place, a business owner could lose its competitive advantage.
_ An individual, start-up business, or established company may have an idea or concept that is unique but not otherwise protectable by a patent. This can include a business model, formulas, recipes, processes, product concepts, marketing plans, unique sources for supplies, assembly processes, or customer lists (collectively referred to as “trade secrets”).
The protection of your trade secrets is essential to maintaining a competitive advantage.
How can a start-up business protect its Trade Secrets?
As the name suggests, the subject of a trade secret must remain secret and there must be adequate measures to protect the secrecy. That means it must not be public knowledge or of general knowledge in the trade or industry.
If the secret is disclosed through authorized means or there are not adequate measures to guard the secrecy competitors can take advantage of the trade secret. But if there is an unauthorized disclosure and use of a trade secret, there are strict criminal and civil penalties.
(Note: If you are an employee, it is important not to disclose a trade secret, here is a summary of the criminal risk)
What are adequate measures for protecting a Trade Secret?
While there are no fixed rules as to what are “adequate” measures, there are best practices that must always be followed:
1. Never disclose confidential information, to anyone who has not signed a nondisclosure agreement or without a confidential relationship.
2. Have password protection on all software that contains Trade secrets and limit an employee or contractor’s ability to place the trade secrets on a personal computer.
3. Maintain a policy that all business records must be returned after separation with an employee or contractor.
4. Never disclose any aspect of the trade secret publicly.
The best practice to ensure your trade secrets are protected is to conduct an annual audit. Through this process, you can identify your trade secrets, determine the steps that can be taken to protect their secrecy, update your company passwords, and test your security measures.
Elliott Stapleton Attorney with CMRS Law