Whether your startup is growing slowly or rapidly, as you begin to add team members, you are entering a whole new world of laws and regulations you must abide by as an employer. In this article, we will present a brief primer of legal considerations you should be aware of and both state and federal laws you must comply with to avoid legal liability as you grow your team.

Independent Contractors vs. Employees

With the gig economy rapidly growing in the U.S. and global markets, many startups are utilizing the services of independent contractors — virtual assistants, marketing specialists, social media managers, graphic designers, web designers, software developers, and more — to help scale their businesses before they are ready to hire part-time or full-time W-2 employees on payroll.

However, understanding the distinction between an independent contractor and employee is essential because, even if a team member is not on payroll, certain factors could cause a court to determine the team member was acting as an employee, rather than an independent contractor, and impose the legal requirements of an employer on your business.

Some of the factors a court will consider when determining whether an individual’s status is employee or independent contractor, include:

  • Telling the team member what tools and equipment to use
  • Telling the team member when and where to work
  • Telling the team member where to purchase supplies and services

This is a very fact-based assessment. The more you direct and control the details of the team member’s behavior, the more likely an employer-employee relationship will be determined to exist. This is very important because when an employer-employee relationship is found, your business is required to comply with many different regulations geared toward protecting employee rights in the workplace.

Americans with Disabilities Act (ADA)

The ADA is a federal law that prohibits employers from discriminating against prospective or current employees on the basis of their physical or mental disability. It also requires employers to provide disabled workers with reasonable accommodations to allow them to perform their job duties, so long as a reasonable accommodation can be provided without causing undue burden to the employer.

Similar requirements are imposed under California state law through the Fair Employment and Housing Act (FEHA).

Equal Employment Opportunity Commission (EEOC)

Under federal regulations enforced by the U.S. Equal Employment Opportunity Commission (EEOC), employers are prohibited from discriminating against employees or prospective employees on the basis of:

  • Race
  • Color
  • National origin
  • Religion
  • Age
  • Sex
  • Sexual orientation
  • Physical or mental disability
  • Pregnancy
  • Genetic information
  • Retaliation

Family Medical Leave Act (FMLA)

The Family and Medical Leave Act of 1993 (FMLA) is a federal law that requires non-exempt employers to provide job protection and unpaid leave to employees who must be absent from work due to a qualified medical or family reason including surgery, caring for an ill family member, or the birth or adoption of a child. FMLA provides job protection for up to 12 work weeks, during which the employee may not be terminated without a legitimate and non-discriminatory reason. The California Family Rights Act provides similar legal protections.

Pregnancy

The Pregnancy Discrimination Act prohibits employers from discriminating against prospective or current employees due to pregnancy or a pregnancy-related condition. Employers may not make decisions about hiring, firing, pay, promotion, job assignment, benefits, or any condition of employment based on a woman’s current, past, potential, or intended pregnancy or medical condition related to pregnancy or childbirth.

If your startup is growing and you need to begin hiring team members, it is extremely beneficial to seek the advice and counsel of an experienced employment attorney who can help to ensure that you have the proper policies and procedures in place to comply with applicable federal and California employment laws.

To schedule a consultation with one of our knowledgeable employment attorneys in Sacramento, contact Perkins Asbill at (916) 520-1417 today.