Recruiting and hiring talent for any business can be challenging.

New startup founders with no experience should get legal support to ensure that the right legal processes are in place before and during the hiring process.

Read on for legal advice for startups looking to grow their team.

Before You Hire

Well before you hire, details about staffing, training, promotions, and management should be outlined in your founders agreement.

Other things you need to do before starting the hiring process include:

  • Get an employer identification number (EIN) from the IRS
  • Register with your State Labor Office
  • Have your accountant set up a payroll system to withhold taxes
  • Workers compensation coverage

Your accountant should be on top of which forms to include pertaining to payroll and taxes but do go through this with them just in case.

Recruiting and Hiring

Most startups don’t have the luxury of an in-house HR department to help with the hiring process. Fortunately today we have websites like AngelList and LinkedIn to help us connect with qualified candidates.

Of course, you want to focus on finding the perfect employee (s) for your startup and should put time into this. But this is only a small piece of the puzzle when it comes to the success of your business.

In addition to recruiting and hiring, make sure all managers are familiar with laws and regulations pertaining to:

  • Title VII of the Civil Rights Act
  • Citizenship laws
  • State discrimination laws
  • Legal background check procedures
  • Occupational Safety and Health regulations
  • The Equal Opportunity Employment Commission
  • The US Department of Labor website.

Review the Fair Labor Standards Act for information about minimum wage and overtime.

You need to make sure you don’t accidentally break rules around hiring, namely those to do with discrimination. At no point in the interview hiring process, for instance, are you allowed to ask job candidates questions that force them to reveal their age, religion or sexual orientation.

Just like the other aspects of your startup, ensure that you have strong foundations in place to protect you from lawsuits or other costly problems down the line.

Consult a business attorney to get legal advice for startups before you start recruiting and hiring.

Background Checks

There are some very specific rules around background checks which have to do with candidate rights

Not everyone needs to do a formal background check, but it is a good idea if you are in the finance or security space and the person will be responsible for high-value goods or information.

The Fair Credit Reporting Act explains how to properly get a candidate’s authorization before moving forward with a background check.


Once you find someone who you think is a great addition to the team, they’ll need to move into the onboarding phase.

This may include training, orientation, and introductions to the team.

It also typically requires getting them to fill out a bundle of paperwork, including:

  • IRS form W-4 to clarify withholding allowance
  • IRS form I-9
  • Employment Eligibility Verification form to make sure they are allowed to work in the US
  • Benefits forms
  • Employment contract

As a business, you’ll want to be sure to report new employees to your state reporting program.

Employee Contract and Handbook

Developing a contract and a handbook simultaneously will help you keep track of each detail. Your contract will be the legally binding part, the handbook can explain contractual obligations and policies, but is not legally binding.

They should include:

  • Details of a non-compete clause
  • Intellectual property agreement
  • Eligibility for benefits
  • Employment classification (employee or contract worker)
  • Sick leave, holidays, and vacation time
  • Termination of employment
  • At -will nature of employment
  • Start date (and end date if contract)
  • State-specific information about the industry and business
  • Compensation details
  • Other important employment terms
  • Links to federal and state legislation related to hiring and termination

One important thing to expand on is an explanation of how the employee benefits might change in the future, as well as how you may handle things should there be management changes or a change in ownership.

You’ll also want to use the handbook to make sure employees are aware of their rights, safety, and support resources. You can do this with posters, videos, or whatever medium fits your work structure, but just make sure they review all the important information you would include in a handbook.

It’s a good idea to at least have a brief digital version of a handbook or a summary available for reference.

Use Caution if You are New to Recruiting and Hiring

Don’t rush into hiring too much at once as this will put too much on your plate. Try to hire slowly and get a feel for the entire process, refining it as you go along. The newest employers can offer you feedback on how it’s going.

Taking it slow will help you to avoid possibly costly mistakes down the line.

Hiring an attorney well-versed in business law can help you create a secure foundation to build your team and set the stage for successful growth.

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