Later today, I’ll be speaking to the next group of startups chosen to participate in the Accelerator for Biosciences in Connecticut, or ABCT. 

ABCT is a Branford-based program spearheaded by Design Technologies LLC, which supports Connecticut’s aim of being a bioscience hub.

It’s an exciting time for new businesses in Connecticut like those chosen to participate in the program.

But employment law issues are often an after-thought for startups.  They shouldn’t be.

I’ll be talking in more detail to the startups in my presentation but here are three things I’ll be talking about for startups and new business ventures:

  1. Startups should document the relationships with new employees.  Offer letters or, in some instances, contracts should be set up so that new employees know the terms and conditions of their employment.  Even more important, the documentation should detail all forms of compensation — whether salary, bonus, equity etc.  And at-will disclaimers are crucial.
  2. Startups also need to consider protecting the intellectual property of the company from the outset.  After all, if a new employee can just take the knowledge and set up shop across the street, how valuable is the company? Thus, having Non-Disclosure Agreements or other restrictive covenants in place when employees or consultants start is critical to making sure a company’s intellectual property is protected.
  3. Lastly, just because the business is a startup, doesn’t mean there’s an exception to paying employees their wages.  Those businesses must comply with all the rules regarding weekly payment of wages.  Failure to do so can result in significant legal exposure and, worse for some, an investigation from the federal or state department of labor.  Startups should make sure they have the cash flow necessary to make payroll.  If you can’t afford to pay your employees, don’t hire them.

Obviously, there are other questions startups should ask themselves too: Are you going to use a PEO? (or perhaps, What is a PEO?) Are you going to use independent contractors? If so, how is that relationship documented and is it proper? Are employees classified as exempt vs. non-exempt? Are the employees even authorized to work in the United States?

If all these questions give startups some concerns — they should.  Employment law issues are an important part of building a company’s foundation.  Ignore them, and the business that you build might be the proverbial house of cards.

Earlier this week, it seemed that a bill requiring employers to conduct additional training on sexual harassment matters was a no-brainer to pass the General Assembly.

After all, Senate Bill 132 passed 31-5 in the state Senate and in this #metoo environment (not to mention local elections in the fall), the House looked to be a near certainty.

But a lot can happen in a few days, and some of the bill’s more controversial provisions were simply too much for the bill to overcome.

Thus, employers do not yet have to worry about the new training requirements and changes to the state’s anti-discrimination laws.

That said, employers still need to follow existing state law regarding training of supervisors (if applicable) and should still exercise caution in dealing with cases of harassment.

One bill that did receive passage late last night was Senate Bill 175, which I haven’t talked much about.

That bill makes a number of changes to government and quasi-public agencies. (In other words, these aren’t applicable to private employers).

Sections 8 and 501 are the key provisions in employment law and limit the use of non-disparagement and non-disclosure agreements.  According to the OLR report:

  • Beginning October 1, 2018, the bill generally prohibits state and quasi-public agencies from making a payment in excess of $50,000 to a departing employee in order to avoid litigation costs or as part of a non-disparagement agreement. Under the bill, “state agency” means executive branch agencies, boards, councils, commissions, and the constituent units of higher education.
  • For state agencies, the bill allows such a payment if (1) it is made under a settlement agreement that the attorney general enters into on the agency’s behalf or (2) the governor, upon the attorney general’s recommendation, authorized it in order to settle a disputed claim by or against the state.
  • It also specifies that, any settlement or non-disparagement agreement cannot prohibit a state agency employee from making a complaint or providing information in accordance with the whistleblower or false claims act.
  • Similarly, any settlement or non-disparagement agreement cannot prohibit a quasi-public agency employee from making a complaint or providing information under the whistleblower law.

For readers who work for the government, these particular provisions — namely seeking approval from the AG’s office — should be reviewed over the next few months.