When you need to grow your workforce, the first question is whether to hire employees or bring on independent contractors. It is often tempting for a new business to classify workers as independent contractors to avoid employment taxes and other administrative issues, but the business must have a defensible basis for doing so.
Keep in mind that this decision is not without constraints. A company’s ability to classify a new hire as an “employee” or “independent contractor” is influenced primarily by the degree of control the company exercises over the worker and how the business treats the worker. Does the company determine when, where, and how a worker does his or her job?
What may seem like a simple analysis can have important consequences. Answers to these questions matter because improper classification can lead to your company being held liable for employment taxes and penalties, as well as other legal ramifications.
If your company decides to bring on new workers as employees, then you must decide to negotiate contracts with these employees for a specific time period, or whether your business will employ the workers “at-will.” There are various pros and cons to at-will employment as opposed to contract-based employment. Other questions that your company should consider include whether to provide employee benefits—such as health insurance, paid vacation, and a retirement plan—or to develop an employee handbook containing the company’s policies and procedures.
Depending on the nature of your business, it may be crucial that you protect your company with confidentiality agreements (also known as non-disclosure agreements or “NDAs”) and non-compete agreements. Confidentiality agreements seek to make sure that workers don’t share company trade secrets or other confidential information, such as company strategy or customer lists, with anyone who is not authorized to receive such information. Non-compete agreements restrict a worker’s ability to directly compete with your company after the business relationship ends for a limited time in the future. Courts in North Carolina give extra scrutiny to restrictive covenants—agreements that restrict a person’s ability to make a living—so non-competes need to be drafted carefully to be enforceable.
Do you want assistance in making sure your business is protected with a confidentiality agreement of non-compete? Contact us today.