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Employment Agreements vs. Independent Contractor Agreements: What Founders Should Know
Startups often rely on both employees and independent contractors. But these are legally distinct relationships - and using the wrong type of agreement can create serious legal and financial risks. Misclassification can lead to tax penalties, lawsuits, and regulatory violations, especially in strict states like California and New York.
Offer Letters for Startups: What Founders Need to Know
Hiring your first employees is an exciting milestone. But it’s not enough to agree on salary with a handshake. A clear, well-drafted offer letter sets expectations, outlines key terms, and helps reduce the risk of misunderstandings later.
Fired or Quit? Why It Matters Legally for Your Startup
When someone leaves your company, founders often want to just “move on” - but whether the departure was voluntary or involuntary has lasting legal and financial consequences. From unemployment claims to final pay rules, the details matter.
FAQs
Open allIt must be clearly written, voluntary, and compliant with state and federal laws. Agreements with older workers have additional requirements under the Older Workers Benefit Protection Act.
No. The agreement must be voluntary. If an employee refuses to sign, they may not receive the severance benefits.
It varies. Many companies use a formula like two weeks of pay per year of service, but small startups may offer a flat amount instead.
No. Severance is optional, unless a written contract or company policy guarantees it.
Generally, there’s no legal penalty if the offer letter is non-binding, but you should keep documentation and prepare for possible delays in hiring.
It’s not recommended. A written letter avoids disputes, creates clarity, and provides a paper trail if questions arise later.
Yes. The offer letter provides a summary of terms, while a formal employment agreement can cover more detailed obligations, protections, and restrictions.
Most offer letters are not legally binding contracts, but they do outline expectations. Binding obligations often come from separate agreements, like equity grants or confidentiality agreements.
Yes. Even a simple email confirmation helps avoid disputes later and provides documentation if questions arise with unemployment agencies.
All wages earned, plus unused vacation or PTO if state law requires it. Bonuses or commissions earned up to the last day should also be included.
In most cases, no. However, if they resigned due to unsafe conditions, harassment, or other “good cause,” they may still qualify.
Yes. Terminations usually trigger more legal and financial obligations, including unemployment eligibility and faster final paycheck deadlines.
Keep it professional, brief, and focused on the business. Avoid sharing details about performance or personal issues. Frame the update around the company’s future direction.
Not always. For low-risk terminations, it may not be necessary. However, in cases involving layoffs, complaints, or sensitive situations, a separation agreement can reduce potential disputes.
It depends on the state. For example, California requires payout of unused vacation, while other states leave it to company policy. Check your state’s rules before finalizing pay.
In most at-will employment states, yes. However, firing must not be based on discrimination or retaliation. Documenting valid business reasons is strongly recommended.
At least annually, or whenever roles change significantly. Job responsibilities, not just titles, determine exemption status.
No. Salary alone isn’t enough - the role must also meet the duties test.
You may owe back overtime pay, penalties, and attorney fees. Regulators can also audit your payroll practices.
It means the employee is exempt from overtime pay requirements, usually because they earn a salary and perform executive, administrative, or professional duties.