Employment Law 101 for Startups

Summary

In this enlightening discussion on employment law for startups, experts Brett Waters, Krista Cabrera, and Louis Lehot delve into the intricacies and common pitfalls that new businesses face regarding compliance. The conversation covers fundamental aspects such as properly classifying contractors and employees, understanding exempt and non-exempt employment statuses, and the necessity of comprehensive handbooks and offer letters. By focusing on legal structures alongside financial management, startups can prevent costly legal missteps in the future.

Highlights

• Brett, Krista, and Louis discuss why employment law is a favorite topic for startups due to its importance. 👩‍⚖️
• Misclassification of employees as contractors is a common mistake with legal consequences. 🚫
• The ABC test in California is essential in determining contractor versus employee status. 📋
• Offer letters should detail at-will employment, salary, and employee benefits. 📝
• Compliance tools like Gusto and Paychex can help in managing payroll and other HR responsibilities. 🛠️

Key Takeaways

• Understanding employment law is crucial for startups to avoid costly fines and disputes. ⚖️
• Classifying employees and contractors correctly is vital to compliance. 👥
• At-will employment should be clearly outlined in offer letters to protect both parties. 📄
• Avoiding technical debt in legal compliance is as crucial as managing it in technology. 💡
• Consulting with legal experts early on helps prevent future liabilities. 🔍

Overview

Navigating the complexities of employment law can make or break a startup. It's not the most thrilling topic, yet it's fundamental—much like loving Brussels sprouts for the vitamins they bring. Dive into this chat with Brett Waters, Krista Cabrera, and Louis Lehot, where they demystify the essential employment laws for new businesses.

Krista Cabrera puts the spotlight on common legal pitfalls, like misclassifying employees as contractors—a move riskier than surfing a big wave unprepared. She also highlights the importance of defining exempt and non-exempt worker statuses to ensure compliance and avoid hefty fines.

Louis Lehot wraps up with insights on the investor's perspective, emphasizing how legal compliance can affect future funding. He advises maintaining solid legal groundwork from the start—because nobody wants to face a courtroom taco-less!

Chapters

• 00:00 - 03:30: Introduction and Start of Discussion The chapter opens with music, setting the scene for the start of the narrative.
• 03:30 - 10:00: Classifying Workers: Independent Contractors vs. Employees The chapter introduces the topic of worker classification, specifically focusing on the distinction between independent contractors and employees. It begins with a casual greeting and acknowledgement of the diverse audience. The host, Brett Waters, sets the stage for a discussion on how different classifications impact both workers and employers.
• 10:00 - 15:00: Exempt vs. Non-Exempt Employees This chapter is part of a series on legal considerations for high-growth startups, focusing on the topic of employment law. Brett Waters, a lifelong Silicon Valley resident, serial entrepreneur, and Stanford University educator, hosts the discussion. He is also associated with the Miller Center for Social Entrepreneurship and runs the Fourthly startup accelerator. Krista Cabrera joins him for the morning discussion.
• 15:00 - 21:00: Legal Compliance and Startups The chapter opens with a casual conversation inquiring about the location of a participant who is from San Diego, California, humorously noted for its delicious fish tacos.
• 21:00 - 28:00: Due Diligence and Compliance in Financing The chapter delves into the critical roles of due diligence and compliance in the financing sector, especially in relation to legal challenges that companies face. It explores common legal issues such as sexual harassment lawsuits, wage and hour class actions, meal period violations, rest period violations, and overtime violations. The narrative further discusses the significance of advice and counseling in these scenarios, which includes drafting and reviewing company handbooks, creating policies, and providing counsel on issues related to leave and termination. Louis Lowe is mentioned as also joining the discussion, suggesting a continuation or introduction of further insights or discussion points.
• 28:00 - 34:00: Building a Handbook and IP Agreements In this chapter, the focus is on building a handbook and understanding IP agreements. The conversation brings in a personal touch with anecdotal stories, such as the usual lunch meetings in Palo Alto for fish tacos, and a claim by Krista that the best fish tacos are actually found in San Diego. These informal exchanges help transition into more serious discussions related to the chapter’s main topics.
• 34:00 - 35:00: Final Thoughts and Resources Final Thoughts and Resources: The chapter discusses the general sentiment that no company founder particularly enjoys dealing with employment law. There is also a mention of planning a future trip to San Diego.

Employment Law 101 for Startups Transcription

• 00:00 - 00:30 [Music]
• 00:30 - 01:00 [Music] [Music] well good afternoon good morning good evening depending on where you're joining us from i'm brett waters and welcome to
• 01:00 - 01:30 another in our series of legal considerations for high growth startups today we're going to talk about employment law everybody's favorite topic so as i said i'm brett waters i've been in silicon valley my entire life and i'm a serial entrepreneur today i teach at stanford university um i'm involved with the miller center for social entrepreneurship and i run the fourthly startup accelerator and joining me this morning is uh christa cabrera morning krista hello
• 01:30 - 02:00 good morning where are you joining from today san diego california san diego california home of delicious fish tacos that is right the best the very best so krista give us the brief background around you sure let's see i've been a california employment lawyer for a little over 20 years which makes me feel very old my practice focuses exclusively on california employment law issues i do about 50 litigation so defending
• 02:00 - 02:30 companies when they're sued for sexual harassment a lot of wage and hour class actions meal period violations rest period violations overtime violations that kind of thing and then about 50 advice and counseling so drafting and reviewing handbooks drafting policies and just providing you know advice on leave issues termination issues that kind of thing awesome terrific and also joining us is uh louis lowe
• 02:30 - 03:00 morning louie bet louie your audio is a little funky but we'll uh we'll get through it as best we can um so louie when you and i meet for lunch in downtown palo alto we typically meet for fish tacos at sancho's taqueria but uh krista tells me that the fish tacos in san diego are actually the best fish tacos in the world so yeah so so louie i think this means that
• 03:00 - 03:30 you and i are gonna have to make a trip down to san diego sometime soon all right excellent so um you know i was thinking this morning about how um you know nobody loves employment law right i've never heard any company founder say to me the thing i love about running a company is i love employment law never ever
• 03:30 - 04:00 and yet you know it turns out to be if you want to found a company you know it turns out to be one of the most important uh regulatory areas to understand and comply with um you know it's one of the main things that startups end up getting dinged for and potentially fined for is uh violations with regard to treating somebody as a contractor when the law says youtube is an employee or exempt or non-exempt and all these other things um so krista if a startup founder comes
• 04:00 - 04:30 into your office as a brand new client and says you know i'm about to make my first hires you know what are the top three things i should know you know what would you what would you tell that startup founder that startup founder would be very smart let's start there we're seeking council before stepping into the very very um dangerous seas of employment law in california um or anywhere really but but you know things are hyper regulated in california
• 04:30 - 05:00 um so the first thing i would say is do not without thinking about it and without seeking counsel start classifying your workers as independent contractors this is probably one of the biggest mistakes we see founders of startups make they you know the people working for them don't want to deal with providing taxes taken out of their paycheck right the founder doesn't want to deal with setting up employees and getting an employee id number and taking
• 05:00 - 05:30 out taxes um and so they think we'll just make you a contractor no problem and i mean it's a there's a lot of risk associated with independent mis contractor misclassification throughout the country but in california in particular there are very rare and limited circumstances where you can appropriately make someone an independent contractor so that's the first thing i would would talk to
• 05:30 - 06:00 your lawyer about is can we classify any of our workers as independent contractors or do we need to make them all employees and i hate to tell you this but 99 of the time the answer is going to be you really need to make them employees right and you know i've done this myself right you know those first few team members you tend to want to say you know what just just invoice me every month i'll pay you as a contractor that way you know that way i don't deal with payroll and you don't have to deal with withholding and it'll be a whole lot easier for all of us
• 06:00 - 06:30 um and so um i think on the edd site there's a um i think there's a page that kind of helps you understand the circumstances under which you can pay somebody as a contractor versus the circumstances under which you're required to treat them as an employee yeah yeah so the the the current state of the law in california um is uh there's a statute it's called ab5 and it basically it lays out what is called
• 06:30 - 07:00 the abc test um you've got to meet three factors factors a b and c in order to classify a worker as an independent contractor and you know essentially the the the factor b is where a lot of companies get tripped up the person has to be doing work that is essentially unrelated to what the company does so if you've got someone doing the critical work of your company they are probably not going to be able
• 07:00 - 07:30 to be classified as a contractor and the sort of classic examples you see of of a true properly classified independent contractor is like um a retail establishment brings a a cabinet maker in to build some cabinets yeah or i mean truly like you know a law firm brings in a plumber yeah right who walks around our offices and waters our plants you know we're not in the business of selling plants we're
• 07:30 - 08:00 a law firm i mean that's truly a contractor so if you think about it in those terms it's easy to see oh most of the time we're dealing with with a problem if we're making people contractors now there are many exceptions to ab5 for example there's like a business to business exception so if you are a business working with another business and several independent factors are met like the business is a true business it's set up as you know an llc um or a
• 08:00 - 08:30 corporation lots of other requirements the business does work for others as well then you can you can you can fit an exception to that abc test in which case a much more employer-friendly test applies multi-factor test and you look at a lot of things rather than this very rigid abc test but even if one of those exceptions applies it doesn't mean automatically you're home free this person can be a contractor it just means we're going to apply a slightly less rigid test to determine whether this worker can be a
• 08:30 - 09:00 contractor got it so the first thing is first thing is to just really understand the legalities around who you can treat as a contractor and who you're required to treat as an employee but then payroll stuff that is right great okay so now i'm going to make my uh now that i understand that i'm going to make my first hire uh and so i meet somebody over a beer uh and i say to them tell you what come to work for my new startup um pay 80 grand a year
• 09:00 - 09:30 uh do you have any questions is that the right way to do it uh i would say once you get through that interview process and you decide you want to enter you want to hire the person um you're going to want to send them an offer letter that's that that that that's what i recommend yeah so just talking over beer and pretzels doesn't cut it you know beer pretzels is great [Laughter] for beer and pretzels yeah
• 09:30 - 10:00 i would i would absolutely uh put it in an offer letter right and make it clear that that unless you've agreed to something different than this and sometimes you have to but 99 of the time it's just going to be employment at will meaning you can terminate this person at any time for any reason and they can resign at any time for any reason and you want to put that in your letter i mean i will say in california and in most states employment is presumptively it will so even if you don't say it that is the
• 10:00 - 10:30 case unless you promised i'm only going to fire you for cause and if i fire you without cause i'm going to give you a six month cleverness but um it still never hurts to put it in writing your employment is it will we can terminate you at any time and you can leave at any time for any reason and then you're also going to want to set forth um just the basics the person's salary the type of benefits you're going to be providing um and and then you're you're going to want to think about what those benefits are you know you can be pretty
• 10:30 - 11:00 vague about it in an offer letter you can say you're going to get the same benefits as other employees you know our handbook will set benefits you get you don't have to really get into everything in the offer letter but you do want to think about the fact that you know depending on where that person works there might be a sick leave statute or ordinance that you've got to comply with so they've got it you know maybe three days sickly if it's certain parts of california more if it's other parts of california um you know so you're just going to need to
• 11:00 - 11:30 think about the types of benefits you need to give them one way or the other you know refer to benefits in that letter um you know and then there are some you know you've got to tell them that they're going to need to be able to show that they can work in the united states just a few basic things you're going to want to put in that offer letter right right so to me the one of the key things there is the at will thing that um you know it's very important to be explicit about the fact that this is an at will employment
• 11:30 - 12:00 relationship meaning as you said meaning that you can quit at any time and i can fire you at any time absolutely absolutely and i think another thing you want to be really clear about in that letter is the salary one you know for sort of talking about sort of like the three big things where where startups can get in trouble another one is um with exempt misclassification we talked about it in classification another issue we see is treating everyone as just a salaried employee not
• 12:00 - 12:30 making anyone track their time not thinking about meal and rest breaks not paying overtime not really thinking about minimum wage because i don't you know i got to start a startup i don't want to deal with tracking time and all that crap i just want to pay everybody a flat salary why is that why is why is that not okay krista that is fine and well if the person you're hiring meets the appropriate requirements for being what we call an exempt employee and when i say exempt i mean exempt from overtime
• 12:30 - 13:00 essentially exempt from the types of rules that apply to our employees it's fine if number one you're paying the person at least two times the minimum wage there is a salary threshold so you can't pay someone 25 000 a year and call them exempt they got to be paid at least two times the minimum wage and number two they've got to be doing what we call exempt work and there are you know certain and this is another um the edd website that you mentioned earlier we'll lay this out the department of labor the
• 13:00 - 13:30 california department of labor website will lay this out as well um but you know i would obviously suggest you you see council on this you're going to need to figure out whether they meet one of these exempt tests so there's like an executive exemption that could apply to your c-level employees folks that are overseeing a department or the entire company there's the uh administrative exemption that applies to uh people doing you know white collar work um there are various exemptions that can apply one through line for all of them
• 13:30 - 14:00 is the work has to require independent discretion so they've got to re regarding matters of importance to the company so this can't be someone who's just doing data entry or just taking directions to properly be exempt and just be paid a salary and no overtime you've got to be doing really important work that requires thought that requires analysis in addition to fitting one of these particular tests and making at least the minimum wage if you don't have that you
• 14:00 - 14:30 do need to pay these people by the hour give them overtime track their time all of that fun stuff right so if anybody in our audience is not familiar with exempt and non-exempt i highly recommend you just google it google it right now or make a note and google it later that this concept of exempt and non-exempt is a really important concept to understand um and then as krista said there's a variety of kind of tests for uh whether you can treat somebody as non-exempt or whether you have to treat them as as other way around with you
• 14:30 - 15:00 louis let's test out your audio [Music] still no good louie still no good so we're gonna we're gonna leave you in uh in viewing mode for the moment and chris and i are gonna continue our conversation okay so um so krista um let's see so we covered um at will
• 15:00 - 15:30 we covered exempt and non-exempt we covered um what was the first thing we covered we covered uh we covered independent contractors independent contractors versus uh somebody who you need to treat as an employee yep um so uh so krista you know i got a startup uh we want to you know we want to uh conserve cash um and so you know me and my co-founders and everybody you know working for free
• 15:30 - 16:00 right now uh because you know we got to get this thing off the ground uh any concerns there major concerns and we see this all the time you uh you uh you gotta pay people to work for you otherwise it's basically a ventured servitude and that is a no-no you do i and i know this is such a typical uh scenario with you know young startups like let's just you know with sweat equity we're gonna work for free we'll get paid
• 16:00 - 16:30 on the back end and that just is not it's not compliant with the law um and and the problem is these types of people who are starting companies you know usually are higher level so you can't just say okay fine i've got to pay these people who are sort of getting the company started i'll just pay the minimum wage um i mean you could do that that's fine but then remember you've got to deal with they've got to track their time they've got to take meal breaks they've got to take rest breaks you got to pay them over time you're not going to want to do that usually with really
• 16:30 - 17:00 high level people starting a company which means you are going to have to pay at least two times the minimum wage so are there any workarounds for this because like i said we want to conserve cash we don't we paying anybody any money you know they're they're you can potentially and this gets a little more into business law so i get nervous i don't like to dabble in areas where i'm not an expert but i will say there i think you could potentially
• 17:00 - 17:30 if if the business is an llc um and the people doing the work are members i do believe you could potentially um have their membership interest be their compensation but i would say you're really going to want to talk to a combination like business lawyer and employment lawyer to see about what that is workable right for the most part really there's there isn't a workaround you do have to pay people who are
• 17:30 - 18:00 working for you brent i'm going to take another shot at the audio here and i hope that wow louie your timing is perfect louis well so i just mentioned business lawyers and you magically appeared the way i see it there are six times that a founder needs to think about employment law or in six kind of uh audiences and and the first is typically when we hear about a startup generally somebody is working for another company already uh so um
• 18:00 - 18:30 uh you're you're you're working for uh uh hulu uh the mythical company on on the the silicon valley uh tv show on hbo and uh you've got a startup idea and you've got to think about what are my obligations to my current employer and your new startup should be done on your own device personal device not a work device it should be done on your own time and you've got to be very careful about overlapping uh areas of uh expertise and
• 18:30 - 19:00 product roadmap because that is a recipe for disaster if if you try and take your current employer's idea and spin it out into your own startup without their permission so that's the first um uh area the second area is is when you start your new company you've you've got to uh recruit other founders and they're going to need some sort of compensation they're going to need they're going to want some sort of a title status position then after you've formed your company
• 19:00 - 19:30 your investors you're looking to raise money and your investor is going to go look at your your setup and they're going to say is this safe and they're going to want to see that um to some extent there's been at least nominal compliance with employment laws because no investor is going to want to buy a class action lawsuit uh or a dispute between founders or a dispute with a prior employer uh so when i'm investor council and and again we work with hundreds of companies and in the emerging growth space as well as
• 19:30 - 20:00 investors yeah we're looking at those areas um i would say you know as you're moving along in the life of your company you've been funded uh you exist you're you're you're you're kicking butt and and you're hiring people uh you're then worried about uh are you paying your payroll taxes is everybody on payroll uh properly documented as as christos noted have you have you made sure that they're all um uh eligible to work in the united states or have you gotten a proper visa that sort of thing
• 20:00 - 20:30 next you have the government and that's a constituency who's going to be checking that you're you're declaring the proper amount of employment tax uh and you're you're taking care of things uh and then finally when you go to sell your company uh or go public for that matter have some sort of an exit you're gonna have a lot of eyes on everything you've done up to then and that's the point where you can lose a lot of value if you haven't done this right it's it's the first place where a buyer is going to say well geez i'm going to need to take a 10
• 20:30 - 21:00 hold back against the purchase price to cover any indemnity issues that i might have with the government or with a former employer or or with employees uh so that's a that's a big potential area and then after you've sold the company i would say failure to comply with employment issues is the number one area where we see post uh the m a claims against sellers so the buyers go ahead and buy your company uh you're you're feeling great
• 21:00 - 21:30 and then suddenly you start to get notifications uh in your email box that uh money's being held back against that escrow that you gave and it's clear you're never getting it back because if buyers start to do an investigation or uh start to study uh this thing that means that there are people on the clock taxi meters are running and that means it's hitting your bank account uh so brett and krista those are the areas kind of that i see and i think there were six maybe there were seven i lost
• 21:30 - 22:00 count uh not good at counting anything more than tacos no yeah there's no problem with lawyers we're not good at that i love what you just said louis and it it raised a cup got me percolating on a few more sort of necessary things to do as you grow um an employee handbook is something that companies need as they grow listen when you're just starting out and you've got i don't know three employees
• 22:00 - 22:30 just the basic policies that are required under the law fine you know you've got to you've got to give people um you know you've got to have a a harassment policy you're going to want an eeo policy there are some very basic policies you're going to want to have in place but as you grow you really are going to need a whole full-blown handbook because the minute really in california the minute you get above five employees a lot of these laws start kicking in the the cfra which is the california version of the fmla meaning you're going to have to
• 22:30 - 23:00 give people up to 12 weeks of leave or you know family medical leave the pregnancy disability leave law is going to apply right away so you're going to need a policy explaining how that works if you're any of your employees become pregnant and need time off so you really do want to want to pretty early on start thinking about getting just a real basic handbook in place that covers all of those um those various policies and um oh oh and the other thing i know this is sort of venturing a little bit
• 23:00 - 23:30 into the world of um ip but another thing you're definitely going to want to have either in your offer letter or as a separate document that you present to your new employee with your offer letter is a proprietary information and invention assignment agreement to piia or pia or you know there's lots of different words lingo to use but basically a document saying every you know here is what we consider proprietary you may never take this information you
• 23:30 - 24:00 may not use this information other than in connection with your work and anything you invent while working for us you assign to us it's going to be important to have that as well right um i want to go back to something else that that you asked brad and and that is um what do you do if um things aren't perfect oh my gosh it's the real world and you don't have money to pay all these people 2x minimum wage and you don't have a break room uh you you don't have a ping pong table you don't have a dog
• 24:00 - 24:30 you don't have a dollar that's right no free no free tacos at lunch no free tacos at lunch and you know i i live in this world with a lot of our early stage uh seed stage precede stage companies and you know we we do our best uh to make sure that we're we're doing as much as we can to comply and and where we're not you know we're we're trying to uh make up for it later and
• 24:30 - 25:00 we're compensating people with equity uh so that certainly uh they won't feel like they've been shortchanged if uh if things uh get better uh and you know we make do and that's um that's something of an art rather than a science and uh it doesn't mean that it's okay not to comply with the law but i i will say that there is uh the the real world of reality that many startups are in which is that they don't have cash to do these things and and you you move along louie can we can we
• 25:00 - 25:30 accrue wages against a promissory note is that kosher no chris is shaking her head i will just say that i mean could you do it sure is it is it technically legally compliant no have i seen it done many times unfortunately yeah and it resulted in indemnification claims when we discovered it later and and the buyer discovered it and charged the sellers uh for the the liabilities that that
• 25:30 - 26:00 accrued so of course the the problem uh brett with uh accruing a note is that you're failing to pay the payroll tax as and when they come due and you're not complying with with the law so again you have an issue with the employee you have an issue with the government you're going to have an issue at some point with auditors if they're auditing uh your financials uh which probably doesn't happen until after you sell the company or go public and then you will pay for it times right multiples of of what you did right now
• 26:00 - 26:30 and then you'll have a problem with your spouse [Laughter] but you know we we see these problems all the time and and we come and and we deal with them brad and and uh so i don't want anybody out there to panic so uh robert asks a really good question which is uh do the founders have to sign a pia is that that's the most important uh document uh of your entire startup right there yeah great it is a great question
• 26:30 - 27:00 great question i have a binder in front of me right now i've got a case where the founder didn't i mean he found the company he made everybody else sign one he didn't found her yep so and this is a good segue into kind of something you touched on earlier louie which is um so you know you've you've handled a lot of venture capital financings in uh in silicon valley uh and beyond um and uh in any financing there's due
• 27:00 - 27:30 diligence that happens and in every due diligence process all kinds of skeletons come tumbling out of the closet and so louis how in your experience how often is it that one of those skeletons has something to do with with employment law compliance i'd say it's the number one issue that we've come across in due diligence of any kind and you know if you're on the company side you're going to want to disclose it if you're on the investor side you
• 27:30 - 28:00 understand that that's an issue whether you see it or not you're not going to want a disclosure because that's going to hit your ability to get an indemnity later on down the line or to recover for it somehow and so what what do you do well again i think you do your best uh and that's uh that's a a very deep uh question bret that would require many tacos and maybe some cervezas with the tacos yeah they go well together it turns out yeah
• 28:00 - 28:30 so um yeah i think this is uh you know to me this is kind of the message uh for the three of us to communicate to uh the various founders on this call today is that um you know running a company is hard enough as it is without running into um kind of unexpected compliance issues and unexpected uh employment law issues and so you know my experience is get this stuff right the first time and keep
• 28:30 - 29:00 it buttoned up and if you do that if you make the effort to do offer letters make sure everybody is at will make sure everybody signs their bias make sure you understand exempt versus non-exempt contractor versus employee if you do all that stuff up front then you will find all of your financing financing financings and other transactions will go a whole lot smoother you know brad i wanted to make a note on that and uh founders asked me often you
• 29:00 - 29:30 know how do i do this um i've i've raised a million dollars literally how do i open payroll right you know five years there's just been a a huge acceleration in in the quality uh and accessibility i would say of technology tools to go do this for you and and one that i recommend often is is called gusto uh and they that they provide uh not only payroll but they can provide some benefits
• 29:30 - 30:00 uh some you know minimal benefits and then they can help you you know build better benefits as you as you go along uh and it's it's very easy to do yourself manage it yourself kind of in the cloud paychecks is another that we see um which is maybe for a bit larger company there's trinet and there's many others we don't have any preferences but you know people like krista and myself who work with startups every day are happy to help founders navigate
• 30:00 - 30:30 that i would say ask your co-founder friends uh as well what what their experience has been and what they like and didn't like um and you know coming back to something you said brett about about you know how to set this up right you know and you've heard me say this before we see uh startups all the time that have three big problems one is they need money uh two is they need a legal structure to get that money and three they need a financial structure to manage the money and i would say that doing all these sorts of things fits in that third
• 30:30 - 31:00 bucket you could call it financial operational hr whatever it's one bucket and when you're building your co-founder team you know sometimes we see the the the one founder the ceo the chief everything officer takes everything on herself or himself and and that's fine no judgment uh and then other times if you've got a group of several of you you know make sure that you've spelled out the rules that somebody is making this their responsibility uh to do this or you know i i think that there are some fractional uh cfo firms uh or fractional
• 31:00 - 31:30 cfos that do a really good job of of navigating the kind of zero to one phase of a startup getting this stuff off the ground and you can always improve on it later and with that brett i'm going to turn it back to you and say thank you so much for bringing us all together again uh for one of these conversations my pleasure louie so we have one last question here that akshita wants to get in which is so we've talked about exempt and non-exempt so you know should we just treat everybody is not exempt is that the right way to
• 31:30 - 32:00 go right yeah i see that question and she says what's the downside of having nothing so the downside is um it's absolutely the risk-averse way to go yes right we're okay we're just giving everybody treating everyone is not exempt and they're all hourly the downside is now you've got to properly track their time so if you if your employees are not exempt they must clock in the minute they start working clock out the minute they stop working they must be paid overtime now so if they work yeah over
• 32:00 - 32:30 eight hours in a day in california we have daily overtime or over 40 hours in a week they're getting time and a half once they get to you know it's like over 12 hours in a day or you know certain thresholds it becomes double time you've got to make sure they take compliant meal and rest breaks there are penalties if they don't um and you could have potential off the clock issues like if these employees are working at home let's say and they don't record that time you could they could come back to you later and say oh but i did all this extra work you didn't pay me for
• 32:30 - 33:00 and oh by the way it was at an overtime rate so they're just you know compliance is very very challenging with non-exempt employees it's absolutely what you've got to do if employees truly are doing non-exempt work but it's not a choice most companies would make uh voluntarily right excellent well our time is just about up um but this has been a great conversation uh kristen and louis thank you very much i think um you know this is obviously a
• 33:00 - 33:30 highly complex topic and the fact that uh you know in 30 minutes you guys gave us a nice kind of overview um it's terrific and uh i think maybe it'd be great if we could do another one of these christian where we go a little bit deeper into the harassment stuff because absolutely that's a big it's a big topic of its own i know stanford makes me you know take harassment training every year um and they you know and they have proof that i've gone through the course and you know it's a it's a big issue these
• 33:30 - 34:00 days so maybe we'll do another one just on that i'd love to i'd be happy to so in the meantime um startup founders out there here's the way i think about this um many of you are technical people many of you are engineers and so you know the term technical debt so technical debt means you've had a team working on this software for you know for a couple years now and there's a whole bunch of duct tape and bailing wire that holds together various aspects and you keep meaning to go back and address it but of course it just
• 34:00 - 34:30 kind of gets worse and worse and worse uh that's the concept of technical debt in the engineering world and that same concept applies to the discussion we've been having here today that every startup you know begins kind of semi-compliant but you don't want that to start building upon itself to the point where you realize a year or two in you are so out of compliance that you're going to have real problems not only with regulators but also with investors and so best to get on top of that stuff
• 34:30 - 35:00 early i think is the bottom line for me in terms of advice for startup founders uh kristen louis thanks again um see you soon all right [Music] [Music] you