Joining a Business
Are you joining a company?
Here are some of the key legal considerations we will discuss with you:
- Company Status: Is the company a startup or an established business? If it’s a startup, are the formation documents and filings complete? Do you have copies? Are you being asked to work for equity until the company receives funding?
- Cash Compensation: How much is your cash compensation? Are you being classified as an employee or an independent contractor (consultant)? Do you understand your tax reporting and payment obligations if you’re an independent contractor?
- Equity Compensation: Are you receiving stock options, stock appreciation rights, restricted stock or other equity compensation? Do you understand how your equity award will work and how much it will cost you? Do you know the tax differences between incentive stock options (ISOs) and nonqualified stock options (NSOs)? What are the vesting terms and what does that mean for your options or shares? How do you calculate the percentage of the company represented by your award? Have you received copies of the company’s equity incentive plan and your individual award agreement?
- Benefits: What kinds of other benefits are included in your employment package? Is health insurance included? Is vacation time specified? What about a laptop computer, mobile telephone or company car?
- Severance: Is your employment purely “at will” or do you receive any payment upon termination of your employment? What are the conditions for receiving severance? What about acceleration of your stock or option vesting if you’re terminated without cause or if the company is sold?
- Offer Letter or Employment Agreement: Have you received an offer letter or a proposed employment agreement? Offer letters are most common but generally contain fewer protections. Employment agreements are generally reserved for C-level management. Do you understand each provision of the document and has everything you’ve been promised been reflected accurately in writing?
- Confidentiality Agreements: Most employers will ask you to sign an agreement to maintain the confidentiality of all of the company’s information, assign all ownership rights of your work product to the company, and not to solicit the company’s customers or employees after you leave. Do the specific restrictions fit the circumstances and do you understand the implications? Which restrictions follow you to your next job and how long will the restrictions last?
- Noncompete Agreements: California generally prohibits employers from requiring employees to sign an agreement not to work for a competitor following termination of employment. If you’re a California resident, are you being asked to sign something that looks like a noncompete? Is your employer based in California or another state?