The U.S. Immigration System and a Workaround for Immigrant Entrepreneurs

An Overview of the U.S. Immigrant System

The United States has long been the country of choice for talented and ambitious immigrants. Immigrant entrepreneurs, in particular, are drawn to tech and entrepreneurial hubs such as Silicon Valley. There, celebrated tech visionaries such as Sergey Brin (born in Russia), Jerry Yang (born in Taiwan), and Elon Musk (born in South Africa) built iconic American companies such as Google, Yahoo, and Tesla, all of which have changed the way the world lives and works. Indeed, more than half of the country’s unicorn companies had at least one immigrant co-founder, and a quarter of engineering and technology startups had at least one key immigrant co-founder.

But to immigrate to the United States is not a simple matter. Under existing law, aspiring and established entrepreneurships can apply to one of several visa categories that would allow them to live and work in the United States. These include the following:

  • EB-1A Extraordinary Ability
  • EB-1C Multinational Manager/Executive
  • EB-2 National Interest Waiver
  • EB-5 Immigrant Investor Program

However, many of these visas are subject to strict caps and can come with strict requirements. The EB-1A visa for extraordinary ability, for example, can be granted to individuals to who have won prestigious awards such as Nobel Prize or an Olympic Medal or have made “original scientific, scholarly, artistic, athletic, or business-related contributions of major significant to the field.” The EB-5 Immigrant Investor Program, similarly, requires applicants to inject at least $500,000-$1 million in capital into the U.S. economy, with the expectation that their investment will create at least 10 qualifying full-time jobs.

Because these prerequisites would preclude most applicants, except for those who are already highly accomplished and successful in their chosen fields, most immigrants resort to the H-1B visa, a common but highly sought-after visa that is sponsored by companies for skilled labor. However, each year the cap of 85,000 visas (65,000 for individuals with job offers and an additional 20,000 for those with advanced degrees from U.S. universities) is filled within days of the application process opening. In addition, the Trump administration has increased the scrutiny applied to H1-B visa renewals and is planning to stop granting work permits to the spouses of H1-B visa holders.



In response to these strictures, many have called for the creation of a “startup” visa, which would empower immigrant entrepreneurs to try and start their own businesses, rather than coming to the United States bound to the employer who sponsored their H1-B visa.

Until that happens though, the next best possible chance for immigrant entrepreneurs may be H1-B visas sponsored by universities through the H1-B program. Unlike company-sponsored H1-B visas, which are capped at 85,000, universities may sponsor an unlimited number of foreign-born entrepreneurs through what many are calling Entrepreneurs-in-Residence. The university technically employs the entrepreneur, who is required to complete a limited amount of mentoring, teaching, or advising. During their spare time, however, they are able to work on their own business ventures. One of these programs, GlobalEIR, currently works with seven universities to host entrepreneurs-in-residence, and to-date they have been able to secure visas for 42 entrepreneurs who have raised $29.9 million and hired 123 jobs.

The GlobalEIR program and others like them have now expanded to 14 university partners across six different states. Entrepreneurs interested in these visas should hurry to apply. Senator Chuck Grassley (R-Iowa) has recently taken notice of these programs and called them a “cynical exploitation of loopholes in the law,” which means that they may soon fall victim to the Trump administration’s attempts to reduce the number of immigrants allowed into the United States.


To learn more about some of the currently available programs, check out some of these sponsoring universities:


Employee Arbitration Clauses and Protecting Your Startup in an Uncertain Legal Landscape

Many in the general workforce see working for a startup company or newly founded venture as a “hot” career move, sitting at their desks pondering such a move as they work for large, traditional companies with structure akin to your everyday Fortune 500 company. Making the switch to a startup often comes with the excitement of building a business, the freedom and culture associated with the workplace or simply the feeling of becoming part of something “larger” than yourself. However, there are also great risks an employee takes when pursuing such a career move.


The Issue 

In many cases, startups lack the ability to comply with a vast number of legal regulations, commonly in the labor and employment area. Employees might lose the feeling of security on matters that are normally handled by large HR departments within a large, established company. For example, where an HR department might handle the calculation of how much overtime pay a given employee is owed, a task like this might slip through the cracks at a startup in which creating a minimum viable product is the focus.

Currently, worker classification issues are plaguing startup companies like Uber and WeWork on matters ranging from underpaying employees to simply not providing statutorily mandated benefits. Some early-stage startups view noncompliance with labor and employment regulations as a small issue when compared to the hurdles that must be overcome to get a business up and running, but these seemingly small issues can destroy a company at later stages due to costly liabilities for workplace disputes and employee lawsuits.


The Possible Solution

In response, many startups turn to what they hope is a safeguard against large-scale employer liability for labor issues: employee arbitration clauses that bar collective or class-action suits. One New York Times headline from 2016 reads, “Start-Ups Embrace Arbitration to Settle Workplace Disputes”; from a general survey of the start-up scene, the Times is spot on. Early-stage companies are increasingly including arbitration clauses in their employment agreements that bar employees from taking collective action against their employer in a civil court, instead forcing individual arbitration requirements. From an employer’s perspective, this removes the incentive that employees normally have to bring disputes to arbitration or civil court in the first place because the cost of doing so individually likely outweighs whatever damages an employee may be awarded for back pay or improper benefit plans. However, employees may resist these clauses, and they may attract unwelcome press attention.

So, if employee arbitration clauses banning class action disputes provide some protection to startups, why are we even talking about this? As happens with many contractual devices providing corporations and employers with an advantage in a bargaining context, a number of plaintiffs launched legal challenges to the overall validity of employee arbitration clauses that bar class action suits. In January of 2017, the Supreme Court decided to consider a group of related cases concerning whether arbitration agreements containing class action waivers violate employee rights under the National Labor Relations Act (NLRA) in order to resolve a federal circuit split on the issue. Thus, come Fall 2017, that tool for protecting your startup from large-scale liability might be removed from your toolbox altogether.

Why might the Supreme Court find these class action waivers are invalid?

  • The NLRA, a federal statute applicable in all states, protects employees’ rights to engage in “concerted activity” to improve wages or working conditions
  • The National Labor Relations Board, responsible for enforcing the NLRA, has issued decisions that hold agreements between employers and employees to handle disputes exclusively on an individual basis violates employee’s rights to engage in “concerted activity”

What does this mean for your startup?

  • Until the Supreme Court hands down a decision on this issue, arbitration clauses with employee class action waivers may still be considered enforceable from a legal perspective, depending on where the company is located
  • Regardless of the Supreme Court’s decision, the best way to avoid liability for labor disputes remains complying with the applicable labor laws and regulations whenever and wherever possible
  • If the Supreme Court rules that these waivers are unenforceable, it becomes even more important to comply with applicable labor laws and regulations because large-scale liability for employee disputes is far more likely if collective action is available
  • If the Supreme Court rules that these waivers are enforceable, the status quo remains, but it only means that the likelihood of facing large-scale liability in employee disputes is lower than it would otherwise be

What should you do from here?

  • Review current employment agreements and evaluate whether or not any provisions in the agreement might constitute an employee waiver to class action disputes (e.g., binding arbitration clauses)
  • Consult an attorney who is familiar with labor and employment law and inquire about ways to mitigate risk in this area
  • If the Supreme Court rules these waivers are unenforceable, remove such terms from your employment agreements for clarity and to avoid disputes concerning the validity of the other terms in an employment agreement
  • If the Supreme Court rules these waivers are enforceable, consider using them when drafting current and future employment agreements in order to protect your business from large-scale liability


The Rift Between Companies: Oculus v. Zenimax

ZeniMax Media and Oculus are embroiled in a dispute over the intellectual property rights incorporated in the Rift product.

ZeniMax Media and Oculus are embroiled in a dispute over the intellectual property rights incorporated in the Rift product.

Have you heard of the Oculus Rift (that loveable virtual reality company swept off its feet by Facebook)? How about legendary game designer John Carmack? If you haven’t by now, you absolutely should have! In any case, here’s your major takeaway: Beware the Employer! The situation playing out between Oculus and ZeniMax Media is an interesting one, and it is a useful lesson in what not to do. While we wait for this to unfold (either in the courtroom or behind closed doors), let’s see where things went wrong and learn from Oculus’s potential mistakes.

Our Legal Setup

On May 1, 2014, ZeniMax Media (the parent company of Carmack’s former employer, id Software), sent letters to Oculus and Facebook claiming rights in at least part of the IP in the headset. In other words, ZeniMax believes it owns rights in IP created by Carmack during the course of his prior work for ZeniMax’s subsidiary, and that some of that IP is embedded in the Oculus Rift headset.  On May 21, ZeniMax initiated a lawsuit against Oculus in the Northern District of Texas. The focal point of Oculus’s problems stems from two documents: John Carmack’s employment agreement (and other ZeniMax/id personnel as well) and a Nondisclosure agreement entered into between Oculus cofounder, Luckey, and Zenimax Media.

Employment Agreements: Be Cautious about who helps you

Entrepreneurs, if you seek someone’s help, be sure to have them take a look at their employment agreement! Almost always, an employment agreement will include provisions that immediately make the company the owner of rights in inventions created by the employee in the scope of his employment. Sometimes, there may be an out if the work is unrelated or outside the scope of the Employer’s work or agreement. However, that may be difficult to prove.

Prior to this whole mess, Luckey, a hardware developer had begun the development process on the “Rift” virtual reality (VR) headset. In 2012, John Carmack began corresponding with Luckey and asked for a prototype of the Rift headset to tinker with. This is where their trouble begins. In the complaint, ZeniMax constantly states that it was developing VR technology with Carmack heavily involved in that research. As a game company, ZeniMax researched VR technology specifically for game development. There exists some question as to whether or not they sought to bring a viable consumer hardware project to market.

Carmack’s specific employment agreement reads:

Employee agrees that all Inventions that (i) are developed using equipment supplies, facilities or trade secrets of id Software or the Company… or (iii) relate to the Company’s business or current or anticipated research and development will be the sole and exclusive property of the Company (ZeniMax) or its designee from the moment of their creation and fixation in tangible media…

In other words, even if Carmack did not use his employer’s resources in working on the Rift, his employment contract would still purport to transfer rights to the employer if the Rift relates to the employers “current or anticipated research and development.”  Additionally, Carmack and other ZeniMax employees are said to have used company resources and research to make both hardware and software (including the software development kit or SDK) improvements to the device.

According to ZeniMax, “Carmack made breakthrough modifications to the Rift prototype based upon years of prior research at ZeniMax.” When Carmack and his crew made improvements, the resulting intellectual property had been assigned to ZeniMax via the employment agreements. The complaint constantly tees up that ZeniMax (Carmack with id Software in particular) had been working on VR hardware and software research. However, record exists where Carmack states that this was his pet project.  [Is there something missing in the prior sentence?]

In any case, if the court sides with ZeniMax, these improvements become their property, including the SDK. Carmack had quickly taken to Twitter to protest saying that nothing he has ever worked on was patented. But that might not be the only issue. The code he wrote, which is automatically protected by copyright, became property of ZeniMax (under ZeniMax’s interpretation of the law and facts). Accordingly, it might be the case that ZeniMax owns certain parts of the code used in the Rift.  If ZeniMax was the owner of Carmack’s rights in code he developed, then Occulus would have had to reverse engineer its code, without incorporating any of the copyrighted content from the ZeniMax-owned code.  It might also be the case that Luckey and ZeniMax became co-owners in the software.

Nondisclosure Agreement: Now that it’s not yours, it’s not yours.

Under ZeniMax’s argument, the technology became confidential information and trade secrets of ZeniMax. This is what gives ZeniMax some ammunition (or rather a actionable claim). Their research and proprietary information that was confidential and not readily attainable had been used in the Oculus Rift. Oculus was using it to profit to the tune of a cool $2 billion from Facebook. This could constitute misappropriation, meaning ZeniMax’s proprietary information was stolen. Helping to solidify their claim, ZeniMax points to the NDA entered into between the Company and Luckey.

It was under this agreement that Carmack showed Luckey the improvements made to the Rift. This contract is what governed the relationship between Carmack’s team, ZeniMax, and Luckey. The definition of confidential information includes the work done by the employees of ZeniMax. If these facts are correct, Luckey would likely not be able to use the information without the permission of ZeniMax (for purposes other than those outlined in the NDA). If ZeniMax’s secrets are disclosed, they potentially lose any trade secret protection. Multiple times in ZeniMax’s complaint, the Oculus team is painted as having no software background and no particular VR experience. If these facts are true, this would help ZeniMax demonstrate that they did not reverse engineer the tech (an acceptable method of discovering trade secrets). Multiple email chains affirmed the notion that they needed Carmack. Only days after demonstrating the Rift improvements, Oculus LLC was formed in the state of California.


ZeniMax’s complaint does not paint a favorable picture of how Oculus handled its negotiations with ZeniMax. The only facts are those from the complaint, and we’ll have to wait for more to come to light to know the truth. It is understandable that an entrepreneur will desire to protect and profit from an idea they believe to be there own. But even if there is not a clear owner of intellectual property rights in an idea, an entrepreneur maybe able to secure clear title to important intellectual property by negotiating a business arrangement with others involved.  ZeniMax’s allegations outline what not to do in negotiating over intellectual property rights.  ZeniMax alleges the negotiations broke down in large part due to the Oculus team. According to the complaint, originally, Oculus was to grant ZeniMax some share of equity in the LLC. According to the complaint, Oculus demanded a worldwide exclusive license over the IP disclosed by ZeniMax pursuant to the NDA. Furthermore Oculus demanded marketing support from ZeniMax and 10,000 free copies of Doom 3 BFG edition (a game capable of showing off the Rift) for the Kickstarter campaign. In return, ZeniMax would receive 2% equity interest subject to a 3 year vesting schedule. Vesting would be dependent on Carmack’s ongoing involvement in the project. Oculus also proposed tht ZeniMax could pay an additional 1.2 million for another 3%. However, that term was eventually dropped.

In 2013, negotiations in total broke down. ZeniMax would eventually prohibit Carmack from working with Oculus. As a result, Carmack left the company to become the Oculus CTO. They then began poaching former members of Carmack’s team despite noncompetition provisions in his employment agreement specifically prohibiting this.  Again, this is all based on ZeniMax’s unproven allegations.  However, this provides an example of how aggressive negotiating posture and subsequent aggressive hiring decisions can inflame a situation and lead to litigation.


Clear title to fundamental intellectual property is typically critical to a startup’s success.  While Oculus was able to achieve a favorable exit, their outcome is likely the exception to the rule.  ZeniMax’s complaint in its recently filed litigation provides numerous examples of mistakes startups can avoid making in working with individuals employed by others or subject to NDAs.


The Perils of Contracting Through Third Party Websites

MichelleSargentBlogPicThe internet has a wealth of resources for start-ups, from legal and venture financing blogs to form documents and state entity-formation pages. There are also many pitfalls to leveraging the internet that unknowing and uncounseled start-ups may not identify. One of these is the use of third-party websites to enter agreements.

For example, a start-up wants to use a contractor to develop some code for their mobile application. The start-up finds a website that allows parties to post a project that needs completing and has users make bids to win the project. (There are many such, or similar, websites, such as,, and The start-up posts its project, and an unknown individual somewhere in the internet world is contracted to complete it.

On its face, this is an easy and low-cost way of finding work for hire. But what may the start-up not consider: Is its intellectual property protected? Is any intellectual property created by the worker assigned to the start-up? What happens if there is a dispute about the completion or quality of the work? What is the worker’s classification for employment and tax purposes?

1.  Worker Classification

Any time a company wants to bring in somebody to do some kind of work for the company, the company must address how to properly categorize the worker for employment and tax purposes. As this blog has previously discussed, in a January 31, 2013 posting by Tasha Francis on Hiring Tips for First Time Entrepreneurs, there are important ramifications to getting the classification correct. And the correct classification may not be the one that matches the start-up’s financial capabilities or expectations. In using third-party websites to locate workers, the classification problem is magnified because (1) there may be no explicit agreement or provision stating how the worker is classified, and (2) it is possible the website loosely uses terms such as “employer” and “employee”—even when categorizing independent contractor relationships.

The purpose of these websites is to allow companies to hire remote, unknown individuals who specifically market and offer their services through the website to perform a specific project, on a specific time schedule, for a specific fee. This seems to create a quintessential independent contractor relationship. Many of these websites’ terms of service, however, explicitly refer to the company seeking services as the “Employer.” And the generic terms of service may not describe the nature of the relationship between the two parties contracting for work—unless the parties independently choose to enter into a separate independent contractor services agreement (the terms of which may not conflict with any terms in the terms of service). Although a start-up may ultimately be protected by the actual nature of its relationship with these electronically engaged workers, the terminology and lack of a defined relationship is just one of many ways relying on a third party may undermine the company’s legal rights and relationships.

2.      Intellectual Property

For many emerging companies, their intellectual property is the company’s main—and potentially only—valuable asset. And seeking to protect this IP is often one of the first steps taken by lawyers representing start-ups. Yet, when an uncounseled start-up engages through a third-party website, it is highly unlikely any of the typical IP assignment or proprietary information protections are contained in the default terms of the relationship.

Now we will return to the company that retains a contractor to develop a mobile application. On the one hand, the company must send proprietary information to the contractor describing its business, what its vision is for the mobile application, specifics for its user interface, the types of users it envisages, etc. Without any nondisclosure agreement, this proprietary information will not be protected from the contractor disclosing it to other parties, or developing the information in third-party products. On the other hand, the contractor will be writing code and developing an interface that will be an integral part of the company’s platform and business plan. But without any intellectual property assignment provision, any copyright and other intellectual property in the work performed by the contractor will not belong to the company. Although it may seem distant to the start-up now, any outstanding, unassigned intellectual property gives individuals a future opportunity to come back and seek something from the company.

It is highly unlikely that a third-party website will contain default provisions sufficient to protect existing company IP or to assign any contractor-created IP. On the contrary, many of these websites include express disclaimers that they are merely acting as a portal and are not subject to liability for any claims under any IP laws. It does not, however, include any IP assignment language from contractors to users, or any default nondisclosure provisions. Therefore, unless a start-up independently identifies the need to draft a separate and independent agreement assigning any IP and protecting the confidentiality of any of its proprietary information, it leaves potential holes in its IP protections.

3.      Dispute Resolution

So what if the relationship created on this third-party website goes wrong, what can a start-up do? Here, there are two main considerations: Does the third-party website impose any dispute resolution conditions on users? And should litigation arise, where would it take place?

A brief survey of the terms of service of several of these third-party websites reveals the existence of mandatory dispute resolution or arbitration provisions. What do these mean? Say the start-up is unsatisfied with the quality of the work performed by a contractor and wants to renegotiate the rate it has agreed to pay for the services based on the poor quality: First, the parties may be required to attempt to independently negotiate and resolve any disputes. They may also, however, be prevented from renegotiating the fee for a project after it has begun. Therefore, the parties would be required to submit the dispute to the third-party website, which may grant itself the full power to resolve the dispute, including the determination of the documents that can be submitted in support of the dispute. Alternatively, the parties may be required to submit to arbitration in which the third-party website selects an arbitration team that makes a binding, irreversible decision on the dispute. In many of the terms of service for these websites, there are no express provisions providing for litigation between users. And insofar as the purpose of the website is to bring together individuals globally to provide services, there is the distinct potential that contractors may be judgment-proof—either geographically isolated or financially unable to be hailed to court in a foreign country to face charges for breach of contract or copyright infringement.

And what if the start-up wants to raise a dispute with the third-party website? There are the obvious broad disclaimers of all kinds of warranties, limitations of liability, and indemnification requirements. But the terms and conditions can also establish that the agreement is subject to foreign law with irrevocable and exclusive jurisdiction in foreign courts. For uncounseled start-ups, the potential pitfalls of being unable to dispute a contract—because litigating abroad is unfeasible—were probably never considered.

These provisions and examples reveal the unforeseen liabilities of entering into agreements through third-party websites. Even for start-ups that may benefit from legal advice in order to draft separate agreements dealing with IP and worker-classification issues, it is likely that the third-party website’s terms and conditions will seek to limit the effect of these agreements to the extent they may be inconsistent with the website’s terms and conditions. And so even extra-website attempts to contractually change dispute resolution procedures may be ineffective. Nonetheless, there are differences in the terms of service across these websites, with some providing for more default, start-up friendly provisions or options to protect IP, classify workers, or dispute services, and at the very least, start-ups may want to consider digging deeper before selecting a third-party service.


How to Find Software Development for a Minimally Viable Product


Startups often find themselves in search of developers for their minimally viable prototype.

Startups often find themselves in search of developers for their minimally viable product.

A common issue for startups is where to find software development services to create a minimally viable product.  In lean startup methodology, a minimally viable product is a product with the minimal feature set needed to gauge customer needs.  Generally speaking, startups have three options if they do not already have a software developer on their team:

1.  Find a Technical Co-Founder – A startup may consider finding a software developer that would be a good fit to take the role of a technical co-founder.  This would typically require finding a software developer willing to make a full-time commitment to your startup.  Startups should also look for a good alignment of values, personality, and interests with a potential founder.  The trouble with this strategy is that it might take time to find, and become comfortable with, a suitable co-founder.  The diligence needed to find a co-founder may be inconsistent with a startup’s timing for developing a minimally viable product. The main benefit of having a co-founder capable of leading the development of a minimally viable product is that it is easy to make the necessary iterations to the product based on what a startup learns from its customers.  A technical co-founder is typically initially incentivized with founder’s equity, subject to a standard vesting arrangement.

2.  Use Independent Contractor Developers – If a startup does not have a technical co-founder, or if that co-founder needs additional assistance in creating a minimally viable product, a startup can often engage individual software developers through an independent contractor relationship.  These programmers should sign an independent contractor agreement or software development agreement with terms covering IP assignment, deliverables, and payment.  This relationship benefits the startup because it provides quick software development services for a minimally viable product, yet doesn’t commit the startup to a long-term relationship.  Also, because these independent contractors will be familiar with the startup’s technology, they may be available to tweak and improve the code based on customer feedback.  Independent contractors can be compensated with pay or with relatively small chunks of equity.  An additional benefit of this arrangement is that it could serve as a trial run for a potential technical co-founder.

3.  Use of Professional Software Development Providers – There are also companies that specialize in software development.  These companies range from high-end providers with extensive software development bandwidth and expertise.  These providers may take equity compensation from certain clients but will typically require monetary compensation in the ten’s of thousands of dollars. Smaller development firms may be less expensive or more willing to accept equity a full or partial compensation.  The drawback of using a development firm is it might be harder and more expensive to use that firm for the necessary iterations required after customer feedback.  Most firms will use their own developer-favorable agreement to cover the services they will provide, IP ownership, and payment terms.


Hiring Tips for First Time Entrepreneurs

Hiring Pic

Your startup company is taking off, and you find yourself wanting to share the workload with others.  Now’s the time to bring on new people.  You know (perhaps from your own previous work experience) that organizations and companies bring on unpaid volunteers, interns, employees and independent contractors, but you are not quite sure about the distinctions between these various groups.  Ideally you’d like to bring on unpaid volunteers or interns to keep your costs low.  But before you do this, make sure you understand the legal requirements associated with each type of worker to better inform your decision.

1.  Volunteers are only permitted for non-profit organizations

Generally speaking, under the federal Fair Labor Standard Act, a business must pay any employee (except for certain “exempt” employees)  minimum wage. As such, volunteering is only allowed for non-profit organizations and the only type of volunteering permitted is that which is “for public service, religious, or humanitarian objectives.”  This means that most for-profit startups are not allowed to have volunteers working for them.  This is true even if someone agrees to volunteer.  Under federal labor laws, even a willing volunteer can come back later and make a claim for back wages, for which the startup owners can be personally liable.

2.  Many startups won’t be able to host unpaid interns

The Department of Labor has articulated six criteria to determine whether an intern is exempt from the Fair Labor Standard Act’s minimum wage coverage. The six criteria are as follows:

1. The training the intern receives should be similar to that which would be given in an educational environment.

2. The training is for the benefit of the intern not the employer.

3. The interns do not replace regular employees, but rather, they work under the close supervision of existing employees.

4. The employer derives no immediate advantage from the activities of the trainee, and, on occasion, the employer’s operations may actually be impeded.

5. The interns are not necessarily entitled to a job at the end of the internship.

6. Both the employer and the interns understand that the interns are not entitled to wages for the time spent in training.

A startup must satisfy all six factors in order to comply with federal law.  Startups must additionally satisfy state wage requirements.  Factor four should particularly concern startups looking to take on interns to keep costs low while still advancing the business.  Furthermore, lean startups may not be in a position to provide the adequate training required by factor one.  As such, many startups won’t be able to host unpaid interns.

3.  Independent contractors and employees are the better options

Startup companies can hire either independent contractors or employees. The distinction between an employee and an independent contractor focuses primarily on the level of control an employer has over the worker, and misclassification of an employee as an independent contractor can result in legal consequences.  Generally speaking, factors to consider (such as those provided by the IRS) in classifying a worker as an independent contactor versus an employee include whether the worker operates under a separate business name, whether they have their own employees and offices, whether they maintain a separate business checking account, whether they advertise their services, whether they use their own tools for the job and set their own working hours, and whether they serve more than one client.  Note that different agencies apply slightly different tests.

Employees in contrast are often characterized by the fact that they perform duties dictated and controlled by the employer, they are given training to perform such functions, and they work for only one employer.  If someone falls within the definition of an employee, there are numerous additional requirements the employer should be aware of including withholding income taxes and Social Security taxes; paying unemployment taxes; offering benefits such as sick/vacation days, health insurance, retirement accounts, workers compensation; verifying the employee’s right to work (Form I-9); and complying with anti-discrimination laws.

There are many benefits associated with hiring contractors (vs. employees) that are particularly attractive to small startups.  These benefits include savings in labor costs and reduced liability to federal regulations including the family disability act.  Furthermore, employers more retain flexibility in hiring and firing independent contractors. But, as mentioned above, a startup should take care not to misclassify an individual as an independent contractor if they are in fact performing the duties and meeting the requirements of an employee.  If your “independent contractor” meets the legal definition of an employee, you expose yourself to liability which can include reimbursement for wages you should have paid them as well as payment for employee benefits which include health insurance, retirement, etc., as well as payment for back taxes and penalties for federal and state income taxes, social security, and unemployment.

After you have decided who can and cannot work for you, be sure to put your agreement in writing.  Should the new hire become disgruntled with their classification at some point in the future, it would be advantageous for you to have a document that clearly lays out the intentions of both parties involved in the employment.



Tips For Using Social Media To Build Your Personal Brand

You can use social media to help establish the characteristics that make your offering unique.

You can use social media to help establish the characteristics that make your offering unique.

These days everyone is trying to develop their personal brand.  That is to say, everyone is looking for a way to help them stand out in their profession.  Your personal brand explains the characteristics that make your offering unique- your product, reliability, attitude, promise, customer service, etc. Personal branding is especially important for entrepreneurs and those that work with them.  For entrepreneurs, personal branding is important because at the early stages, people are investing in the people associated with the start-up as much as they are investing in the product or idea.   Personal branding is also important for those who work with entrepreneurs (e.g., startup attorneys, venture capitalists, etc.), as their future business is often driven by their reputation.  For examples of startup companies and the people who work with them that are very active on the social media website TWITTER, see venture capitalist Jason Mendelson (@jasonmendelson), Wilson Sonsini Goodrich & Rosati, (@wilsonsonsini ), a law firm serving entrepreneurs and venture capitalists, or the payment startup Square, Inc. (@square).

Social media websites, such as TWITTER, LINKEDIN, MYSPACE, and FACEBOOK, can be powerful tools in helping you to establish and promote your personal brand.  However, these same tools can also tarnish your brand if used incorrectly.  Here are some helpful tips on how to successfully and responsibly use social media to develop your personal brand.

1. Select your brand

What do you want to be known for?  The goal of personal branding is to establish a positive correlation between you and your services in the mind of others.  As this is highly valuable retail space, you may need to start with a narrow focus.  Are you promoting yourself as a news source, or do you want to be known for your expertise in a particular area?  Decide what is most important to you, and focus your efforts on building up that relationship with consumers first.  Once you have chosen a brand be consistent. Brands only have power because the consumers rely upon them as indicators of predictable, reliable, or valuable products.  Changing your brand will undermine initial efforts in building a brand.

2.  Envision your audience

Next you should consider who you want for your audience.  Are you looking to interact with the general public?  If so, you will want to focus your efforts on social media sites which can be accessed by the general public, such as TWITTER or publicly accessible blogs.  If however, you are looking to target a more focused group of people, for example colleagues in your profession, you may want to focus your efforts on websites such as LINKEDIN, a social networking website for professionals.  Clearly identifying your target audience and choosing the appropriate medium to send your message will allow you to specifically reach those individuals you would like to know your brand.  Also, it is important to realize that it is now possible to link the TWITTER, FACEBOOK, and LINKEDIN feeds together so that a message sent out on one channel is automatically sent to all feeds.  With this convenience users should be even more aware of their respective audiences on each social media site, so that, for example, a personal tweet doesn’t get sent to business contacts on LINKEDIN.

3.  Know what you are getting yourself into and know any limitations you might encounter

The next thing to do before embarking on your social media quest to build up your personal brand is to check with your employer regarding their social media policy.  Does your company have regulations prohibiting employees’ use of social media on certain subjects, or do they support your personal branding efforts?   Are there any regulations about using social media sites during work hours?  Be aware of and follow any limitations these regulations may have on your postings, as misuse of social media can lead to trouble in the employment law context (for examples of recent cases see The Social Media Employment Law Blog).  Early-stage startups should consider formulating a strategy and philosophy concerning social media that all founders and employees adopt.

Assuming your company permits your use of social media to promote your brand, you should familiarize yourself with the Terms of Use regulations imposed by social media sites.  While you may retain intellectual property rights pertaining to anything you post on some sites, this is not necessarily the case for all websites. Know what intellectual property rights you may be giving up before interacting with social media sites.

4.  Gain followers

So you’ve chosen a brand, identified your audience and cleared it with your employer.- so how do you gain followers?  This may be more difficult than you initially think because social media is saturated with information. How do you stand out?  One way is to provide something of value to your readers.  For example, you could serve as a filter for your readers. If you are able to filter out the valuable information from extraneous information- the wheat from the chaff- you will gain people’s attention.

There are also proactive ways to seek out an audience. One tried and true way of gaining the attention of others online is to give attention and assistance to them first.   People are more likely to be interested in what you have to say, or to follow your brand if you express an interest in them first.  There are several ways to do this.  For example, LINKEDIN has an online tool that allows you to endorse the skills of others. Most blogs allow you to “tweet” or “like” their page, thus drawing attention to the posting.  Alternatively, you could post substantive and meaningful comments to others’ blog posts as a way of establishing credibility for your personal brand.  Engaging online in support of others’ work will inevitably draw their attention to you and your brand.

5.  Manage the brand

The most important, fundamental thing to do over time is to ensure that the experience your audiences gets from you is consistent with the brand. This is called managing the brand. Given that social media is dynamic and constantly changing, energy you put into establishing your brand can be quickly wiped away if you fail to maintain the quality of your brand.  Good practices involved in managing your brand include routinely posting reliable information, monitoring the quality of your service, and cleaning up old posts or information that remains online.