2. Strategic employment projects 🔮

These are the questions you should be asking to better understand the business in your first 90 days. 

These will help you map out the strengths and weaknesses legal needs to address, so the business is well set up for due diligence - whether that’s for a future funding round, an IPO, or an acquisition.

Workforce structure

With working-from-anywhere high in demand, it’s important to understand the workforce structure at your business by asking the following questions:

• What does the company’s workforce look like? Are you comfortable with the risks inherent in that approach? 
• Does the company employee all its workers directly, or does it use more complex structures involving contractors or employers-of-record? 
• Where contractors or employers-of-record are involved, has the company thought about misclassification risk? 
• Is the company complying with off-payroll working rules?

Employment contracts

Where there’s a business, there’s contracts - these questions can help you better understand employment contracts and company hygiene around them:

• Do the company’s employment contract templates present any due diligence red flags?
• IP: Do the employment contracts contain an effective assignment of IP rights created by employees in the course of their employment?
• Termination: Are there any unusual termination provisions?
• Restrictive covenants: Are the restrictive covenants (non-compete, non-solicitation, etc) appropriate and enforceable?
• Executive team: Are the employment contracts for the executive team appropriate for employees of their seniority?

Collective representation

Questions that you could ask regarding collective representation are around:

• Unions: are there any unions or works councils involved?
• Agreements: are there collective agreements that apply to the company’s workforce?

Share option plans

Share option plans are a frequently asked question, particularly at a smaller business. To get the best understanding of share option plans, make sure you ask the following questions:

• What share option plans are in place, if any?
• Are the rules clearly communicated to workers?
• What processes are in place to comply with rules for tax-advantaged schemes (e.g. EMI options)?

Location

If your business operates in several locations, it’s worth getting a handle on location of these employees, and compliance with local rules. 

• Where is the workforce based?
• Does the company comply with all local rules, including by remitting tax and social security payments to the right authorities?
• Do workers work remotely, and - if so - on what terms?
• Are employment contracts appropriate to the location where workers are based?

Similarly to the location section above, it’s important to understand the policies: Does the company have a complete set of workforce policies, and when were they last reviewed?

Grievances or performance management

Ask the following questions to get an understanding of the processes around grievances or performance management.

• Does the company have clear policies for grievances and performance management? 
• Are these policies followed?

Pensions

When joining a new business, it’s useful to understand::

• Whether the company operate a pension scheme
• What the risks are (e.g. underfunding)

Employment law advisors 

Has the company got the right external advisors in place for its workforce? For this, you’ll need to consider geography, workforce structure and collective representation when deciding the appropriate firm.

Employment law 101 webinar

In this session, our expert panellists discussed topics including employee stock options, the process of terminations/redundancies and the best strategies to handle common employment claims. The panel included:

• Gaga Macko, Senior Legal Specialist, Employment at Remote
• Wende Knapp, Assistant General Counsel, Employment Law at Procore Technologies
• Nick Pritchett, Consultant Legal Counsel at Legal Edge
• Michael Haynes, General Counsel at Juro

Click the preview image below to watch the webinar in full.

Introduction to employment law panelists

Tom Bangay: Hello, everyone. Thanks everyone for joining and welcome to this community session on Employment 101 for in-house legal teams. My name is Tom. I look after content and community at Giro and thanks everyone for joining today. So just on housekeeping, if you have questions at any point, just put them in the chat or in the Q&A and we'll feed them through to real time to the panel who will say hello to in a second. Yeah, so this topic, I guess, why employment? I think lawyers joining a company in an in-house role probably have a broad range of experience, but often they're not experts on employment law and probably are expected to be from minute one of day one, which is slightly unfair. So I think the goal with today's session is to talk through with the panel some of the common kind of questions and issues that get thrown in-house legal teams around employment law. And yeah, we'll just have a talk about some strategies to get through those.

I'm going to introduce the panel, or rather ask them to introduce themselves. So if I could ask you all to just tell me a bit about yourself, who you are, where you work, and also which jurisdiction you're kind of most familiar with, because obviously what's true for employment law in one jurisdiction may not be in another. So I'm going to go left to right. So I have Gaga on the left. Hi, Gaga.

Gaga Mucko: Hi, everyone. My name is Gaga Mucko. I work at Remote. And I just started at remote. Previously, I worked at Localize. Both are fully remote with employees in many jurisdictions. I am a qualified lawyer in the Netherlands. So this is the jurisdiction that I have most experience with. But as I said, I already worked cross border. So I also know some things about other jurisdictions as well.

Tom Bangay: Lovely. Thank you. And remote is in about 5,000 countries. So probably. Great. Thanks very much. Wendy, I have you next on the screen.

Wende Knapp: Great. Thanks so much, Tom. It's great to be here. My name is Wendy Knapp, and I am an Assistant General Counsel for Employment Law at Procore Technologies. We are a construction management software company, so a SaaS company that is global. We're based out of Santa Barbara, California, but we've got about 3,500 employees globally, including throughout EMEA, APAC, and North America. So my primary areas of jurisdiction are across North America, APAC, and I dabble a little bit in EMEA, but I will leave that subject matter expertise to Gaga and the other panelists. But it's great to be here. Thanks so much.

Tom Bangay: Lovely, thanks very much. And I'm just going to plug the fact that you and Gaga are connected through our mentorship program, which is really cool. And we're going to launch the next cohort of mentoring, I think in April for application. And then we'll get started in May, which is just really nice. There's a question from Lucy in the chat on being muted. It's the microphone button on the far left of your buttons below. But I can't hear any background noise, Lucy, so I think you're all good. Great. OK, so I have Nick next. Hi, Nick.

Nick Pritchett: Good afternoon, everyone. My name is Nick Pritchett. I'm an employment law specialist. I'm in practice and in-house, and I'm part of Legal Edge, which is a relatively small band of consultants who have all had significant in-house experience and then bringing all that skill set to bear for startups and scaling companies as they tackle thorny topics like employment law.

Tom Bangay: Lovely. Thanks very much, Nick. And then last and definitely not least, Michael.

Michael Haynes: Hi, everyone. Can you hear me all right? My connection was a bit rubbish just then. I'm actually a total imposter in this panel because I'm a talentless generalist, but I'm general counselor at Juro. Before Juro, I was at Kazoo and have worked at a range of tech companies in the last six, seven years and have probably been in a position that a lot of commercial lawyers are in when they come in and be one of the very small number of lawyers in a legal team. So I'm here as the empathy vote.

Common employment law risks

Tom Bangay: Yeah, competition winner, Michael. That's why we let you in. Thanks very much for joining us. So we covered that we have a range of jurisdictions in play to discuss. And I think that the top question we had just to get started was, I mean, this first section is, if you want to move to the next slide, Theresa, it's on common employment risks. So I guess if you're a new lawyer coming into a company, I guess of any size, but scale-up has been the most kind of relevant journey here. What's kind of the top risk that you find? Maybe let's go in reverse order that we just went because Michael, you landed and probably found a burning box of employment issues that we didn't want to talk about in Giro. Just in your experience, both in a big company at KUZI, but then here, like what tends to be the number one thing that lands on your desk from an employment point of view?

Michael Haynes: So it's generally not, my experience is it's generally not one thing, right? It's generally you come in and there's a kind of range of things of various importance that you could do that you've got to kind of prioritise as you come in. I think that if you're the first or one of the very early lawyers or if none of the lawyers before you has had any kind of re-employment experience, actually one of the things that you can find straight away is just that there's not really a plan, right? No one's really sat there and thought, okay, well, what is employment going to look like at my organization? You may find that actually you've got diverse risks based on whatever's happened before.

You might find that you're spread over geographies that you're not really that well equipped to deal with. You might find that you've got a growing workforce that's on the edge of unionization that you might need to kind of address pretty quickly. Or you might come in and you find you've just got a couple of relatively low key disputes going on, but everything's taking along okay, but no one's really done. So I think that I'm really interested in what the other panelists think actually is the things that I definitely miss as I come in as a generalist. But I think it's really organization dependent, stage dependent, what I would say.

Tom Bangay: Yeah. Well, let's throw that to Nick because same jurisdiction, but a bit more of a specialist. What do you tend to find trips up companies and finds them coming to people like you guys?

Nick Pritchett: Yeah, I think it's right, you've got to take a try and adopt the kind of bird's eye view as much as possible because you've got to look at stuff in the round. But then being industry specific will lead you to the I think sort of the immediate burning fires. Scale-ups particularly, one of the things I find a lot is it's a period of really real excitement. If it's ready to be new, there's a lot of goodwill, a lot of enthusiasm and it's quite hard for the first lawyer at that point to then say, probably need to get some protections in place because it feels like a bit of a downer.

But in startups and scale-ups particularly, founder contracts having something properly in place that protects the business, both in terms of IP and, God forbid, if something goes wrong in that relationship and there's a bit of a schism or a split or someone leaves under a cloud, you need something in place to do that. So similar to having a kind of insurance policy, you hope you never have it, but it's important to get on the books quickly and make sure that there is sufficient formalized documentation to protect the business there.

The other one for scale-ups, assuming they're in a sort of a tech way, a lot of companies and scale-ups are relying on contingency workforce, engaging contractors and consultants. And in fact, that may be the primary model for how they deliver services or products. So with the case law developing in that area at a real pace, getting on top of not just sort of off-paywall working rules and the what people refer to as R35, but your risks around status and tax of consultants, I think would also be top of my list in week one.

Tom Bangay: Very nice, thank you. Wendy, I guess your company's a bit bigger and the US is a lot bigger and more complex than lots of jurisdictions. So obviously your place needs a really quite senior role to look after employment. What tends to be the most common kind of bear trap that you guys are looking out for?

Wende Knapp: Yeah, absolutely. I think one of the areas where Procore, we just went public almost two years ago, but as we're growing globally, it's very much more of a startup mentality because we're just coming into markets. And I think Nick just touched on it is making sure that your employees or contractors are classified properly. It's something that we face globally. Different jurisdictions have different categorizations of how you can treat workers. It's the same in the US. So I'm really glad that he highlighted that because folks think especially in a gig environment, right, that we can just hire a lot of gig workers and independent contractors and realistically local law and US law and Canadian law all over the globe.

There are very specific ways that you have to treat workers and protections for those workers. And so getting that right is going to be really important. I think what I would add to is a lot of startups don't have a lot of documentation and processes in place, but I think getting really sound offer letters and employment contracts, even if you, you know, either source that from a good resource that you have or pay for it, I think having those employment contracts set in place is something that's really important to spend time on. And then where you don't have the time to really create processes and templates, having consistent practices.

Now I'm talking specifically in the employment space of how you discipline employees, how you treat redundancies, how you handle promotions, right? In startup world and even for some mid-sized companies, we tend to have a lot of legacy folks or folks that we really like and we wanna move them over to a different position because we think that they can stretch. And yet other people that might be newer where you don't have that relationship, people try to exit them from the business more quickly or treat them differently. So a pattern of practice, consistency of treating all of your employees equally is something that's, I think, really ubiquitous around the globe. And you don't have to have a lot of processes in place to do that. You just have to have consistent practices.

Tom Bangay: Yeah, very nice, which I think it gets more and more complex the more companies, countries you're involved in. On that point, Gaga, I guess, like remote is handling, you know, employment contracts for like trillions of companies, because inevitably less. But which means you're kind of hyper exposed to these kind of kind of risks. Is there anything that you see as a really common stumbling block for startup?

Gaga Mucko: Well, I'm not going to be very original here, because I also think that what a lot of startups do is they underestimate the engagements and how they don't really think properly about how you should engage people. And often they choose for something that they think will provide a lot of flexibility, like for instance, the contractors agreements. And Nick already highlighted the tax risks, but there are obviously also employment risks, where those contractors could claim protection under employment law.

For instance, in Spain, it is quite easy. In the Netherlands, there is a lot to win when you're being terminated or in case of a sick leave. So this is something that seems to be easy and flexible, but can turn into a very big risk for the companies. So I think it is good at the start to think how do we engage people and what fits our business? And what's the best way to do it. And taking that into account, I think a lot of companies that are scaling up and are in that hyper growth mode, they tend to go into a lot of jurisdictions without fully realizing that employment law is very national. So I think it's also important to understand that what works in one country will not work in another and think about how to mitigate death risk.

Employers of record (EOR)

Tom Bangay: Very nice. Yeah, I think obviously one strategy that companies are pursuing to try and confront that variance and get the engagement right between jurisdictions is using employees of record and services like remote and others. I guess, like having seen the adoption of that just increased dramatically, especially during the pandemic when people started moving around a bit more. I feel like we learned a lot about how to do that. Would anyone like to volunteer their experiences of working with an EOR? Obviously, Gaga, I'm going to get you to talk about this too, but perhaps anyone on the customer side who's adopted an EOR lately and any of the kind of common issues when you engage with those kind of providers.

Wendy Knapp: I'd be happy to weigh in just at a 30,000 foot level. One concern that we always keep in mind is trying to avoid the co or joint employer aspect of, you know, working with a PEO or an employer of record, right? So we tend to be really careful about sourcing talent and trying not to go direct and allowing the PEO to help source that talent. Making sure that certain benefits are separate so that, you know, actual Procore direct employees are going to be treated from a benefits perspective very differently than our PEO and employer record employees, because we do want to try to avoid, you know, what often happens is you've got a PEO that might be in country that might be a smaller organization, because there's a lot of PEOs that are just maybe country specific.

And so when an employee has an issue, they're going to go after whomever has the deeper pockets. And so what they try to do is morph that into, well, this was actually a sham relationship. I actually got all of the benefits. Everything came from X company. And so they really were my employer. This is particularly concerning in the US in particular, if you don't keep those things separate. But I have seen in other jurisdictions as well, just trying to keep that relationship separate to avoid that.

Tom Bangay: Yeah, it's a tricky one. Stephanie already weighed in with a question on this in the chat I've just seen, which is one of the things that might make people hesitant to use that kind of service is losing control in case of litigation. And then also it's a new category of or newish category of provider. So people are worried about, you know, have they really been tested with massive litigation that works out what exactly is going to happen? I don't know, Nick, maybe have you heard kind of many queries from your client base in that regard?

Nick Pritchett: It's funny enough, it's normally us that are raising it as a sort of an awareness point because the client by that point is normally actually very keen to press ahead. Normally, they've already made the decision to go into a territory and it's just a question of how to do it. And in that experience, you know, EOIs, they've can be a very useful option. I think when you're laying out the options for how to break into a territory, you look at the consulting model, subject to all the risks we've already just already found, then you look at the, and having your own entity and that sort of things. I think you are, there's a really useful gap there in terms of one of the options that are available.

You're absolutely right there. So far, sort of not tested. The legal system seems to be kind of evolving to sort of bring them into the fold. We've got the platform workers directive in Europe that will come through in the next few years. And I think that it won't be, it's only a matter of time before we will get some decisions on how the employment, how that side of things work. But I think for the time being, the advice to clients sort of on that point is to really make sure they've got firstly, the contract between them and the EOR assigns liability and risk in the right way that you're comfortable with. And also that the EOI is actually providing proper sort of local law verified contracts and advice as well, particularly for things that are gonna matter to you like transfer of IP and control them there. So yeah, still a slight unknown, but it seems to be a really successful model.

Wende Knapp: And what I would add to that is it's so much more successful than doing independent contractor relationships, right? So it is a great way to get into a market, especially if you need a smaller team or you're not ready to spin up an actual entity of your business. And I really like the, the PEO or the employer of record model because it does alleviate that independent contractor status, right? Where we're able to drive our business team members to get the talent that they need in the country they need, but in a legally compliant way. And so EORs and PEOs really allow us to do that. Risk aside, there's always gonna be risk in any relationship, but I do appreciate the EOR and the PEO space because it has allowed us to go into country and minimize the risk of doing so.

Tom Bangay: Very nice, thank you, Wendy. Gaga, let's let you defend the EOR. How would you like to do that?

Gaga Mucko: Yeah, I think I might be biased here working for remote. But, you know, I'm not going to say that the EOR model will work for every company. And I think I'm going to repeat myself before engaging employees in any way, you should do your research. And I would really advise any legal team to team up with the people team and write down what is important for your business, what needs do you have and then find a way to expand internationally that fits your needs. Because if speed is the determining factor, then I think an EOR would be a great idea if someone in chat mentioned full control over your employees and employer branding is the way to go. Then I think that you are maybe not the best way.

I must say that, you know, even in litigation, obviously, we always work with our clients. So it's not that you are fully losing the control. But it's also, also important to understand what you're getting yourself into. And the EOR is not a way to circumvent loss. So if you're entering a jurisdiction, you also have to understand what you're getting yourself into and that termination in the Netherlands is very different than termination in the United States, for instance. I've seen that the commenter said that, you know, this is a new model.

In the Netherlands, it's not. In the Netherlands, we have a very extensive history of flexible relations. This is quite regulated. So like the risks also depend on a country. So again, do your research before and see whether this is the best way to go or whether an opening your own entity would be better or hiring someone through a branch entity. There are a lot of options and working in private practice, I was advising also on all of those different aspects of cross border employment.

To watch the webinar in full, click the preview at the top of this page.