In this presentation, Neena Gupta of Gowlings highlights several key aspects of employment law for startup companies.

1. Dreams, myths and nightmares:
Employment law for startups
P.A. Neena Gupta
Partner
Gowlings

2. Myth #1
“We’re only a small start up; the law doesn’t
really apply to us.”
• There is no exemption for “small companies” or
“startups”
• Owners are exempt from employment standards
legislation
• Officers are not – CEO, President, Treasurer
• Different standards in different jurisdictions

3. Employment Standards
• Basic (Ontario) rules you need to consider:
• Minimum wage ($10.25 in hour)
• Overtime (after 44 hours a week)
• Hours of work
• 8 hours a day
• 40 hours a week
• Some flexibility
• Vacation – 2 weeks paid vacation
• Statutory holidays – paid days off

4. Employment Standards
• Some exemptions apply for:
• Managers/Supervisors
• IT professionals (usually at higher level)
• Interns (should be through some kind of formal
program sponsored by university, college, high
school, not-for-profit organization
• No exemptions because “we’re a start up working
together”

5. Myth #2
“We don’t need any paperwork … Lawyers …
tedious formalities ... Too expensive …. we’re just
so excited to be working together … we’ll work it
out when we make it big!”

6. Dreams may differ
• People working on a team often have manifestly
different expectations
• “I’m going to get a share of this company when it goes
public”
• “I’m going to be a director”
• “I’m going to get a bonus”
• “I’m here for the long term”
• “I’ll get paid when we get an investor”

7. Disappointed dreams can become nightmares!
• “I’m not happy anymore. This idea is my baby. I’m
taking it elsewhere.”
• “The company doesn’t share my vision about the
potential of this idea, so I’m going to go to XYZ
Co, because their CEO is really open to this type of
development.”
• “I didn’t get the shares/bonus I deserve…Adios amigos
....”

8. Myth #3
“We’re an amazing team. We have such chemistry.
We’ve known each other since high school.
Nothing will ever separate us. Together we are
going to take on the world!”

9. Things Change
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Personal ambitions change
Health/Disability
Marriage/Divorce/Children
Personal rivalries/jealousies

10. Don’t believe me?
• Apple computers – founders Steve Wozniak and Steve
Jobs
• Adidas shoes – brothers Adolf and Rudolf Dassler
• Ambani brothers

11. Written agreements matter!
• Employment agreements
• Shareholders’ agreements
• Intellectual property agreements

12. Employment Agreements
• Business terms:
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Job title
Role/job description
Reporting structure
Pay
Vacation
Bonus
Commission
Equity/share/phantom stock, etc.

13. Employment Agreements
• “Divorce” terms
•
•
•
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How much compensation if employee is terminated
How much notice of resignation?
What happens to shares?
What happens to equity or quasi-equity interest?
• “Post-divorce” restrictions
•
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Confidentiality
Non-competition
Non-solicitation of employees
Non-solicitation of customers

14. Intellectual Property Agreements
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Ownership of IP
Transfer and assignment of IP
Copyright
Waiver of “moral rights”
Vesting irrevocable powers of attorney
Obligation to cooperate after individual departs
company
• Non-competition
• Non-solicitation
• Obligation to advise future employers/partners of IP
agreements

15. Shareholders’ Agreements
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Different classes of shares
Rights of shareholder (voting, non-voting)
Rights of company to acquire shares (drag along)
Rights of shareholder to force purchase of shares (tag
along)
• Valuation formula for shares
• Restrictions on sale or disposition of shares
• Planning for changes (death or divorce)

16. Myth #4
• “We were just talking.”
“Danny and I had lots of chats in the early days about
him earning equity if things worked out. I needed
someone to help with marketing and think I might have
mentioned 5 or 10%. It was all vague – pie in the sky. In
the end, Danny was a dud and Johnny had to finish off
everything he started. We fired Danny and gave him
notice ... What do you mean he’s claiming 10% of the
company? It wasn’t in writing … we didn’t agree on it …”

17. Oral Agreements Are Enforceable!
• Oral agreements are enforceable
• If reasonable for person to believe he was getting 10%
if he joined company at lesser wage or to take job with
startup instead of established rival, court will enforce
verbal promises
• Be careful what you promise

18. Myth #5
• “All accountants/lawyers are the same!”
• Select your advisors carefully
• Ensure that they have exposure to your industry
• Good at working with startups
• Good advice is often a bit more expensive – but you
get what you pay for!

19. Thank You
P.A. Neena Gupta
519-575-7501
neena.gupta@gowlings.com
montréal
ottawa
toronto
hamilton
waterloo region
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