The Employment Relationship

In Washington, DC a small business employee is an “employee at will,” unless a specific contract is signed. Employers are not allowed to make employment decisions based on race, creed, color, sex or age, but can fire an employee for almost any other reason—or no reason at all. The law assumes that market forces will motivate an employer to act reasonably and therefore provides wide latitude in the employment arena.

Employment status:

As a small business owner, you should be clear as to whether an employee is truly an employee or an independent contractor. If an employee is an employee, the employer has many regulatory requirements to meet as well as sources of potential liability including

• Federal income tax withholding
• Employee share of FICA
• State income tax withholding ( if any)
• Local income tax withholding (if any)
• State unemployment compensation (if any)
• Disability insurance (if any)
• Federal unemployment tax
• State unemployment tax
• Liability for wrongdoing and damage done by an employee

Employee Stock Option Plans (ESOP):

As part of your company’s compensation program, you may have established Employee Stock Option Plans or ESOPs, which are trust accounts into which company stock is purchased and placed. Benefits of an ESOP for the small, privately-held company include

• Use as a succession plan for the family business.
• Use as an estate planning tool.
• Creation of a ready market for retiring workers who want to covert their stock into cash.
• Avoiding post-death liquidity problems of substantial stockholders.
• Motivating employees.
• Use as a means to enhance the amount of cash available to the company to work with.

Employees can only sell their stock when they leave or retire.

If you have questions about Washington, DC employment status or how to set up the most appropriate ESOP for your company, contact the small business attorneys at the Law Office of Michael Trevelline.