Archive for the ‘Small Business’ Category

Why Employment Law Training is So Important for Managers and Supervisors

Wednesday, May 9th, 2012

In nearly all businesses, it is the front-line managers and supervisors that have the most contact with employees. The actions and decisions of these front-line managers and supervisors can have a profound effect on company liability in nearly all areas of employment law.

Most managers and supervisors didn’t get their job because of their extensive knowledge of employment law but rather because of their competence or skill at their job duties.  However, as managers and supervisors they now make decisions and take actions every day that can be subject to all sorts of employment laws. Decisions on hiring, discipline, pay, reviews, termination, leave, duties or job assignments and many other things can impact employment laws ranging from the Family Medical Leave Act to discrimination, wrongful discharge and sexual harassment.  Being uninformed about these laws can lead to devastating results for a company even when acting in good faith.

It is critically important that managers and supervisors at all levels, and especially front-line managers and supervisors, be properly trained on the fundamentals of employment law. Experience has shown that some of the most egregious employment law problems for a company often have their roots in the interactions between the employee and his or her immediate or department supervisor.

We have conducted employment law seminars for all types of businesses all over the United States, from Minneapolis to New Orleans and New York to San Francisco, as well as right here in the greater Kansas City area and  throughout Kansas and Missouri.  A common issue with those who attend the seminars, regardless of their location or the type of business, has been the inability of front-line managers and supervisors to spot potential employment law problems in time to prevent a problem from either occurring or getting bigger.  It cannot be overstated how important it is for these managers and supervisors to be properly trained to spot these issues.

We often tell businesses that it is not nearly as important that the managers and supervisors know the answers as it is that they know the questions. By that we mean they need to have enough knowledge to at least ask whether something might be a problem under a particular law. Experience has again shown that if these issues can be spotted early enough, very often they can be prevented entirely or at least dealt with early enough that they don’t get out of hand and become even more costly.

Our employment law training is designed to be understandable and, hopefully, even enjoyable by managers and supervisors without a great deal of education or experience in employment law.  We present these fundamentals in a straight-forward, easy to understand manner and then use real case examples (many of them amusing) to illustrate how the law works in actual cases.  Our training can be tailored to your needs and can be structured to fit the time you have available.  Because we believe this training is so important to preventing legal issues for businesses, we offer it for a low flat rate, regardless of how many people attend.

If you’re interested in having employment law training conducted for your business, please contact our office and we’d be happy to discuss it with you further.

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Types of Business Entities for New or Small Businesses

Tuesday, May 8th, 2012

There are three basic types of business entities to choose from:

  • Sole Proprietorship
  • Partnership
  • Limited Liability Company (LLC)
  • Corporation (C-corp)

There are various advantages and disadvantages to each, and the choosing the correct entity to form depends on a variety factors.  Also, there is another category called a “professional corporation” or “professional association” that are used only by certain professionals such as doctors, lawyers, accountants and others.  There are also limited liability partnerships and other variations on these entities.

Also, the IRS can tax business entities in different ways.  Often we are asked by a client to “form a sub-S corporation.”  However, one doesn’t “form” a sub-S corp.  That is a designation made by the IRS.  Generally, either LLCs or C-corps can be designated as a sub-S corp.

There are also not-for-profit or non-profit corporations that are governed by different rules.

In order to decide which entity is best for your particular business, consult with your attorney.

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U.S. Department of Labor Announces Smartphone App for Workers to Track Hours!

Monday, June 6th, 2011

Wage and hour laws can pose enormous problems for employers. These laws are widely misunderstood by many employers, and the liability for mistakes can be enormous.  For employees, these laws offer protection from employers who seek to cut costs by failing to pay workers what is required by law.

However, on May 9, 2011, the US Department of Labor (DOL) just made it easier for employees to impose liability on their employers for mistakes or deliberate violations under the wage and hour laws. In a short press release, the DOL announced the launch of a free smartphone app, for use on an iPhone or iPod Touch, which allows employees to track hours worked for themselves, thus making it easier to prove hours worked and possibly overtime owed.

The app is available in Spanish and English and is available for download from the homepage of the Wage and Hour Division of the US Department of Labor.  The app makes it simple and easy for workers to track their rate of pay, work start and stop times, and arrival and departure times. The DOL stated that it is exploring updates that would enable the app to also work on other smartphone platforms, such as the Android and BlackBerry.

The press release can be found at http://www.dol.gov/opa/media/press/whd/WHD20110686.htm

The app can be downloaded at http://www.dol.gov/whd/

Employers are strongly urged to have a thorough evaluation of all of their wage and hour policies, including employee classifications, to avoid common but very costly violations of wage and hour laws. For more information about such a review, please contact our office.

Posted in Small Business, Wage & Hour | Comments Off

Small Business Legal Services

Thursday, February 17th, 2011

Many small business owners opened their business because they had knowledge, skill or perhaps just a keen interest in something and wanted to work for themselves.  However, often they quickly learn that there is much more required for running a business than just the knowledge, skill or interest that prompted them to open the business in the first place.  How quickly small business owners learn to deal with the legal and business management aspects of running a business can determine whether the business succeeds or fails.

Many years ago in law school, my Corporate Law professor made a comment that has always stuck with me and that I have found to be very true in my 21 years of practicing law.  His comment was this:

“If you look at any successful business, you find that they all have on thing in common.  The thing they all have in common is that, very early on in their existence, they formed a close relationship with four people: An accountant, a lawyer, a banker and an insurance agent.  The reason for that is because it is a problem in one of those four areas that can kill a business just as easily and as often as not making enough money.  That’s why large corporations have in-house legal counsel and accounting departments.  That’s also why many large corporations self-insure themselves.  Small businesses obviously can’t afford to do that, but they can use private attorneys, accountants, insurance agents and banks.  And when I say ‘successful business’, you’ll find that this is just as true if the business stayed small or chose to grow.  Whether they get that help or choose to try to do it all themselves is often the difference between the business succeeding or failing.”

I have seen my old professor’s statement come true countless times, both for good and bad.

Attorneys help small businesses in the same way that legal departments are used in larger corporations; both help keep the business out of legal trouble.  Here are just some of the legal services used by small businesses, in no particular order:

1.    Selection and maintenance of a business entity (corporation, partnership, LLC, etc.) as well as helping to draft a business plan, bylaws and operating agreement.

2.    Contract drafting or review, including non-compete agreements, vendor contracts, leases, purchase agreements, separation agreements or other types of contracts.  It is much cheaper to draft a contract properly to begin with than it is to litigate a poorly drafted contract.

3.    Filing, foreclosing and collecting mechanic’s liens and other construction law issues.

4.    Commercial or business litigation, whether the business is a plaintiff or a defendant in the lawsuit.  This can include breach of contract litigation, suing (or defending a lawsuit) for money owed, business torts (such as interference with contract or business expectation), and obtaining restraining orders preventing further breaches of a contract, enforcing a non-compete agreement or for other reasons.

5.    Representing business clients in alternative dispute resolution proceedings such as mediation or arbitration.

6.    Representation before public entities such as zoning boards or city councils.

7.    Drafting and reviewing employee handbooks for legal compliance and establishing effective employment policies.

8.    Representation in various state and federal agencies such as the EPA, state licensing boards, unemployment claims, EEOC, Department of Labor or other entities.

9.    Providing cost-effective employment law training to managers, supervisors, HR staff and owners in such areas as sexual harassment, hiring, firing, discrimination, and numerous employment laws.

10.    Providing updates regarding changes in the in the law that affect the business which the business might otherwise not know.

11.    Insurance coverage disputes.

12.    Wage and hour compliance issues under the FLSA and state wage payment laws, including ensuring the correct classification as exempt or nonexempt (sometimes called hourly or salaried) status of employees.

13.    Issues unique to not-for-profit corporations.

It usually costs a lot less to prevent a legal problem than it does to fix one after it occurs, and some services can even be handled for flat fees.  Just like large corporations consult with their legal departments to prevent or avoid legal problems, so should small businesses with their private attorneys.  The key to prevention is not waiting until the crisis occurs.  Contacting an attorney for a free initial consultation is essential to discuss what your business might need is far better than waiting until a problem arises.

My goal is first to make sure that your business is protected in order to prevent costly litigation from occurring.  If litigation can’t be reasonably avoided, then litigation is pursued aggressively to get the best possible outcome.

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Protect Your Business with Non-compete Agreements

Friday, January 14th, 2011

Small businesses are increasingly using non-compete agreements to reduce the impact of the loss of their greatest assets: employees and the knowledge they possess.

The term non-compete is the common term for several different types of agreements more properly known collectively as restrictive covenants. It is absolutely critical that these agreements be drafted correctly to ensure that they are enforceable.

Properly drafted restrictive covenants can give a small business the ability to obtain an injunction to block a former employee from going to work for a prime competitor, recover attorney fees in the event the employee breaches the agreement and even allow the business to recover damages from the competitor who hires or retains the employee in violation of the agreement. However, poorly drafted or pro forma agreements can, at best, fail to provide adequate protection and, at worst, create additional legal problems for the employer.

Balancing Interests

The law governing restrictive covenants generally attempts to balance two conflicting and competing interests. On one hand, they seek to protect the legitimate business interests of employers in protecting confidential information, which can include everything from customer contacts to pricing and other trade secrets. On the other hand, the law also attempts to balance the legitimate right of employees to take their skills into the marketplace and sell them to the highest bidder. These laws vary from state to state, and differences in state law can be substantial. The law also is evolving as businesses increasingly require certain employees to sign them as a condition of employment.

Proper drafting of restrictive covenants requires careful examination of the facts of the employee’s job duties and the nature of the business or industry. Few types of contracts are more reliant on the specific facts than restrictive covenants. Slight changes in the facts can render the agreement unenforceable in whole or in part. An agreement that may be valid and enforceable in one industry or region may be unenforceable in a different industry in the same region or the same industry but in a different region.

Types of Restrictive Covenants

The primary types of restrictive covenants are non-compete, non-disclosure, non-solicitation and a category that has developed more recently, sometimes referred to as anti-raiding agreements.

  • Non-compete agreements prevent the departing employee from starting their own business in direct competition or working for competitors, vendors or others generally within a specific geographic region and for a specific time period.
  • Non-disclosure agreements prevent the departing worker from disclosing any confidential information. Non-disclosure agreements generally do not require time or geographic restrictions, or if such provisions are required, they are much broader than those enforceable in non-compete agreements.
  • Non-solicitation agreements prevent the departing employee from soliciting customers or business away from the former employer.
  • Anti-raiding agreements prevent a departing employee from attempting to hire other employees away from the previous employer. This scenario most commonly occurs when the departing employee is starting their own business or accepts employment with a subsequent employer in which they have hiring authority.

Validity of Contracts

Restrictive covenants cannot, and should not, be drafted in such a way as to act as a restraint on free competition in the marketplace. Courts will apply a number of factors in evaluating the validity of such agreements. Generally recognized protectable interests of the employer include customer contacts and trade secrets. The definition of “trade secret” is far broader and protects much more information than what many small business owners realize, including such areas as pricing.

Because restrictive covenants are actually contracts, the usual requirements for any valid contract apply, including the necessity of valid consideration for imposing the restrictions on the employee. This is easily done when the restrictive covenant is required as a hiring condition because the consideration is the employment itself. Consideration can be a bit trickier when the employer seeks to impose a restrictive covenant on an existing employee.

One final note of caution: because the use of restrictive covenants has become so prevalent in recent years, employers need to be wary of the possibility that an applicant for employment might be covered by such an agreement. If the prospective employer could be considered a competitor under the agreement, hiring the employee in violation of the agreement could expose the prospective employer to damage claims for interference with the agreement.

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