i know that one of the toughest things that i, and my fellow small business owner friends, have had to deal with is understanding legal issues. they seem scary, advice seems expensive and most of the time i end up throwing up my hands and not knowing what to do. but today, we’re lucky to get some advice from a pro- kate summers of the law firm constangy, brooks & smith. kate is sharing some great tips on good business practices, from a legal perspective. if you’re just starting out, or have been running your own business for a few years, there’s plenty to take away from her (free) guidance. thanks so much to kate for sharing her expertise with us!
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Good Business Practices from a Legal Perspective
Once you make that all-important decision to hire your first (or your five hundredth) employee, you’ll be faced with many legal considerations. There is no way to cover them all in one blog post, but I’ve included some important general tips and guidelines below, applicable to companies of all shapes and sizes. (The inevitable disclaimer: the following is not intended to be, nor should you consider it, legal advice. Keep in mind that laws vary from state to state, and all situations are highly fact-dependent.)
1. “Trust, but verify.” Having professional, trusted employees is a vital aspect of almost all successful businesses. Be choosy on the front end – you’re making an investment in your employees, and they will become a huge part of your business and your life. Be sure to ask for and actually call potential employees’ references. Have a 90-day probationary period and monitor your employees closely during this time. Make a quick decision to let them go if they are not working out. When you find a good fit, set up a system of checks and balances, and don’t give any one person the ability to make or break you. Remember whose name is “on the door” and remain personally familiar and up to date on all aspects of your business.
2. Document, document, document. Unfortunately, the days of business on a handshake are virtually extinct. As a business owner, it is important for you to maintain organized and thorough records of all of your business transactions. Choose any system you like, but have a system. Archive your emails, take digital photographs, and get everything you can down in writing. If you make a deal over the phone, send an email or a letter to confirm. (Keep in mind that contracts for goods or services over $1,000 are not legally enforceable unless they are in writing.) And once you have all of this documentation, don’t forget to back it up. There are some good online systems available (like Carbonite, which charges the same price for personal and business users), or invest in an external hard drive and schedule regular back ups.
In dealing with documents pertaining to your employees, there are a few additional tips to remember. First, beware of email and remember the rule about not putting anything in an email that you wouldn’t want your grandmother (or a judge) to read. Be careful what you put down in writing in any form of documentation, and be sure to avoid any derogatory or snide remarks (no matter how innocently or jokingly intended), or especially any comments about your employee’s race, gender, age, or other discriminatory comments. Check on the relevant record-keeping requirements in your state, and keep in mind that with respect to some documents, “out with the old” is not such a bad idea. Of course, if you’re ever in the unfortunate position of being subject to a lawsuit or an Equal Employment Opportunity Office (or similar state agency) charge, you will have a legal obligation to preserve all relevant documentation and should never get rid of any documents under these circumstances.
3. Take care of your employees. There are many components that go in to being a good boss and not running afoul of the employment laws. (Keep in mind that the application of some laws depends on the size of your company. A common cut-off point is fifteen employees for most federal statutes. However, many states have similar laws without the same types of size cut-offs, so be sure to double-check and don’t assume that the laws don’t apply to you if you’re a small business.) A few important, general tips include the following. Have an “open door” and/or specific reporting policy and mean it. Invite feedback from your employees and take it seriously when you receive it. Set and communicate realistic expectations, and give regular and honest performance reviews. (Don’t give a good review to a bad employee just because you don’t want to hurt their feelings. You will have a hard time explaining that act of “kindness” when they don’t know why you’re letting them go and are considering filing a lawsuit.) Do the right thing and be consistent. As you make decisions, think about the future. Actions you take today can affect the actions you have to take down in the road in similar situations. In short, be fair to your employees while they’re with you, and if you do have to let them go, as a partner in my firm likes to say, “Don’t kick them in the teeth on the way out.” Many lawsuits are fueled more by hurt feelings or a sense that the employer has been unfair than any actual legal merit. And remember that as a business owner, you have to defend both kinds!
4. Know when to call in a legal pro. Be willing to acknowledge when you’re out of your league and a professional’s help is needed. As a general rule of thumb, if you’re outside of your comfort zone and the stakes are high, you should consider seeking professional advice. Keep in mind that your big dilemma may well be the kind of thing an attorney in that area handles on a daily basis. It is without question more cost effective to prevent a crisis than it is to try to control one after it occurs. One of the most rewarding aspects of my job as an employment attorney is helping businesses run better and prevent problems before they occur. Lawyers can – and should – be a part of the solution and part of a healthy business, and not just the bearer of bad news when you finally approach them with a problem that has gotten way out of hand. In recognition of the value of this type of service, some firms (including mine) offer services tailored to business owners, such as a flat-fee “hotline” allowing unlimited calls throughout the year to your attorney for purposes of general advice and troubleshooting. Whatever arrangement you choose, you should not be afraid to consult a professional.
5. Know how to call in a pro. You don’t go to the dentist for an earache, so do your research on the front end and find a reputable attorney or law firm near you who practices in your specific area. In the age of the Internet, there are countless resources at your disposal, and you should approach “buying” legal services the same way you would approach buying a car or finding a medical specialist. Keep in mind that attorneys these days are often VERY specialized, and you can more than likely find one who will be a very good fit for your business and your particular issue. There are many online resources for finding attorneys by geographic location and specialty. One of the largest and best-recognized of these sites is Martindale Hubbell. www.martindale.com. Once you’ve narrowed down your search, remember to consult Google and the law firms’ websites, as well. Law firms put a lot of thought and effort into designing their web pages for their clients and potential clients, and a quick study of their web pages could help you make a decision between firms and attorneys. You can usually find valuable resources and more information about your specific issue on those pages, including helpful articles and links, too. A last word of advice – just like in other aspects of running a business, it’s usually a bad idea to hire your friends or relatives.
About Kate Summers: Kate lives and works in Nashville, TN, as an employment attorney with the firm of Constangy, Brooks & Smith. I’m also a huge fan of design, photography, and all things Southern. My favorite piece of furniture that I own is obviously a DIY chair!