The next tip for those who own, or want to own, a small business: set written employment policies.
All companies, large and small, need a written employment handbook that describes the policies that must be followed. When I talk to an employer or an employee about a legal issue, one of the first questions I ask is: is there an established policy that governs this issue? This is the same question that the court is going to ask if a legal dispute turns into a lawsuit. The answer should be found in the written handbook.
Also, employers tend to rely on their “policy” when a problem arises. For instance, when an employee asks a small business owner for something the owner is not willing to give, the typical (and easy) response to the employee is: that’s not our policy. The problem is that many times the “policy” is not in writing. Another problem is that there tends to be more inconsistency in how employees are treated when a policy is not in writing. Inconsistency leads to the appearance of discrimination which can lead to a lawsuit.
Many policies can be included in a company’s handbook. Typical handbooks include descriptions of the policies governing: attendance, vacation, sick, pay, confidentiality, trade secrets, discrimination/harassment, discipline, etc. One of the most important parts of the handbook is the at-will employment disclaimer which informs employees that the handbook does not create a contract of employment. Another very important part of the handbook is the “acknowledgement of receipt” of the handbook. Employees should be required to sign the acknowledgment and return the acknowledgment to the company. The employer will be hard pressed to prove to a judge later that the employee was aware of the company’s policies if the employer never had the employee sign an acknowledgment of receipt of the handbook.
And, last, but not certainly not least, once the employment handbook is created, all supervisors must be trained on how to implement the company’s policies. There is no protection for the company if supervisors do not know and consistently enforce the policy.
The information contained herein is general information not legal advice, and does NOT establish an attorney-client relationship with Lori Brown or Hymson Goldstein & Pantiliat.
The next tip for those who own, or want to own, a small business: know the employment laws that affect your business.
If you are in business, your purpose is to make money. To make money, most companies need workers to run the business. Last month we discussed the difference between an employee and an independent contractor. If you decide that you are going to hire “employees”, then you need to know and comply with the various federal and state employment laws in effect.
For instance, there are various federal laws that prohibit discrimination in employment. Those laws include: (1) Title VII which prohibits employment discrimination based on race, color, religion, sex, or national origin, (2) the Equal Pay Act which prohibits sex-based wage discrimination, (3) the Age Discrimination in Employment Act (ADEA) which protects individuals who are 40 years of age or older, (4) the Americans with Disabilities Act (ADA) which prohibits employment discrimination against qualified individuals with disabilities, etc. There are also similar state laws in Arizona that protect employees against discrimination. You also need to comply with federal and state laws that establish minimum wage, requirements for payment of overtime work, recordkeeping and child-labor standards. And then there are medical leave laws such as the Family and Medical Leave Act (FMLA) and worker’s compensation standards as well.
Not all of these laws affect every business because some of them only apply to businesses with a minimum number of employees. For example, FMLA only applies to employers with 50 or more employees. Every responsible small business owner should become aware of and comply with the employment laws that affect his/her business. You certainly do not want to first become aware of a law that affects your business when you get hit with a government agency complaint or lawsuit.
The information contained herein is general information not legal advice, and does NOT establish an attorney-client relationship with Lori Brown or Hymson Goldstein & Pantiliat.
The next tip for those who own, or want to own, a small business: do not misclassify employees as independent contractors. The reason that many small business owners want their workers to be independent contractors is because independent contractors are not covered by employment, labor, and related tax laws. Therefore, a new business owner might be tempted to misclassify employees as independent contractors in order to avoid paying payroll taxes, benefits, and other liability. Before you make this determination, you should do a careful analysis of many factors including:
- the type of work the worker is performing
- whether the worker is supervising your employees
- whether the worker has his/her own tools and equipment to perform the work
- how much control you have over the worker (such as who sets the work hours and the pay rate)
- whether the worker has his/her own insurance
- whether the worker works for other companies or just for yours
- whether the worker advertises his /her services separately
The above is not an exhaustive list, but demonstrates that this issue is not a simple one. For instance, typically, independent contractors sign an independent contractor agreement which details the terms of the relationship between the company and the independent contractor. But, do not fall into the trap of thinking that if you have a worker sign an independent contractor agreement, than that automatically makes the worker an independent contractor. If you are being investigated by a government agency, the independent contractor agreement might be one factor that is considered, but it will be unlikely to cut short the investigation and end the inquiry altogether.
Also, consider this: if an employer fails to pay wages owed to an “employee”, that employer could liable under Arizona law for three times the unpaid wages. If a court or government agency found that your business had misclassified an employee as an independent contractor and failed to pay wages properly, you could face other penalties as well including penalties related to the employment taxes you should have been paying all along. There are other issues to consider as well such as immigration and worker’s compensation coverage.
My grandma used to say: “begin as you mean to go on”. She was a wise lady because that is not only good life advice, but good business advice. Whether you own an existing business or are starting a new one, it is wise to make sure you classify your workers properly. And, if you already have an ongoing business and think you might have misclassified your workers, you are better off making efforts to correct your mistake now rather than letting the problem linger which could lead to bigger problems down the road. At Hymson Goldstein & Pantiliat, PLLC we have experienced employment law attorneys who can assist you and guide you to avoid these legal pitfalls.
The information contained herein is general information not legal advice, and does NOT establish an attorney-client relationship with Lori Brown.
With Mother’s Day and Father’s Day around the corner, I am reminded not to forget. Technology today makes it much easier not to forget. We can program calendar entries into our cell phones, set reminders, alerts, alarms, and notifications, and if all else fails, remind ourselves with a sticky note taped to our computer monitor, refrigerator, front door, etc. But, even with all of this technological assistance, many of my clients come to me and are in need of legal assistance when they have failed to meet a deadline.
One example is when a client gets served with a lawsuit. “Service” of a lawsuit usually means that a process server has handed the person a copy of a Complaint and Summons. After service of the Complaint, the client typically has 20 days to file an answer to the Complaint. If the client fails to answer that Complaint, a default judgment could be entered which can lead liens on property, garnishing wages, garnishing bank accounts, etc. None of these things are good!
Another example, which is somewhat less conspicuous, is when a small business owner gets a letter in the mail from the Arizona Department of Economic Security (“DES”). DES is the unemployment office. When an employee files for unemployment benefits, DES notifies the employer of the claim for unemployment benefits, and the employer typically has 10 working days from the date of the letter to respond to DES as to why the employee quit or was fired. If the employer fails to respond to this one letter, DES will decide, without any input from the employer, whether the employee is entitled to benefits or not. The employer can do very little later if it changes its mind and wants to protest the employee getting unemployment benefits. Too many small businesses ignore these very important letters. So the tip for the month is, remember not to forget, and don’t ignore important letters from government agencies!!
The information contained herein is a business advertisement with general information not legal advice, and does NOT establish an attorney-client relationship with Hymson Goldstein & Pantiliat, PLLC.
The next tip for those who own, or want to own, a small business: get appropriate business insurance and pay taxes. Several small business owners have come to me recently with questions about whether they should pay their workers as employees or independent contractors. This issue, employees versus independent contractors, is one I will address in a later letter. To understand this issue, you have to first understand why a small business owner would not want to have employees: having employees means having to pay more taxes and for more insurance.
An employer with employees pays its share of employment taxes to the federal and state governments. Additionally, all businesses need insurance, but businesses with employees need more insurance. Some of the typical insurances that a small business should consider, some of which are mandatory, are:
• Worker’s Compensation Insurance
• Unemployment Insurance
• Business Liability Insurance
• Professional Liability /Errors and Omission Insurance
• Medical/Dental/Vision/Life/Disability Insurance
Failing to properly pay taxes or get insurance can lead to, among other things, the IRS coming after you for back taxes, interest and penalties or your business having to pay out of pocket for an employee’s work related injury. You would not want to get in to a situation where you open a successful business and that business is brought to its knees due to unexpected liabilities or losses. Protect your business investment and assets with the appropriate and necessary insurance and payments to Uncle Sam.
Lori N. Brown
The information contained herein is a business advertisement with general information not legal advice, and does NOT establish an attorney-client relationship with Lori Brown or Hymson Goldstein & Pantiliat, PLLC.
As promised, we begin with our first tip for those who own, or want to own, a small business. My first tip is to create your corporate shield.
The purpose of creating your corporate shield is to “shield” you as an individual from liability. This means that if a lawsuit later develops against your company, the lawsuit would be against the company and not you as an individual. For example, I had a client once that simply picked a name for his company and began operating as that company. That client was later sued as himself because the company he was operating as was not a true legal entity. In this situation, for example, the client is sued as: “Joe Smith doing business as ABC Company”. The big problem here is if Joe Smith loses his lawsuit and gets a judgment entered against him for any amount of money, the creditor on that judgment can lien any property Joe Smith owns, garnish his wages, garnish his bank accounts, etc. Bottom line, you want to avoid being sued as an individual for issues related to your business.
The way to create your corporate shield is usually by creating a corporation or a limited liability company. This is very formal process which requires, among many other things, a filing with the Arizona Corporation Commission. You need to be sure that your corporation or limited liability company is created properly with the appropriate documentation such as bylaws, issuance of stock, stockholder agreements, operating agreements, etc. There are also tax implications involved in the choice of entity and perhaps, tax elections to be timely made.
If you, your family members or friends need help with creating a corporate shield, our team of knowledgeable attorneys are here to help.
Many of my clients are individuals who own small businesses or are starting a small business. Some of my clients have been sued and need an attorney to defend them in an action. Other clients need an attorney to file a lawsuit, usually to collect money they are owed. But, the best case scenario for a client is when the client has the ability to call me before they get served with a lawsuit or get into a situation where they want to file a lawsuit. The reason this is the “best case scenario” is because then the client can hopefully avoid a lawsuit altogether. Lawsuits are costly endeavors, in both money and time. Keeping this in mind, I decided to write a series of monthly letters for those individuals out there who want to do their best to stay out of court and save money in 2013!
Over the next year, I will be sending out my monthly letter which will include a business/legal tip for those who own, or want to own, a small business. A small business owner understandably wants to “focus on business” and not have to deal with issues that are outside their area of expertise or what can be seen as administrative-type work. But, I have seen too many small business owners who wait until there’s a serious problem before calling for legal help. Maybe they don’t want to “waste time” or money having an attorney involved. For example, most small businesses don’t have an employee handbook. What happens when you want to fire a “problem” employee? Or what about a contract you signed – just so you could “get the job done”, but you never spent the time to read the contract until it was too late?
As anyone who has started a business knows, there is so much more to a business than just a “great idea”. You need to have all the nuts and bolts to make your business successful.
Over this past year I have had several clients who left a job and came to me because they had signed a non-compete agreement with their former employer. These individuals were concerned that the noncompete agreements they had signed would prevent them from getting new jobs. This concern was valid as non-compete agreements may be enforceable in Arizona depending on the facts of each case.
Courts analyze the enforceability of non-competes by looking mostly at the reasonableness of three main features of the provision: its duration; its geographic scope; and the activity it restricts. For instance, a non-compete might say that an employee cannot compete with her former employer for six months which is more likely to be enforced by a court than a five year limitation. Next, a non-compete might say that an employee cannot compete with the former employer within five miles of the former employer’s office which is more likely to be enforced by a court than if the non-compete says that the employee cannot work anywhere in the United States (and therefore the employee needs to move to another country to find work! ). Finally, a non-compete that says for example that a pulmonologist cannot practice pulmonology for a certain time limit and in an certain area is more likely to be enforced than a non-compete that says the person cannot practice medicine in Arizona for the next year (and therefore that doctor has to enter a whole new field if he wants to stay in Arizona).
To know when the courts will or won’t enforce a non-compete agreement is not easy. Many clients think that a form used in one business will work for another – but that’s not the case. Because so much depends on the facts of each situation, if you are ever presented with a non-compete agreement or are an employer thinking about having an employee sign a non-compete agreement, you should strongly consider having an experienced employment lawyer review the agreement with you to determine the agreement’s strength and enforceability. Otherwise, you could end up in an unwanted lawsuit. At Hymson Goldstein & Pantiliat, PLLC, we have several lawyers that are well-versed and experienced in employment law and non-compete agreements who have argued appeals on this issue that can help you understand and avoid the pitfalls of such an agreement.
Lately I have been reviewing and negotiating severance agreements for a variety of clients. I continue to be surprised that employers are offering severance pay in this economy. You wouldn’t think, with so many people being out of work, and companies closing down regularly, that an employer would want to pay hundreds, if not thousands, of dollars to an employee who is being fired or laid off from employment. But, I suppose it does makes sense when you consider that the main reason an employer offers severance pay is to obtain a broad release from the departing employee to prevent the employee from suing the employer.
For instance, the normal practice in a severance pay situation would be for the employer to notify an employee that s/he is being separated from employment and present the employee with a written severance agreement which describes the terms of the separation from employment. Typical terms in a severance agreement include, among other things, the amount of money the employee is being paid, health insurance continuation (usually under COBRA), and, of course, release language that states that in exchange for the severance pay, the employee is releasing any and all claims the employee has against the employer. Sometimes the agreement will include outplacement service to assist the employee in finding new employment and these terms are often very negotiable.
Thus, every employee being presented with a severance agreement must understand that once the severance agreement is signed by the employee, the employee has effectively released all of his or her claims against the employer. Potential claims against the employer can sometimes be used to negotiate a higher severance payment from the employer. But, in most cases, once that severance agreement is signed, a lawsuit can’t later be brought against the employer for issues related to the employee’s employment.
So remember not to just “take the money and run”. If you are offered a severance package by your employer, you should carefully consider the written terms of the agreement, evaluate any potential legal claims you may have against your employer, as well as have legal counsel review the agreement before you sign.
As is common for many women nowadays, I wear many “hats” in my life. I have a full-time, demanding job as an attorney, I am a mother to a two-year old and a one-year old (and a baby on the way), I am a wife, I am a daughter, I am a sister, etc. People ask me on a regular basis: “how do you do it all?” My stock answer is: “I just do”.
The truth is, in my daily life, when I do stop to think about all I have to do on a regular basis, I do get overwhelmingly stressed. However, I suppose I then put my Scarlett O’Hara hat on and declare, “I’ll think about that tomorrow.” Truly, necessity is what tends to rule my life. I envy other women who (at least) appear to be tremendously organized and somehow have time to cook several meals at a time and freeze them. My nightly menu consists of meals I can prepare in 15 minutes or less while I do my very best to keep my kids from destroying my kitchen in the meantime. However, at the end of most days, when I put my children to sleep (and usually have to go “back to work” in my home office), I wonder, did I hug and kiss them enough and do they feel safe and secure knowing that their mommy loves them more than anything in the whole wide world? It is then then that I realize how thankful I am for the crazy stress in my life because it is the unbelievable blessings in my life that also create my stress.
For all the mothers (and fathers) out there with this kind of stress, in honor of Mother’s day and Father’s day coming up, let’s all pat ourselves on the back for the truly tremendous efforts we have made thus far in our lives and remember, and be thankful, for the amazing blessings we have in our lives.