Bottom Line Business Insights : Maryland Business Lawyer & Attorney : Wagonheim Law Firm : Mergers & Acquisitions & Contractual Negotiation

When I said the words “it’s time to have an adult conversation about money,” anyone overhearing might be forgiven for thinking I was talking to my 12 year old son. I wasn’t. I was looking in the mirror.

Toward the end of last year, I gave out bonuses to my employees. I do this every year and there was no doubt that they were well earned. Some people thanked me; some did not. Regardless, in what has become an unwelcome annual tradition following the delivery of the bonus checks, I found myself wondering.

“What did they think?”

“Were they pleased?”

“Were they disappointed?”

“Did they walk away thinking they were happy to be working for me or do they think I’m some kind of skinflint?”

I value each and every employee. There is no such thing as indentured servitude and, as people of talent and accomplishment, everyone who works here has options in the marketplace. I want to keep them happy. Of course, I also want to run a non-cash-strapped, profitable business.

That’s when it occurred to me: It’s time to sit each of my employees down and have an adult conversation about money. It’s time (or long past it) to talk to them individually about their wants, constraints, and expectations … and mine as well. After all, we share a common interest, they and I: we want this firm and everyone associated with it to prosper. 

That’s my task between this week and next – to sit down with each person and talk to them about raises and bonuses, profits, losses, and projections. If we each approach it the way I think and hope we will, for the first time I won’t have to wonder if we’re on the same page; I’ll know it.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

I remember helping my father install his law firm’s first IBM PC in 1985. He was ecstatic. He felt that the kind of personal technology represented by the computer would enable solo practitioners like him to match the production of firms many times their size.  

The rise of the individual, giving power to the lone voice, seems to be the common thread running through our technological and social advances. The internet, the proliferation of blogs and consumer review sites, and the advent of social media have elevated individual branding to an art form. 

Today, companies are struggling to catch the social media train many are convinced has already left the station. Many business owners feel that they have somehow failed unless they have thousands of Facebook “likes,” Twitter followers, and LinkedIn connections. So they encourage their workforce to blog, tweet, post, and connect. After all, many of the social media sites are designed around the individual, rather than the company. They are created with an eye toward building the personal, rather than corporate brand.

But how does that square with a shifting workforce?

Kevin O’Keefe recently wrote a blog post for attorneys entitled “Who owns the Twitter followers at your law firm?” In his posting, he recounted the now-pending case of a new your company, Phonedog.com which filed suit against a former employee seeking ownership of his Twitter account and its 17,000 plus followers. The Complaint alleges that the employee, Noah Kravitz, opened the account while employed by Phonedog under the name Phonedog_Noah. When he left, he took his account with him.

While this case has yet to wind its way through the courts, the question it raises is absolutely crucial to the determination of social media strategy as well as to the formation of employee-employer relations. Many employment contracts have provisions stating that anything the employee creates while employed – all intellectual property in other words – belongs to the employer. Few contracts, however, address social media. 

As you review your employment agreements and social media strategy for 2012, remember that they are not separate entities. They overlap. As technology advances, so does the power of the individual to help or hurt your company’s brand. Just as many companies place a priority on keeping employees’ cell phone numbers after they leave so that they can catch calls from company accounts, business owners should also keep social media followings in mind when planning beyond the tenure of any given employee.

_____________________________________________________________________________________________

• Email This
• Print
• Comments
• Trackbacks
• Share Link

2012 will mark my 25^th year serving as general counsel to small-to-medium-sized businesses. During that time, I have handled innumerable employment-related inquiries. For the first part of my career, my advice concerning personnel files and the building of a defensive wall against potential employee lawsuits was conventional, parroted established wisdom, and was dead wrong.  

You see, it used to be that when a business owner called and asked me if she would be in the clear if she fired someone, I would inevitably ask about the existence and contents of performance reviews. The conventional wisdom being that a paper trail of performance reviews in the file would bolster the company’s defense against a discriminatory or retaliatory firing. 

But I began to notice something curious about these supposedly these company-saving performance reviews. 99% of the time, the performance reviews were entered into evidence, not by the company, but by the disgruntled former employee. 

The reason? The performance reviews, even those preceding the firing decision by just a few months, would inevitably rate the soon-to-be-fired employee as “meeting expectations” or “above average.” Not one item of the laundry list of the employee’s grievous deficiencies could be found anywhere on the company’s own evaluation forms. What’s worse, the presentation of these deficiencies in court by the company would invariably have to come from the person who signed an adequate, if not glowing, performance review immediately prior to termination. 

 The reason? The vast majority of supervisors will check any box necessary to avoid the unpleasantness of confronting an employee with a less-than-positive evaluation. 

Last week, I attended a seminar presented by Garold (Garry) Markle of Engergage echoing and building upon this theme. Markle compared the performance review process to one in which the supervisor tells the employee “you hit yourself in the head with a hammer; I’ll hit you in the head with a hammer, and then we’ll see if both blows felt about the same.”

Instead, Markle emphasized the need for establishing a frank coaching dialog with employees on the things that really matter -- both to the employee and the business. 

Now, I disagree with one of Markle’s apparent assertions that the coaching be conducted primarily on an annual basis. I would prefer to build a system in place for a continuing dialog. 

Where I wholeheartedly agree with Markle is that conventional performance reviews -- whether conducted because “you’ve always done them in the past,” “that’s the way everyone does it,” or “my lawyer insists that I paper the personnel file” should be tossed in the trash never to see the light of day again. 

In place of performance reviews, work to install something that’s rationale, true, and doesn’t come back to bite you in court.

_____________________________________________________________________________

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Hiring is often an impulse buy. It is the candy in the check-out aisle or Chipotle on the way home. Sure, the need may have been there for a while, and (to depart from the analogy) well documented and analyzed. Even the process may have been extremely well thought-out. But at the end of the day, the actual selection of the person from the piles of resumes and the hours of interviews is most often an impulse buy. It’s a gut reaction. Who seems to be the best fit?

Most of the time, hiring managers can’t even put their finger on precisely why Person A got the nod over Person B. Maybe it was a side comment at the interview or a slightly more professional appearance. Maybe the applicant simply had the mannerisms of the person the hiring manager pictured in her head. Whatever the reason, in today’s employment market, where most any help wanted notice is met with a flood of resumes, the answer is rarely clear-cut merit. The answer is a feeling.

Firing is different. When you fire someone, you damn well better have a reason. And that reason can’t be that the employee doesn’t “look the part.” The reason has to be clear, easily articulated, backed up by documentation, and merit-based.

Therein lies the lesson. For the typical business, more thought goes into why people are asked to leave the company than into why they are asked to join it. Certainly, it’s easy to understand why. A good bit of planning precedes the meeting at which an employee is to be let go. The discussion is bound to be tense. The parties’ interests are in direct conflict. What’s more, the firing decision is likely to be scrutinized – by the soon-to-be-former employee, the employee’s soon-to-be-former coworkers, and possibly even by a plaintiff’s lawyer, if not a judge, down the road. The company had better have its ducks in a row.

So what does that mean?

Often, it means that the company has documented the gap between the employee’s performance and the company’s expectations. Drill down a little further, and it means that, at some point, the company put pen to paper in order to clearly describe both the standard of the job and the ways in which the employee’s performance fell short.

In my (almost) 25 years representing business owners, I’ve come to notice a common phenomenon. (And yes, I’m aware that “common phenomenon” is an oxymoron of sorts, but I use the word because what I’ve noticed is, true to the definition of “phenomenon” notable or remarkable.)

I’ve noticed that the expectations of the company, in terms of a clear job description and key performance indicators are often determined only after the person has been hired. This is particularly true in small-to-midsize companies where employees often wear many hats and fewer policies and systems are institutionalized.

Dr. Lee Thayer, CEO coach and author of numerous books including Leadership: Thinking, Being, Doing and The Competent Organization, contends that organizations in hiring usually make 3 mistakes:

1. The person was probably provided with a list of activities to be performed. That’s the way conventional “job descriptions” are constructed. There may have been some past experience or credentials thrown in for the company to hedge its bets.
2. It was likely nothing was said about what was to be accomplished. You can’t measure activities objectively. But you can measure accomplishments.
3. The person was most likely hired for a “job.” He or she was not hired to a role in the organization’s future. It is the future that really matters, not the past. Past performance does not predict well to future performance.

In other words, the person being fired was probably not told, at the time of hiring of specific reasons that might lead to dismissal. Why? Because these reasons had not yet been thought through.

I was trained as a trial lawyer at the outset of my career. The first lesson in preparing a case for trial was to write your closing argument first. Figure out what you want to be able to tell the jury, and then make sure you introduce the evidence and elicit the testimony to back it up.

Hiring, I’ve learned, is no different. If you envision the ending first – the precise reasons why you may have to fire this person you’re thinking of hiring, you are more likely to set the stage for a successful hire.

In other words, fire them first…and you may not have to fire them at all.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

 And Reduce Employee Turnover in the Process...           

For the most part, personnel evaluations are to good business what bleeding with leaches is to good medicine – a practice mistaking activity for benefit. If your company does not understand how to get actual benefit out of personnel evaluations, don’t schedule them. This would be unfortunate, however, as a good system of personnel evaluations can lead to increased moral, and can show benefits that go straight to the bottom line.

To garner these benefits, business owners must take a hard look at what they hope to accomplish through personnel evaluations. If the evaluation is solely used as a mechanism to document performance come bonus or termination time, the business owner is seriously missing the boat. While documentation is important, the primary benefit to an evaluation system has nothing to do with employee discipline. It has to do with value. 

In essence, personnel evaluation can be used by the business owner as a review of business practices and personnel decisions. It is virtually inevitable that employees, particularly those on the front line, know more about the day-to-day operations of any business than does the owner. Consequently, the evaluations should be at least two-way, where the employee is encouraged to provide suggestions and insight into what would make his or her job easier and more productive. The evaluation should be a substantive dialogue in which both participants described expectations and performance of the other. Correctly structured, the evaluation can be the best method of matching person to job, job to function, and function to profit.

Each participant must be adequately prepared for the evaluation. In many cases, this should involve a written questionnaire to be completed by the employee, as well as a standardized evaluation form to be completed by the employer. The integrity of these forms is paramount. If the employee feels that he or she is being evaluated on either unfair or inapplicable standards, the evaluation will be nothing but an exercise in lowering moral.

Once each participant has prepared for the evaluation, the conversation should be structured in a non-threatening exchange designed to evoke the most benefit from the meeting. Both participants should leave the meeting with a clear understanding of the other’s thoughts and positions. In addition, a follow up session, however brief, should be scheduled to air out the inevitable “things I wish I had said.” This is especially true where the employee’s evaluation may be construed as negative in certain important respects. 

In addition to content, scheduling is also a very important consideration. While many if not most businesses schedule annual evaluations, it is frequently advisable to schedule smaller, more frequent meetings – perhaps quarterly. The benefit is not only the reduction of the intimidation factor, but also the greater likelihood that small issues will be caught and dealt with before they develop into large problems.

Business owners with fewer than 10 employees often dispense with evaluations in the belief that close day-to-day contact eliminates the need. While this is true to some extent, there is still a benefit to be had by a scheduled time to discuss performance. Often, particularly in small enterprises, employees are so busy with day-to-day concerns that they do not find the time to consider and address larger, more fundamental issues. Scheduled evaluations provide this time; and it is even more crucial where the employees are a tight-knit and happy group. The reason for this simply lies in the greater likelihood that employees would have and be willing to provide insights into better business practices, if only a specific time were scheduled to discuss them. 

Finally, as alluded to at the outset of this section, documented personnel evaluations are invaluable in substantiating reasons for disciplinary actions, demotions or terminations. Few pieces of evidence are more powerful than paperwork showing that the employee had been repeatedly advised of unacceptable performance when termination becomes an issue.

Bottom Line: Every business owner should establish a well thought-out evaluation policy which matches the tenure and culture of the company. What works for General Electric will not work for a four person landscaping business. Nevertheless, both companies can reap huge rewards and avoid large pitfalls with a well-crafted system.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Business owners should not run scared. If an employee is not right for the business, he or she should be asked to leave. This is true regardless of the employee’s gender, race, physical limitations, or religion. True, state and federal laws play a vital role in protecting employees from decisions based, even in part, on any of these factors. Nevertheless, a business should never be afraid to make a termination decision for legitimate reasons. 

The primary fear of most business owners is that even legitimate firing decisions will be called into question by disgruntled former employees. The best defense is a rational and documented policy applied evenly across-the-board to all employees. This policy includes documented job descriptions against which each employee’s performance is compared, a consistent evaluation policy, and a well-maintained personnel file.

In certain cases, an employer may terminate on-the-spot without regard to the niceties of documentation over time. These situations involve dishonesty, endangerment to health and safety, use of alcohol or drugs at work, violent behavior, or the unauthorized disclosure of company trade secrets.

Performance and attitude issues, however, are both far more frequent and more difficult to remedy. Where issues involving poor performance, insubordination, poor attitude, abuse of sick leave, or excessive lateness or absence are concerned, documentation over time is vastly preferable to termination on-the-spot where it comes to protecting your company from a future lawsuit. 

There is no substitute for written documentation of failed disciplinary measures, habitual tardiness, or poor interaction with peers and/or customers, where defense of a lawsuit is concerned. Written documentation will always be more effective than even the most heartfelt testimony in the eyes of a judge or an EEOC hearing officer. This is true even for notes placed in a personnel file without the employee’s countersignature. Always follow the rule that “if it is worth remembering, it is worth writing down.”

An exception to the written documentation rule involves peer reviews. It is usually a mistake to request an employee’s peers to comment on his or her behavior. While complaints, particularly those involving sexual or other forms of harassment, are an obvious exception to this rule, asking a non-supervisory peer to provide comments on another’s performance will often backfire.

Once a firing decision is made, it is best to follow a few simple rules:

• Have the conversation in private.
• Arrange the conversation in such a way as to minimize disruption in the workplace.
• In most cases, the employee should be asked to leave immediately, even if severance will be paid.
• The employer should be prepared with written documentation of severance offers and a written statement on the company’s policy concerning the provision of references.
• The employer should be prepared with full calculations of unused leave, overtime, and other benefits to which the employee is entitled.
• The conversation should be direct and to the point.
• Never try to “sugarcoat” the reason for termination.
• Never refer to a need to change the company’s image or mention physical limitations as a reason for the termination decision.
• Treat the fired employee with dignity.

There is a lot of debate on the proper time to fire an employee, but most experts agree that Friday afternoon is the worst. The best thing for a terminated employee is to be able to overcome the shock through activity and turn his or her attention toward the task of finding new employment. A Friday afternoon termination gives that employee nothing to do over the weekend but stew. 

Once the employee has been fired, it is important to tell the remaining employees. A business owner should not be lulled into thinking that “no explanation is the best explanation.” Invariably, employees will notice the empty chair and fill in their own information out of gossip and innuendo. It would also be a mistake to overly dramatize the situation by stating “I am not able to discuss the matter upon the advice of our attorney.” Instead, simply state facts and let the matter drop. An example might be “we had to let Jim go this morning after it became obvious that he was not able to improve his job performance.” Direct and to the point. 

Finally, an employer should always evaluate the possibility of providing severance in exchange for a full and complete release. Often, a company will decide to pay severance out of established practice and will find itself on the wrong end of a lawsuit once the check clears. A far better practice would be to pay severance in exchange for a release of all claims. While Maryland law allows an employee sufficient time to consider the ramifications of signing this release, it frequently benefits both sides to increase the amount of severance slightly and eliminate the possibility of a future claim.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Success in business, particularly in a small business, often hinges upon how well the entire organization understands the company’s vision, philosophy, and procedures. Unfortunately, these are often the very topics which are overlooked at company meetings where business owners focus on immediate goals and/or problems. Relationships are saved and deals are made by a staff that understands what the business is trying to accomplish, stays on message, and speaks with the same voice. 

Memos won’t do it. Retreats or pep rallies held once every blue moon won’t do it either. Too many business view team building with a binge and purge mentality. These owners seem to feel that one can make up for a lack of consistency with an intensive effort every year or two. I advise these owners to save their breath and their money rather than engage in these pointless exercises. 

Instead, team building is more like a fitness regimen. Effort consistently applied over time, even in short bursts, will always have the desired effect. In contract, we're one to attempt to get in shape by running a four hour marathon once every 18 months instead of adopting a consistent training regimen, one would be much more likely to end up in the hospital than at the finish line.

Similarly, there is no substitute for regular hands-on training in everyday policies and procedures. If your company decides to put in the effort to tighten up its documentation, for example, the effort would be wasted unless each front line person were personally introduced to and trained in the use of the new materials. The training may take five minutes or five days. But in either case, every business owner should know that the best procedures in the world will not overcome the problems caused by a staff ill-prepared to use them.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Hiring and Firing – the business equivalent of marriage and divorce – stand out among issues facing business owners for several reasons: (1) every business owner runs into both situations repeatedly; (2) few business owners can separate myth from reality where legal issues are concerned; and (3) both consistently rank among the top five “small business killers” when mistakes are made.

Regardless of whether you run a three person company about to hire its fourth employee or operate a large multi-state enterprise, a well thought-out hiring process is the key to increase moral, a healthier bottom line, and a lawsuit-free future and you don’t necessarily need to hire an $80,000.00 per year HR director or pay an arm and a leg in legal fees in order to hire well.

A good hiring policy rests on three legs – a well-crafted job description, the application, and the interview. While the job description is the most overlooked element of the hiring process, particularly for small businesses, it is usually the most crucial and, more often than not, is mentioned by a business owner immediately after the words “I wish we had drafted a …”

There is an art and a science to drafting job descriptions. A well drafted job description has several components:

• A description of duties;
  
• A summary of qualifications;
  
• A summary of pre-requisites (physical, mental, and/or emotional)
  

This is the document that will enable you to hire, promote, and fire without fear that your actions will be interpreted as discriminatory in violation of state or federal law. This is the document that will withstand scrutiny by a judge, jury, or the EEOC when questions of demotion, disciplinary action, or termination arise. Unfortunately, this is also the document most business owners do not take the time to draft. 

Both the application process and the interview must proceed in lockstep with company policies and the requirements set down in the job description. Application forms can (and should) be standardized to avoid any possibility of disparate treatment between candidates. Potentially troublesome practices, such as the request for photos (or copies of driver’s licenses), inquiries into personal information, or discussion of required benefits should be eliminated. 

While applications may be standardized, interviews rarely follow a set pattern, as they are driven by conversation. Nevertheless, a well trained interviewer will understand questions to avoid, subject which, while well intentioned, can expose a company to litigation brought by an unsuccessful applicant, techniques to bring out each candidate’s strengths and weaknesses, and a uniform core message concerning the company’s policies and the specific job at hand.

Frequently, one of the most effective defenses a company can raise to a claim of discriminatory hiring practices is that interviewers and hiring managers were provided with training through a seminar or required reading and certification. And remember, this sort of training is not restricted to big companies. Training is often inexpensive and valuable to any size business.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Every month, I ask our Empty Hourglass Clients to meet with me, free of charge, so that I can keep a better handle on their businesses and answer any questions they may have. You see, many business owners have questions that arise in the day-to-day operation of their companies which, while important, do not seem to rise to the level of immediacy required for the payment of legal fees. So the questions sit…unanswered. The issues remain unaddressed. And frequently, though not always, large problems grow out of what could have been minor inquiries.

I have noticed a trend in these meetings. In more than half of them, my clients ask me if I would review their Personnel Manual/Employee Handbook. 

In view of this trend, I thought it might be beneficial to list and comment on one of the most common issues I have found in company after company … industry after industry:

The Manual Should Reflect Policies, Not Aspirations

The purpose of the Manual is to describe the rules by which the company operates. Time and time again, after reading a company’s Manual, I find myself asking clients “is that really what happens in your company?” Often, the answer is “no.” Maybe there is no formal procedure such as that described in the Manual.  Many there are no written forms or step-by-step investigatory approach. 

That’s OK. Many companies have not formalized their processes. My recommendation, however, is that management take the time to figure out small, doable steps to put into place and describe them.  By spending page after page describing procedures which everyone in the company knows will never take place, the company has generated a Manual that is simply not worth the paper it’s printed on.  Other than double checking paid holidays and the amount of vacation, the rest of the Manual is just wasted words on useless paper.

If you’re wondering whether your Personnel Manual needs an overhaul…or even if you’re thinking of writing one for the first time, take a look at any sections which detail company procedures – from requesting Paid Time Off to describing disciplinary procedures – and ask whether the words on the page reflect what happens in reality.  If not, change one or the other.

Because when it comes to Personnel Manuals, Shakespeare was right: 

To thine own self be true.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Many companies have personnel manuals they've worked hard to put together and have not looked at for 5 years or more. If you're one of those companies, or are simply looking to put together a personnel manual for the first time, here are some things to consider:

•  Do you have a section addressing social media and how entries reflecting badly on your company can result in disciplinary action?
•  Do you have a section on post-termination references that actually reflects what you do in real life?
•  Does the Manual address the last several problems or termination-level offenses your company experienced?
• Have you placed your employees on notice that the company reserves the right to monitor their online activities and even e-mail if company equipment is being used?

As with many things, it is better to have these policies in place and not need them, than to need them and not have them.

Want to further discuss this issue?Let's talk about it on Facebook, LinkedIn, or Twitter.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

By Guest Blogger: Michael J. Lentz, Esquire

In November, 1787, James Madison, writing under the shared pseudonym Publius in the New York Packet, published one of the watershed documents in the constitutional development of our nation. In the tenth essay, in a series that later became known as The Federalist Papers, Madison argued that political factions were vitally necessary in a republic, because: “Enlightened statesmen will not always be at the helm.” Madison was concerned that competing interests were vital in the absence of an ability to control the qualifications and interests of the elected decision makers. 

Not long ago, I was reminded of Federalist #10 by a question posed by a colleague on a listserv: 

“Can a minor serve as a director of a corporation?”

I think the answer to this admittedly-novel question is probably “Yes, but it probably isn’t such a good idea.” In the course of the discussion, though, I was struck by how little consideration is given to what “statesmen” will guide the helm at most corporations. 

The only qualifications that directors of a Maryland corporation must meet are those set forth in the corporation’s Charter. Many, if not most, Charters are completely silent on the issue, meaning that no one is statutorily prohibited from serving as a director. 

For many small business owners, the qualifications of their company’s board of directors may not seem immediately relevant, since the owner(s) and/or their family members are often the only directors. However, director qualifications can be an important consideration, either as part of a succession /contingency plan or when considering equity financing. 

If an owner-director were to become seriously ill, so as to be unable to discharge the duties of the office, the corporation would likely have to function without that person as a director until his term expired. Directors’ duties are generally non-delegable, so even someone otherwise authorized to manage the director’s financial affairs (such as through a power-of-attorney) would likely not be able to serve as a director. Absent a qualification in the Charter, there would be little the corporation could do to remove the director in the interim.

Perhaps a more common concern arises when a corporation chooses to consider equity financing. The decision to take on an equity investor is a significant one that should not be undertaken lightly . . . see our earlier piece on the risks of getting married without dating first.

If your company decides to take on an equity investor, most substantial investors will request, in addition to equity in the company, some measure of control over the company. This control will usually come in the form of preferred stock that gives its holders the right to elect a certain number of directors. Such directors usually can only be removed by a majority (or super-majority) of the votes cast by holders of the shares that elected the directors. So, equity investors will often request what are essentially unassailable, permanent directorships. 

While the investors own self-interest will usually lead him to elect competent, qualified individuals, there’s neither any guaranty nor any legal requirement that the investor do so. In such cases, the company’s easiest control over such board seats for the long term is a Charter provision setting out the qualifications that such individuals must possess.

Does this situation sound familiar?

Contact us for a free consultation! 

Raise this issue for discussion on Twitter, Facebook, or LinkedIn.

Michael graduated from Georgetown University Law Center in 1998. After spending five years with large Baltimore firms and three years as a solo and small firm practitioner, Michael joined Wagonheim Law in 2006, where he continues to utilize his extensive experience in commercial, bankruptcy, and appellate litigation to work with companies throughout the mid-Atlantic region.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

 Guest Blogger: Michael Lentz, Esquire

It’s that time of year again. The NCAA’s annual tournament to determine college basketball’s national champion, colloquially known as “March Madness®,” started last week. In one of Thursday’s games, tiny Morehead State upset traditional powerhouse Louisville, in a true David-vs.-Goliath outcome. Trailing by 2 with roughly twenty seconds left, Morehead State had the ball and called its final timeout.

            Morehead State’s coach told his team to deliver the ball to Demonte Harper and just wait. The plan was that Harper would hold the ball for one final three-point attempt, as time expired. The game would be decided then and there. At the time, Harper had made only two of his nine shots, none of his five three-point shots, and by all accounts was having a terrible game. Of course, Harper made his shot, and Morehead had its Hollywood ending. 

            In interviews after the game and the next day, Morehead’s coach said that he planned to use Harper in an all-or-nothing spot because he was generally an excellent shooter, and he was several inches taller than the players likely to be guarding him. As a result, he would likely have an easier time taking a shot. The coach knew his players’ respective strengths, put them in position to succeed, and trusted them to do their jobs.

            That’s great advice for any small business owner. Figure out what every member of your team does best, and put him or her in a position to do that, as often as possible. If you’ve got a genuinely wonderful “people person” who would be an excellent ambassador for your company, get him in a position to interact with the people that matter to your company. Similarly, a shy, quiet wallflower type is probably best not being your receptionist or leading a sales team. Let your speakers speak and your writers write. 

Of course, once you’ve identified each person’s strength, keep asking them to use it, even if they’re in a bit of a slump. This is true even when the outcome really matters – in fact, it’s especially true when the outcome really matters. That’s (probably) why you hired them in the first place.

Questions? Comments? Concerns? Raise it for discussion on Facebook, Twitter, or LinkedIn.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

In my last post, I related the story of how Thomas’ English Muffins successfully sued to prevent one of its key executives from defecting to a competitor.  The rationale behind the court’s decision was that permitting the executive to join the competitor could cause irreparable harm to Thomas’ business, since the executive knew key information about Thomas’ products and its business.

As a business owner, you have a vested interest in preventing your company’s customers, processes, secrets, and the like from migrating out the front door with a departing employee. Although it worked out for Thomas’ English Muffins, you shouldn’t count on a judge’s or jury’s good graces. Plus, litigation is a very expensive way to protect your company’s vital assets. Better to take care of things up front and inexpensively, rather than from the inside of a courtroom.

So, what’s the best way to do that? Get your key employees to sign Non-Compete, Non-Solicitation, or Confidentiality Agreements as part of your corporate policy, and as a condition to their (continued) employment. 

There are primarily three types of legal documents you can use to protect your business. Each has a specialized function and may be more appropriate for your business than the others. In some instances, you may need two or even all three (they can usually be combined into one master agreement). Here are the basics:

• Non-Compete Agreements: These agreements prevent key employees from working in your industry within a specified geographic area and within a specified time of their departure from your company. For example, if you’re in the business of manufacturing windows and doors, you may want to sign a Non-Compete with your top producing sales person (or people) that prevents them from working for any other window and door manufacturer or distributor within a 50 mile radius of your headquarters for 12 months after they leave your company (the geographic and time limitations should be carefully tailored by your attorney to ensure that they are enforceable).
• Non-Solicitation Agreements: This agreement prevents departing employees from soliciting your customers and your other employees to leave your company. A Non-Solicitation Agreement doesn’t prevent the employee from being in the same business after her departure (as a Non-Compete Agreement does), but rather says to the departing employee, “You can be in this business, but you can’t steal my customers or my other employees.” It often makes sense to require more than just key employees to sign Non-Solicitation Agreements.
• Confidentiality Agreements: These agreements are used to protect trade secrets, processes, sensitive company information (such as customer identities, financial information, and the like), and company plans. For example, if your company is planning to expand into a new geographic market, then you probably don’t want that information getting out to your competitors. You would require your employees with access to such information to sign a Confidentiality Agreement.

I believe that virtually every company should have one or more of these agreements in place with certain of its employees. Unfortunately, with the exception of the largest corporate enterprises, very few businesses are aware of these issues, much less what to do about them. Until it’s too late, of course. With that in mind, feel free to give me a call or shoot me an email to discuss any concerns you may have related to these issues, or any other business or legal issue that’s on your mind. I’ll be happy to answer your questions and point you in the right direction. Free of charge. And with no obligation. 

• Email This
• Print
• Comments (1)
• Trackbacks
• Share Link

A week or so ago, I came across a story in the legal press that reminded me of something I wish more of my clients would focus on: Non-Compete Agreements. The story was about a lawsuit filed against Chris Botticella, a former Senior VP of the company that owns Thomas’ English Muffins. It seems that Mr. Botticella had accepted a new position as a senior executive at Hostess, one of Thomas’ competitors in the baked goods space. Thomas’ sued to prevent him from taking the job, and won.

Why? Well, it seems that Botticella is one of only 7 people on the planet – yes, the planet – who knows the secret to how Thomas’ English Muffins are made. And Thomas’ certainly didn’t want him taking that knowledge to one of its biggest competitors. As a result of the court’s decision, my guess is that Botticella is going to have a tough time finding work as counter help at the corner bakery, much less as a senior executive at a large, national baked goods company.

How does a lawsuit over English Muffins relate to YOUR business? Simple:  your people are your greatest asset, and, when they leave, potentially your greatest liability. They literally have the power to make or break your business. Every business guru will tell you this, but then you’re left to your own devices to figure out what it all means, and how to protect your business’ reliance on this sometimes unpredictable asset.

Perhaps the most important way you can protect your business’ customer accounts, secrets, processes, plans, and the like from traveling to a competitor after the defection of a key employee is to require key employees to sign a well-crafted Non-Compete or Non-Solicitation Agreement.

A Non-Compete or Non-Solicitation Agreement will prevent your best sales executive (you know, the one whose accounts resulted in 68% of your gross income last year) from leaving your company for a competitor, and taking her business with her to boot. Additionally, if you’ve got any proprietary systems or technologies, it’s imperative that you protect them. Your competitors will likely pay top dollar to lure away your key sales executive, information systems guy, CEO, or key manufacturing process employee. The loss of such an employee (and your competitor’s gain of that employee) will be felt where it hurts the most:  your bottom line.  Equally as important, they are enforceable.  As recently as 5 weeks ago, Judge Richard D. Bennett of the United States District Court for the District of Maryland reaffirmed in TEKSystems, Inc. v. Bolton not only that a Non-Compete is enforceable if reasonable in scope, but also that it will be automatically extended for the period the employee is found to have been in breach. 

Do you have employees whose loss would or could have a devastating effect on your revenues or your business? If you do, or even if you’re not sure, feel free to give me a call or shoot me an email and we’ll discuss it. I’ll be happy to answer your questions and point you in the right direction. Free of charge. And with no obligation.  You can also read more about Non-Competition Agreements in our recently released Business Owner's Pocket Guide. 

In the next entry, I’ll be writing about some of the important provisions a Non-Compete or Non-Solicitation Agreement should contain, and the real effects of these agreements. Stay tuned.

• Email This
• Print
• Comments (1)
• Trackbacks
• Share Link

Yesterday, we received the catalog from Despair.com. One of their demotivators featured the legend: “Hard work often pays off after time, but laziness always pays off now.” I thought about this as I was working with a client on revamping her company’s employee handbook. We discussed everything from dress code to paid-time-off, to the point where she was so tired that she asked, “Do you think that all of these details really matter? Can’t we be a little more vague and worry about addressing some of these issues when they come up?” 

But the point is, you can't -- not if you want to avoid unwanted results from your employees or claims from DLLR.  As time-consuming as the redrafting effort was, we needed to get it right.  The devil is in the details.

It’s easy for this idea of the devil being in the details to be lost on some. In this economy, we are tempted to rush, rush, rush to get the end product completed. We’re stretched thin, and our only goal tends to be the almighty dollar. However, we have got to stop and be reminded that, in any endeavor, the devil – the difficult part – is getting those small details just right, so that the end result is excellence. 

When we neglect the details, people notice. For instance, in that employee handbook, if we failed to note that jeans were impermissible for office staff, you can bet that employees would notice and would expect that jeans were acceptable attire. What’s worse, the client who walks through the door to your business and sees the office staff wearing the jeans may be turned off by the lack of professionalism. And if you later tried to enforce a “no jeans” policy, or ultimately let an employee go as a result of the lack of professionalism, not having this detail documented in the handbook may allow that employee a legitimate claim for wrongful discharge and/or continued benefits.

Of course, the flip side is also true. Sometimes the more details you tend to, the less that people really notice. But this is a good thing. Allow me to explain:

You come home from work today, check your mail, and find an invitation to a party in a few weeks. The date comes along, and you go to said party, where you eat, drink, mix and mingle for a few hours, and then head home. Do you really think about all of the details that went into the party?

If I were your hostess, here’s what would have gone into that party (at a bare minimum!): 

• 2 hour to select the perfect theme (season, occasion, etc.), date (no Ravens home game, or other obvious conflict), time and location (backyard, fancy restaurant, art gallery, you name it!)
• 30 minutes forming a guest list (taking care to stay within proper friend and family circles and to be as inclusive as possible),
• 2-3 hours to select the perfect invitation (considering everything from the theme to the font, because the invitation sets the tone of the event),
• 30 minutes choosing stamps and timely mailing the invitations (there is such a great selection of stamps out there, you may as well find one that works well with your event!),
• 2 hours selecting decorations (even more if some decorations are homemade or require any kind of legwork)
• 3 hours selecting a menu
• 2 hours shopping for decorations and food (if you aren’t using a caterer)
• 4 hours preparing food (again, if you aren’t using a caterer)
• 5 hours cleaning and/or setting up the space (placecards or nametags… labels to identify food selections… fresh flowers on tables and in the powder room…)
• 2 hours assembling my own wardrobe for the event

And then, the guests arrive.

Paying attention to all of these details is exactly why the party will go off flawlessly. And exactly why not one guest will think twice about everything that went into making the party fabulous. But guess what? It’s exactly why every guest will remember the evening.

Both personally and professionally – whatever your business, give great care to those details! 

• Tuck in your shirt. Look the part.   
• Proofread. Yes, even emails.
• Avoid saying “um.”
• Remember people’s names.
• Make eye contact. Smile!
• Create an outline before your next presentation. Practice.
• Ditch the AOL, Yahoo, or Gmail account and get your business its own domain name! For $75, two guys in a pickup are transformed into a solid company you can trust.

If you take the time to battle those devilish details, they are sure to produce returns tenfold.

I wore maroon, patent leather, pointed-toe, crocodile-printed pumps to work today. They pick up the hint of burgundy in my brown checked suit and truly complete the outfit. They even make me feel more confident as I attend my morning, lunch, and dinner meetings today. 

As I said…the devil is in the details.

• Email This
• Print
• Comments (1)
• Trackbacks
• Share Link

Yesterday, I found myself at a traffic light behind a company truck.  The truck belonged to and advertised a dog waste removal company.  I pondered this.  For a while, I wondered what the job interview was like.  But as the light turned green and traffic started to move, I noticed something else.  The truck was sporting a bumper sticker that read:

Your Life is not My  Problem.

I turned my pondering up a notch.  "How is it," I wondered "that in this one moment, frozen in time, the dog poop guy seems to be looking down on my life?"  Now, don't get me wrong.  This guy, perhaps even the owner, had a company, did honest work, and maybe even made a killing performing a service hordes of people would pay to avoid having to do.  But why was his employee insulting me.  And did the company's owner know it?

And this led me to my question:

How many owners realize the hidden (and not-so-hidden) messages their employees are sending?

Several years ago, Walgreens faced a lawsuit over just this issue -- only in more extreme form.  It seems that Walgreens pharmacy employees entered their thoughts on various customers in the comments field of the company's perscription software.  There, stapled right to a perscription for a customer's anti-anxiety medication, was a print out featuring some anonymous employee's assessment "She's CRAZY." 

Now maybe she is, and maybe she isn't.  But one thing we know for sure.  Walgreens has spent millions of dollars on a campaign to convince the public that it is a friendly neighborhood pharmacy.  How much money, then, did this one errant employee flush down the drain with one careless, or in this case, incredibly stupid example of personal expression?

Appearances matter.  If your employees have customer contact, check every aspect of the interaction.

• What do the outgoing voice mail messages say?
• Look for bumper stickers on vehicles used for delivery -- political, religious, or even humorous.  What's funny to one is insulting to another.
• Listen to how your employees express themselves.  Do they have a penchant for telling ethnic jokes or making sexist comments in an attempt to be funny?  Some people do  these things so often they don't even notice them anymore.

Can you see your company through your prospective customer's eyes?  If the dog waste company could, they might have taken the time to ponder that bumper sticker.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Employees are expensive.  Misclassifying them as independent contractors is more so.

Most state laws require employers to pay for their employees' workers' compensation coverage and unemployment insurance...at a minimum.  The Federal government imposes additional (and very expensive) requirements.  Specifically, employers must:

• Pay Social Security contributions of 6.2% of salary up to $106,800 (in 2009),
• Withhold 1.45% of all earnings for Medicare,
• Pay overtime to eligible employees
• Provide unpaid leave under the Family and Medical Leave Act for those companies to which the Act applies.

Independent contractors, on the other hand, receive 1099 forms at the end of the year and are responsible for their own taxes.  Employers contribute nothing.

It is tempting, therefore -- particularly in difficult economic times -- for employers to classify people as independent contractors and save both the money and the headache of withholding taxes insurance payments, and contributions.  But it's not that easy.  The IRS looks very carefully at each situation to determine the exact nature of the relationship between the company and the individual.  For the most part, it comes down to a question of control. 

The IRS and most states examine the following factors to determine the nature of the relationship:

1. The company's right to direct or control how the work is being performed
2. Who establishes training programs and whether they are mandatory
3. The source of the tools (including computers and software) used to perform the work
4. The location where the work is performed
5. Whether the company has the right to assign additional projects
6. Whether the hired party hires and pays his or her assistants or support staff
7. THe company's right to determine when the work is performed and/or set certain hours

Bottom line, if your company has the right to control or direct what is being done, how it is being done, and when it is being done, your company is most likely and employer.  

Most importantly, a wrong answer can be extremely expensive.  Companies which misclassify employees and independent contractors can be subject to huge tax bills for unpaid taxes as well as penalties for failure to file required tax forms and, in certain circumstances, failure to adhere to Federal and State statutes such as the Family and Medical Leave Act and Title VII of the Civil Rights Act of 1964, as amended (applicable to employers who have 15 or more employees).  In addition, misclassified employees can pursue their own claims against the company for any losses they may have sustained.

Both companies and individuals can ask the IRS to make a determination of employment status by filing with the IRS Form SS-8:  Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding.  

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Businesses are running scared. 

Twitter is driving the NFL to distraction.  According to the New York Times, the Green Bay Packers have announced that players using Twitter during games, practices, or to report on team activities will be assessed heavy  fines. The Miami Dolphins have all but outlawed Twitter.  Who knew a tweet could do what a 290 pound lineman couldn't?

And the NFL is not alone.  Consider...

• On January 21, 2009, the Associated Press reported that officials in Paramus, NJ  suspended without pay an employee for posting allegedly racist comments on his Facebook page.  He used his own computer and made the entry on his own time. 
   
• In March, a Philadelphia Eagles employee lost his job over Facebook postings critical of the teams trade decisions.
   
• July saw the requested and accepted resignation of a NY government employee for some strongly worded postings critical of both President Obama and Professor Henry Louis Gates

Lest you think that social networking sites inspire fear in only the weak of heart, consider this:  CNN reports that the United States Marine Corps have launched a full, frontal assault on social networking sites.  According to a Marine Corps spokesman:

"These internet sites in general are a proven haven for malicious actors and content and are particularly high risk due to information exposure, user generated content and targeting by adversaries."

Businesses throughout the country and around the world are struggling to harness the marketing power...and contain the potential HR fallout...of social networking sites.   As this plays out, and in view of the incredible and virtually untapped marketing potetion of these sites, I have a few recommendations:

• Develop written social networking site guidelines for your employees;
• Talk to your employees about your company's presentation to the outside world in the hope that you can make them part of the solution, rather than the problem;
• Review all employment contracts to ensure that your company can take proper disciplinary action against those who's postings cast you or your company in a negative light; and
• Make sure any Personnel Manuals or handbooks include both the Company's social networking site rules and a discussion of the possible ramifications of violating company guidelines.

• Email This
• Print
• Comments
• Trackbacks
• Share Link