I Told My Employees That I’m Giving Them Stock Options. Is That Legal?

Employee Stocks Many good and generous employers want to share with their employees.

The idea behind giving employees stock is a sound one. Employees who are owners may be more invested in the business’s success. They may feel more appreciated. It could give them a sense of pride, ownership or purpose beyond anything that they would feel from a simple salary.

These are the main reasons I hear from employers who wish to create an employee stock plan.

For a myriad of business reasons, I prefer not to share stocks with employees. I prefer an employee profit-sharing plan that does not involve equity.

But I understand that many business owners may feel like a stock plan is right for their employees.

So you may be wondering, if I tell my employees that they are entitled to stock options in a letter, memo or at a meeting, is that legal? No. Watch to learn more.

Video Transcription:

I offered stock options to my employees in a memo. Is that OK?

That is not a good idea. Employee stock plans and stock option grants are complicated.
First of all, stock grants may create taxable events that impact you as the employer.

Second, stocks and options create duties by the majority stockholders to the minority stockholders under state laws that you may not anticipate.

Third, such a memo may create earned wages and must comply with wage laws.

Fourth, federal securities regulate promises and statements regarding stocks.

In short, employee stock plans create a variety of legal issues that you must understand before you start handing out shares and options.

There are better alternatives if you wish to give your employees a profit-incentive.

For example, you can have a 401(k) set up to include profit sharing or you can set up a bonus program.

If you are considering benefits and stocks for your employees, contact us to learn about legal compliance. Get our white paper Reduce Your Per Employee Annual Legal Compliance Costs. Or contact us at 800-449-8992 or [email protected].

Disgruntled Workforce Means Problems

If you have a morale problem with your workforce, you better do something about it… fast.

When you have a disgruntled worker, it always leads to problems.

As a business owner, here are the problems I see when a person turns bad apple:

  • They “poison the well” and create negativity amongst your other staff
  • People lose their drive and initiative, so work quality suffers
  • People start scrutinizing the employer or developing “grievances”
  • The bad person (or several) have to be replaced, costing money

In addition to the practical aspect of having to spend more money replacing employees (not a small consideration in itself), leaving employees always carry risk. People tend to treat a break in an employment relationship with the same emotions as leaving a personal relationship.matches burning

In other words, unhappy ex-employees sue. Even when you are squeaky clean, unhappy ex-employees will threaten it.

Sometimes they will sue frivolously, and you end up with a problem, regardless. There will always be a percentage of litigious ex-employees, which means that if more employees are leaving, then there will be a proportionate increase in the number of lawsuits.

Here’s another legal issue: demoralized employees take more stress-related medical leaves. This actually happens a lot and is the leading cause for medical leaves. It’s really easy to violate the leave and disability laws (thus inviting lawsuits). It’s also disruptive to your workforce. And an unhappy, stressed employee doesn’t always recover and return to employment smoothly.

Finally, whenever employees leave, employers must immediately pay all earned compensation (including vacation pay, non-discretionary bonuses and earned commissions). If you do not have a bunch of cash on hand to deal with terminating and replacing employees, you may find yourself in the middle of a wage and labor crisis.

What can an employer do to avoid employee morale problems bankrupting them?  Here are four strategies that could save you thousands of dollars.

  1. Focus on improving employee morale and retaining skilled workers. Take some time to improve relationships with those employees and foster loyalty and contentedness. This is not just a hippie-dippy people idea. Research shows that people work based on “purpose” (which includes a strong sense of community, being valued, loyalty and other social factors), not based on money. Yes, people need money. But an employer who fosters the right social conditions can get away with lower pay or other hardships without loss of morale. And definitely get rid of the bad apples because their drama is unfair to the rest of your team.
  2. Clean up your HR act by reviewing employees. Employees actually want to be reviewed if they care about their jobs (see point above regarding purpose). You can use reviews to praise (important) and address frustrations and failures that cause low morale. You should also use this as an opportunity to document issues with problem employees so that you can defend yourself later.
  3. Audit your wage and pay practices with the help of your employment lawyer.  Wage and pay class actions are the most common type of class action litigation filed in California, constituting roughly two-thirds of all new class actions being filed and hundreds of new cases each year.  You are vulnerable to these types of lawsuits if your pay practices aren’t pretty close to perfect (and there are many laws out there that are traps for the unwary employer, so do not trust an HR service or a do-it-yourself). Not only do audits give you an opportunity to find and fix liabilities before they become lawsuits, but you can use it as an opportunity to show your workforce positive change and encourage their loyalty.
  4. Encourage — or even require — your employees to take their accumulated vacation during slow times.  This is a good way to get vacation time off the books of an employee who has thousands of dollars worth stocked up, which will have to be paid in total at the time of quitting. Plus, employees who take regular vacations are less stressed and happier.

If you have any business or workforce concerns, spend 30 minutes with us on a free Business and Employment Planning Session or schedule a consultation with one of our business law attorneys or our real estate attorneys at (800) 449-8992.

California Prepares Its Workforce for Zombie Apocalypse

zombie handsThe California Legislature must watch too much of The Walking Dead.

They are really worried about disease.

In the first part of July 2015, they passed two bills aimed at controlling Californians’ health.

There was a bill limiting parents’ ability to decline vaccinations for their school aged children.

And there was a bill requiring employers to give all their employees a minimum amount of sick time every year.

Sadly, due to scarcity, California is unable to mandate that all schoolchildren and employees take the vaccine to prevent Zombism. But if you get bitten, you will definitely have some paid time off to go through the change.

I’m writing to talk about the California sick time law. (It must be about Zombism because it is an answer to a problem that nobody had.)

If you are neither an employer or employee in California, you may still find it interesting. California is trying to lead the country towards more “European” employment policies.

Starting July 1, 2015, all employers were required to meet new sick time accruing laws for all employees.

  • It applies even if you have only one employee.
  • It applies even if you have only seasonal employees.
  • It applies even if you have only salaried exempt employees.

So if you are a small California employer who did not have benefits before because you couldn’t afford them — guess what? California just gave all your employees a raise.

As I’ve said before, I think it is a good business decision to give your employees time at home to be sick. But it should be your decision, not California’s.

(Aside: you should read my blog post on why sick time is a good idea. It is one of my most popular. And it features a picture of my cat.)

California did not just say that you have to provide sick time. They say how much and how you are to accrue it and account for it.

All those forward-thinking “unlimited paid time off” plans that Millennial-type companies have been implementing are now illegal.

Of course, the accrual rules developed by California Legislators were confusing and unworkable. So they passed amendments just a couple weeks later, to try to make the rules clearer.

Fail.

The rules are not clear at all. I’m an employment lawyer with more than a decade’s experience in California wage law, and I had to read the bills several times.

So what do you need to know? This is my most simplified summary:

  • Employers need a written sick time policy.
  • Employers need to provide current employees with written notice that sick time benefits have changed (in addition to the policy).
  • There’s another mandatory poster to spruce up the break room.
  • Employees get at least 8 days of accrual in a year.
  • Employees must accrue at the minimum rate of at least one hour sick time per 30 hours worked.
  • There are several options for how an employer may do the accrual for their particular workforce’s scheduling.
  • Even though they are entitled to 8 days on the books, an employer only has to let the employee take 24 hours of sick time in a year (that’s hours, not 3 days)
  • Unlike vacation time, sick time does not have to carry over or be paid out when an employee leaves.
  • This applies to virtually all employees with very few exemptions.
  • Part time employees do not have to accrue, but seasonal employees do.
  • A reinstated employee gets their old accruals back.
  • Some payroll companies may not be adequately set up to handle this.

If you need help with this, please click on the button below to set up a consultation.

Bellatrix PC offers the Employer Protection Package, which allows employers to outsource employee compliance functions for less problems and less hassle.

Does It Matter If I Have An Employee Handbook?

4 Good Reasons To Have An Employee HandbookIt shouldn’t surprise you that an employment lawyer will advise you to have an employee handbook.

But it may surprise you is that I would rather you have no handbook than one you write yourself.

Why would I say that?

Well, a handbook is an important legal document in lawsuits and labor audits. If you have non-compliant policies, it can create presumed liability automatically. In other words, non-compliant policies are like an admission of guilt.

In some cases, no written policies (for example, with respect to certain breaks, required notices, and pay policies) can also create a presumption of guilt. But non-compliant policies are a greater danger.

By far, my recommendation is that you have a lawyer-drafted, compliant employee handbook. Here is a short video on four good reasons why:

So now you know why you should have an employee handbook. Is downloading one off of an internet resource good enough?

NO! Employment laws are complex and numerous. Boilerplate employee handbooks often have provisions that sound reasonable to you as the employer, but are in fact illegal in some jurisdictions or may mislead you into doing something illegal.

I write several handbooks a year. I have never found a good template off a website (and I have tried several). I ended up creating my own template and checklist for management decisions. (You can choose different policies depending on how you want to run your business, and I advise on the financial, business and legal implications of those decisions as part of the drafting process.)

An employee handbook is a 50 page legal document that you should not attempt to DIY. Call a pro. And keep it updated!

Video Transcript:

Does it matter if I have an employee handbook?

“Does it matter if I have an employee handbook?” Yes! Here are four good reasons why. 1. A handbook teaches your managers and your employees the proper and legal way to do things. It’s not always commonsense. 2. A handbook empowers you to politely tell an employee “No” to a special request because it is against policy. This keeps everything fair. 3. A handbook can be used to defend you, should an employee lie about a situation to a court or governmental agency. 4. Employers are required to provide certain notices in writing to their employees, and a handbook is a good way to do it. Failure to provide these notices can result in lawsuits, fines and even criminal penalties. So yes, a handbook is essential and it should be reviewed by an employment lawyer annually. Does your business need employment law help? Visit us at bellatrixlaw.com to apply for our Employer Protection services.

You can find the full video on Employee Handbooks on YouTube.

Business Law

BUSINESS LAW

Disputes, misunderstandings, and litigation impact the health and longevity of your business. Whether you’re the owner of a sole-proprietorship, a partner in a partnership, a member of a limited liability company, or shareholder in a corporation, it is critical to ensure that your entity’s legal and financial interests are being protected by an aggressive and experienced business law lawyer.

At Bellatrix PC, we pride ourselves on providing our clients with responsive, tactical business solutions.  Through critical analysis of the issues at hand, our legal team has repeatedly achieved favorable outcomes for numerous clients across a diverse range of industries and legal structures.  As a results-oriented firm, we aim to resolve complex disputes as rapidly and efficiently as possible, so that you can resume normal operations with clarity and confidence.

To arrange for a private consultation with the commercial attorneys of Bellatrix PC, call our law offices at (800) 449-8992 today.  The sooner you consult with us, the sooner we can get to work addressing your legal matter.

Experienced Business Law Lawyers

Even outwardly simple business transactions can lead to confusion and uncertainty.  Businesses of all structures are subject to myriad state, federal, and municipal regulations, which collectively encompass matters ranging from workplace discrimination to job site safety to the enforceability of non-compete contracts and other contractual agreements.

Even for highly knowledgeable and experienced entrepreneurs, it can be virtually impossible to keep abreast of the business world’s numerous and ever-shifting laws while busy with the daily demands of running a company.  All too many business owners have been unpleasantly surprised by federal investigations, the imposition of civil penalties, and lawsuits by employees, despite believing they were in full compliance with the law.

At Bellatrix PC, we bring a nuanced practical understanding of the full scope of business law to each and every legal matter we handle.  We will listen to your concerns, advise you with regard to your rights and responsibilities as a business owner, and explain the potential outcomes of the courses you could take on the path toward resolving your issue.

Should litigation arise, we are fully prepared to defend your business all the way to trial if necessary.  However, we are also qualified to function as mediators, to represent your company during arbitration, or simply to act as general counsel for your basic, daily questions and concerns.  We will help you understand the benefits and disadvantages of each available legal strategy as it pertains to your matter, so that you can make an informed decision about what’s right for your company.  When you work with Bellatrix PC, you can feel confident that your business is in capable hands.

Representing Partnerships, Corporations, and LLCs: Cases We Handle

As business owners ourselves, we are personally familiar with the seemingly endless complexities which can arise in business and commercial law.  In order to serve our clients effectively, we handle a wide variety of legal matters throughout every stage of the business life cycle, from formation to sale and dissolution.  No matter which point in its life cycle your company has reached, our dedicated attorneys are prepared to counsel you.

We are equipped to handle the full spectrum of commercial matters, including but not limited to the following:

Breach of Contract

  • Contracts act like blueprints, setting clear expectations for all parties to any business agreement.  When a contract is breached by one or more parties’ improper actions or failure to act, the other party or parties can suffer significant financial harm.

Business Formation and Dissolution

  • Selecting the right legal structure is critical for the long-term success of any business.  Likewise, proper dissolution ensures that debts and assets will be distributed appropriately when the company changes hands or reaches the end of its life.

Commercial Litigation

  • All types of disputes can lead to destructive lawsuits.  Whether your company has been accused of breaching a contract, engaging in discriminatory hiring practices, or other alleged misconduct, our attorneys will vigorously defend your business in court.

Contract Drafting and Negotiation

  • Contracts are the foundation upon which all business transactions are built.  We will prepare, review, revise, and aggressively negotiate your contracts with employees and other businesses, ranging from licensing agreements to commercial leases.

Employment Law

  • Whether your company has been named in a gender discrimination lawsuit, needs assistance determining overtime classification and fair payment of wages, or you simply have questions about drafting an employee handbook, our employment law attorneys are here to help.

Trademarks and Intellectual Property

  • Databases, recipes, software, and related information can be a company’s most valuable assets.  We work to protect your intellectual property and trade secrets with clear and enforceable contracts.

Our other areas of practice include, but are not limited to, the following:

  • Business Insurance
  • Creditors’ Rights and Debt Collection
  • Hiring, Firing, and Layoffs
  • Independent Contractors
  • Leasing Property and Equipment
  • Libel, Slander, and Defamation
  • Mergers and Acquisitions
  • Minimum Wage and Wage Disputes
  • Non-Competes and Non-Disclosure Agreements
  • Non-Profit Organizations
  • Payroll, Salary, and Bonuses
  • Permits and Licensing
  • Sexual Harassment
  • Stock Options
  • Tax Compliance
  • Unfair Competition and Unfair Business Practices
  • Whistleblower Lawsuits
  • Workplace Discrimination
  • Wrongful Termination

Whether you’re thinking about starting a company, need assistance resolving a stubborn dispute, or have already been named by a commercial lawsuit, the attorneys of Bellatrix PC have the skill and knowledge to help your business reach its goals.

To schedule a private appointment, call our law offices at (800) 449-8992 today.

What’s Your Problem?

Maybe We Can Help. Request Your Consultation Today.

Alicia Dearn

Alicia I. Dearn is the founder of Bellatrix PC, a woman-owned law firm with offices in Missouri and California. Bellatrix PC handles lawsuits and business transactions. We advise in business, employment, real estate, intellectual property, civil litigation, and election law.


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Five Reasons Why Employers Should Force Sick Employees to Go Home.

cat in officeThat’s Elliot, the office cat.  He’s actually not just an office cat, he’s my full time cat; but he hates being alone, so he goes to the office with me, where he promptly annoys everyone by sleeping in their inboxes or walking across their keyboards.

Elliot runs out the office’s front door at least once a day, only to be caught and brought back inside.  It’s his thing.  He never goes far… at least, he never did until last Thursday, when he ran around the city block.  This seemed only marginally annoying at first, until after a couple hours it became obvious that Elliot had stepped in something caustic.  He had a severe chemical burn on his paw, which he licked and turned into a severe chemical burn of his tongue and stomach.  Elliot spent the weekend at the vet hospital.

On Monday, I tried to leave Elliot safe in his bed.  But he complained and so I took him to the office with me.  He wanted to go to the office as was his routine, even though he was sick!

Obviously, Elliot is a cat and not my employee, so having him come to the office when he is sick doesn’t impact my business too much.  But it made me think about all the reasons why having sick employees in the office is a bad idea, no matter how much they insist on coming in (for whatever reason).  So here’s a partial list of why you need to force sick employees to go home until they are better:

1.  Contagions: if one employee has a contagious illness, they are contagious when they are early in the sickness, have a fever, are coughing or sneezing, and when they are carrying virus or bacteria on their hands.  Those germs get into your air and are circulated around and get onto everyone’s phones, doorknobs and computers.  Before you know it, after a few days to two weeks, half your workforce is out with the ebola virus.  This grinds productivity to a halt.  You get your customers sick or you get sick yourself.  Passing around communicable diseases is bad for business.

2.  Worker’s Comp Liability: if an employee is drugged up, tired, foggy, uncoordinated, etc., they may be more prone to accidents.  Accidents at work equals worker’s compensation claims and lawsuits.  Not only will this affect your premiums, but if it is a severe enough injury, it will trigger an automatic OSHA inspection, which almost always results in fines and other consequences when it turns out you aren’t quite as compliant as you expected!

3.  Liability to Customers: it doesn’t happen too often, but occasionally I get a call from a client where an employee accidentally (or even on purpose) hurt or offended a customer to the point that the customer is threatening legal action.  Here’s an example: a waitress who is lightheaded from a head cold accidentally pours hot coffee on a patron’s lap, severely burning him.  That’s exactly the kind of stupid situation that could have been avoided by the employer forcing the sick employee to go home.  Most of the time, it’s not worth the risk of keeping a sick employee out interacting with customers.

4.  Disability and Leave Law Compliance: if you have an employee who is exhibiting health problems, you might have a trigger for ADA and leave law compliance.  Not all sicknesses in the workplace are head colds.  If you have any indication, whatsoever, that an employee may be suffering from something, you need to begin documenting the steps you are taking to obtain releases and accommodate disabilities, immediately.  The interactive process under the ADA is a long process and is frequently handled improperly by employers.  This leads to a lot of lawsuits and wasted money.  Do not wait until the employee comes to you; be proactive.  This is especially the case if the employee is a poor performer and in danger of being fired; you do not want a wrongful termination lawsuit on your hands!

5.  Productivity Disruptions: here’s a basic bottom line point for you.  If you have a sick or injured employee, they are half as productive for the same hourly price.  Why spend that?  This is especially foolish when the employee’s illness is prolonged by coming to work when they could stay home and use up their sick time (which is on the books already) and get back to full steam in half the time.  It is also inefficient if extra time is being devoted to managing them, double checking their work, or picking up the slack, all because they are being “dedicated” by coming in while sick.

Here’s my advice.  Allowing sick employees to work is penny-wise but pound-foolish.  Make them go home!