How to Use Releases to Prevent Employee Lawsuits

Boss Yelling at EmployeeIf I had a dollar for every time a client told me that some dispute should be easy to resolve, or they can’t imagine that the other side would litigate… well, I pretty much do because I always end up defending those “surprising” lawsuits.

Being a lawyer makes you cynical. Most of the time, things don’t come to me until long after everyone has stopped being reasonable or cooperative. So perhaps my clients are not being delusional when they think that the problem they are dealing with will peter out… perhaps that happens nine times out of ten.

The tenth time, though, you are in my office, and it’s going to be a doozy.

Sometimes you need a little insurance so as to avoid spending too much time with me and people like me. That’s why I suggest getting releases from exiting employees strategically.

A release is an agreement not to sue you for any harms (real or imagined) in exchange for some sort of benefit (usually an extra payment, like a severance agreement). A release ensures (with only the very rare exception) that the employee will not come back to create problems.

But the release has to be done correctly.

Releases are legal contracts that are also regulated by a dozen or more employment laws. Here are a few things you should know:

  • You cannot enforce a release on undisputed, owed wages.
  • You cannot enforce a release without adequate consideration (that’s the benefit provided to the employee in exchange for waiving rights).
  • Certain laws require waiting and revocation periods for certain classes of employees, and these cannot be waived.
  • You cannot enforce a release on future liabilities (i.e. harms that have not happened yet).
  • Certain provisions may be illegal, such as non-compete, no rehire, confidentiality or non-disparagement clauses.
  • You cannot have an employee release rights to complain regarding criminal activities or to certain governmental agencies because that might amount to payment for blackmail.
  • You should have carefully considered construction and enforcement provisions to ensure that the release will hold up in court and in your favor.

Releases do not need to be done for every exiting employee. Nor would that be cost-effective or even necessary. So do not do them routinely as part of the exit interview.

But if you have an employee who has had some drama during their employment, then a release can be worth the extra expense. You must weigh the cost of providing a benefit for severance and using a lawyer against the likelihood that you will be sued. But remember that the expense of a payment and release is often a teeny, tiny fraction of a lawsuit.

Releases are a great strategy to mitigate or avoid risk. If you have an employee you are worried about, contact your employment lawyer to determine whether a release is a worthwhile idea.

5 Must-Read Business Books That Might Change Your Life

Reading the top 5 Must-Read Business Books

I have a college degree in English Literature. So you would think that I read a lot of novels. You’d be wrong. Since I graduated, I have mostly read must-read business books and law books.

It’s not that I’m boring. (Although I may be that.) Rather, I’m extremely focused on growing Bellatrix PC into the greatest law firm ever. (I may also be a tad bit competitive.)

Running a successful business requires more than vision, dedication and an entrepreneurial spirit. It requires being a lifelong learner.

Business books can inspire, motivate and help you get past operational, management or financial blocks. Here are my favorites:

  • How to Win Friends and Influence People by Dale Carnegie

Published in 1936, this book is still relevant and insightful. This book teaches three fundamental techniques for dealing with people, both in business and everyday life. It also teaches six unique ways to make people like you, twelve ways to turn people to your way of thinking, and how to influence change in people without making them resent you.

This is perhaps one of the most important must-read business books for small business owners and decision makers to read. Understanding people is one of the keys to success in business and sales.

  • The 4 Hour Workweek by Tim Ferris

I didn’t I was an entrepreneur until I read this book in 2007. I started my first business almost immediately after read this book. So Tim Ferris literally changed my life.

This book promises to teach you how to “escape 9-5, live anywhere, and join the new rich.” Working only 4 hours a week is not immediately feasible for an entrepreneur, though, so it’s promise is initially elusive. But the ideas in this book form the cornerstone of a new school of thought in the business world.

Pen-ultimately, The 4 Hour Workweek teaches the art of leverage, which is the key to finding freedom as an entrepreneur. It also teaches you how to eliminate 50% of your work in 48 hours using proven principles. A lot of the work you do does not move the needle enough. Ferris teaches you to ruthlessly slash those things so you can make more money and take back your life.

This Must-read business book is not for the faint of heart.

  • The E-Myth Revisited by Michael Gerber

Truer words have never been put on paper about why small businesses fail than what is in this book. Most small business owners have bought themselves a job and are not flourishing as entrepreneurs. This book explains why through examples and by contrasting how most small businesses operate to successful models, such as franchises.

If you are struggling as a business owner, doing it all, and barely making ends — read this book right now. It could save your business and your sanity.

  • The Hard Thing about Hard Things: Building a Business When There Are No Easy Answers by Ben Horowitz

Building a successful business is hard! I wish more “gurus” would acknowledge this fact.

What is useful about this book is that Horowitz goes there. Ben discusses how difficult it can be to run a successful business. Where other books focus on inspiration, founding a company and getting started, this one focuses on the myriad challenges that can derail a business after it’s up and running.

Throughout the book, the author shares insights on managing, buying, investing in and developing a business (with a focus on tech companies, but applicable to all industries).

  • Dotcom Secrets: The Underground Playbook For Growing Your Company Online by Russell Brunson

When I got this book, I devoured it…. And then I promptly read it again. The only other business book that I’ve read more than once is The 4-Hour Workweek. Now Dotcom Secrets sits dog-eared on my desk and I refer to it regularly.

Dotcom Secrets is a hardcore marketing and sales book. I already knew a lot about marketing and sales when I read it. But this dense book filled in some gaps for me. It’s made easier to digest with a lot of stick figure diagrams.

This book generously doles out evidence-based advice on how to sell to your audience (in any context — not just online). There is applied psychological theory in masterful sales. Don’t just emulate — understand.

Optimizing your sales processes could change your business and change your life.

 

Sexual Harassment

SEXUAL HARASSMENT

Sexual harassment claims against your company can result in negative publicity, enormous fines, time-consuming and expensive litigation, lowered employee morale, and reduced productivity in the workplace. If your business is facing sexual harassment allegations by a current or former employee, you need immediate legal support from a knowledgeable and experienced employment law lawyer, such as those of Bellatrix PC.

Whether you are already facing a legal claim, or are simply concerned about compliance with FEHA and Title VII requirements, our attorneys are prepared to assist you.  We can represent and defend your business in civil litigation proceedings, or review and revise your current policies and procedures with our business risk review.  To arrange a private consultation, call our business attorneys right away at (800) 889-8376.  We work with partnerships, corporations, and LLCs.young-woman-with-briefcase

Examples of What Constitutes Sexual Harassment

Sexual harassment has a much broader definition that most people initially realize.  In fact, the passage of SB 292 in 2013 amended and expanded California’s former definition by providing that workplace conduct need not be motivated by sexual desire in order to be considered sexual harassment.

In order to avoid  facing harassment allegations, employers must familiarize themselves with the type of conduct which is prohibited by law.  Employers must also:

  • Include sexual harassment provisions in their employment handbooks, e.g. explanations of prohibited behavior.  Sexual harassment policies are mandatory.  
  • Put up anti-harassment posters supplied by the Department of Fair Employment and Housing.
  • Consider promoting a sexual harassment prevention program at the workplace, which may help to limit liability in certain situations.

Note that if an employer has 50 or more employees, he or she is further required to “provide at least two hours of classroom or other effective interactive training and education regarding sexual harassment to all supervisory employees who are employed as of July 1, 2005, and to all new supervisory employees within six months of assuming a supervisory position.”

Some common examples of sexual harassment include, but are not limited to, the following:

  • Any unwanted physical contact.  This includes, but is not limited to, pushing, touching, slapping, or pinching employees.  It also includes blocking doorways or otherwise preventing employees from moving freely without having to make physical contact.
  • Visual acts, such as making inappropriate hand gestures, showing a co-worker sexual materials, or staring at an employee’s body.
  • Verbal expressions, including jokes, threats, slurs, unwanted advances, and other crude or sexual language.
  • Offering an employee a raise, promotion, etc. in exchange for sexual favors.  Conversely, threatening to demote or terminate an employee who withholds sexual favors is also sexual harassment.

woman ready to take notes

Are California Employers Liable for Sexual Harassment in the Workplace?

While sexual harassment may be the act of an individual employee, employers can nonetheless assume liability.  This can apply even in cases where the employer was unaware that harassment was occurring or did occur.  However, employers may not be liable in cases where all of the following statements apply:

  • The alleged harasser was not a management-level employee.
    • This applies regardless of the plaintiff’s position at the company.
  • The employer was unaware that any harassment was occurring or did occur.
    • The employer must “take immediate and appropriate corrective action to stop the harassment” as soon as he or she becomes aware that harassment is a problem.
    • If an employer is aware that an unsafe work environment exists, yet fails to take reasonable measures to correct the problem as provided by Government Code § 12940(k), that employer could potentially be targeted by a lawsuit alleging negligent hiring or negligent retention.
  • The company had an active program to prevent sexual harassment from occurring.

Employers must be made aware that harassment claims need not involve financial damages to the plaintiff in order to be successful.  As stated by the California Department of Fair Employment and Housing, “A victim may be entitled to monetary damages even though no employment opportunity has been denied and there is no actual loss of pay or benefits.”

Harassment is expressly prohibited by both state and federal law: Title VII of the Civil Right Act of 1964 and the California Fair Employment and Housing Act (FEHA), respectively.  Title VII generally applies to employers with at least 15 employees, whereas FEHA applies to employers with at least five employees.  Therefore, a company which escapes Title VII provisions may still be subject to FEHA, which furthermore applies to independent contractors.  Employers are subject to maximum fines of $150,000 in cases where the Fair Employment and Housing Commission determines that harassment occurred.

What About Liability for Non-Employees?

Sexual harassment laws also extend to non-employees.  For example, an employer could potentially be held liable if one of his or her clients or customers harasses an employee.  In order for the employer to escape liability in this type of situation, two conditions would have to be in place:

  • The employer would have to immediately intervene as soon as he or she learned that harassment was occurring or had occurred.
  • The harasser must not have been in a position of authority over the victim.

Note that employers can also be held liable for harassment to job applicants and interviewees who are not actually employees of the company.

Finally, it is worth addressing the common misconception that only men are guilty of sexual harassment, and that only women are victimized.  From a legal standpoint, gender has no bearing on harassment claims – only the conduct which occurred.  Persons of either gender can be victims or harassers.

If a former employee has filed a sexual harassment claim against your business, you need an aggressive and experienced legal team to defend your company in court.  To set up a confidential legal consultation, call the business law attorneys of Bellatrix PC at (800) 889-8376.

Things to Consider When Getting A Business Credit Card

Old man puzzling over chess boardNo matter what sized business you are, cash flow is a major consideration. In fact, I’d say that cash flow is the King Kong issue of any business.

Whether you are just starting out, or you’ve been running a business for several years, you’ll find that ensuring ongoing cash flow is hard and requires vigilance.

Having access and carefully managing a line of credit can be the answer to short term problems (and there are always problems!).

There are many options, but the rewards available on credit card purchases make it an attractive way to manage expenses. You just need to be careful not to get into debt. Do your due diligence as an employer and know what to do for your business.

Things You Must Consider

1. It is easy to get into debt on a credit card.

Sure, a credit card means that your company will have additional funds available when you need them. But it also makes it tempting to take on debt through spending.

Debt can be a good thing if you leverage it for a return on investment. So, for example, if you buy advertising on your credit card for $500 and it returns a measurable result of $1000, then the debt was worthwhile.

Pay off the card before it incurs interest and repeat.

But if you are buying nicer throw pillows for your office, ask yourself whether that is worth paying interest on or tying up your credit cushion (no pun intended). Everyone likes a nice office, and maybe those throw pillows will make you money somehow. But if they do not have a measurable ROI, then wait to buy them until you have surplus cash.

The key is, don’t use a credit card to “consume” goods and services. Use it to keep your business in growth. If you can keep to that discipline, a credit card is an excellent tool.

2. Consider the cost of the card versus the benefit.

Here’s a simple example:

My husband immigrated to the United States when we got married. When he got here, he had no credit. In order to establish credit, we wanted to get a credit card for him. After that, we got an offer for a 1% cash back rewards card.

The card had an annual fee of $99. In order to break even on the fee after the 1% cash back was applied, we would have to use the card over the year for a total of $9,900 in purchases, or $825 per month.

And since he had no established credit, they only offered a line of $500 to start.

Doing the math, we would be losing money on the card unless we maxed it out and paid it off twice per month.

Needless to say, the card was not worthwhile. So we chose a card without an annual fee that was also without rewards, until his credit could get established.

As you can see, evaluating a credit card goes much deeper than just comparing interest rates and policies. You need to know your business, your spending habits, and what type of rewards program would be the best fit for you.

Consider:

  • Annual Fees
  • Grace Periods
  • Late Payments
  • Interest Rates
  • Reward Types and Restrictions
  • Insurance and Charge-back Policies

3. Whether you should give your employees access.

There are two ways to handle expenses with your employees. Way one is to give them permissions to use the company card. Way two is to make the advance expenses and turn in an expense report.

Personally, I do both, depending on the employee. For purchasers or key managers, having a company card makes more sense. I can’t ask them to order $1000 worth of office supplies on their own cards and expense it.

But for employees who have expenses related to sales or travel, a separate card is a good idea. It makes expense accounting must easier. But, just so you know, the employee gets to keep perks such as mileage or points.

To schedule a consultation about a business law issue, contact our attorneys at (800) 449-8992 or contact us online.

Insurance Policyholder Coverage

INSURANCE POLICY HOLDER COVERAGE

An insurance policy may come into existence as a contract, but insurance coverage issues fall under their own body of law. In many instances, lawyers that practice general business law assume that they can handle the problems and questions presented by insurance coverage issues, but what they may not realize is that insurance issues are far from intuitive in nature. Whether the issue is a disputed claim, a coverage issue, or a “duty to defend”, coverage issues are typically grounded in state law.

insurance contract

If you are wondering if your insurer should be held liable for a specific claim or if you hold certain rights or benefits under your policy, the experienced insurance coverage attorneys of Bellatrix PC can assist you or your business. To schedule a confidential consultation, call us at 800-449-8992 or contact us online.

How Can An Insurance Coverage Attorney Help?

Our insurance coverage practice handles insurance issues ranging from relatively straightforward matters to extremely complex and multifaceted disputes. We handle first-party claims where the insured, himself or herself, files a lawsuit against the insurer for refusing to assume liability for a covered event. Our practice also handles third-party claims that typically arise due to a failure to defend or a failure to pay a claim submitted on the behalf of a covered policyholder. Our insurance coverage practice can also handle an array of other insurance related claims including:

  • The interpretation and assessment of existing or proposed insurance policies
  • Provide guidance in selecting a policy and level of coverage that is appropriate for anticipated risks.
  • Provide clear advice regarding the potential consequences of an insurance decision.
  • Understand the business, industry and the common risks faced by similarly situated businesses.
  • Anticipate actions by the insurer.

In short, attorneys who regularly handle insurance coverage issues for policyholders are aware of all the laws and regulations governing insurance carriers, policies, and what the policyholder is entitled to.

Who can Use an Insurance Liability Lawyer?

A lawyer who handles insurance coverage provides value to a broad array of individuals and businesses. Any policyholder who contacts a lawyer will receive a contract review and guidance on coverage issues, indemnity issues, and failure to defend issues, among other things. Others who would be well-served by establishing a relationship with an experienced insurance coverage attorney include:

  • Corporate lawyers – Lawyers working in a corporate firm are often the first place a potential client will go. Corporate lawyers who simply refer matters out to a general practitioner without first checking for insurance policy coverage may be doing their clients a disservice. Remember, failure to raise a timely coverage claim can be a grounds to oppose coverage. At Bellatrix PC, one of the first steps we take in any litigation is to analyze and seek insurance coverage.
  • Homeowners and renters – If you own a home, you almost assuredly have a home owner’s insurance policy. Likewise, many renters insure their goods and possessions. There is nothing worse than finding out after the fact that your coverage was insufficient or did not cover the things you thought it did.
  • Business owners and employers – Owners of a company know that their business faces certain common risks and certain risks that are unique to the industry. We can review insurance policies already in effect or suggest other types of policies to consider for your business.

Because insurance liability issues are determined by a particularized body of law, any individual or business whose interests are affected by a policy can find value in meeting with an insurance coverage attorney. While people most commonly seek an attorney after the fact, it is prudent to review your policy, the duties it creates, and its levels of coverage with an experienced professional before disaster strikes

Rely on our Experience handling Insurance Coverage Issues for Policyholders

The insurance coverages attorneys of Bellatrix PC are dedicated to assisting individuals and businesses with coverage issues. We can provide on-point advice to guide your purchase of an appropriate policy. Moreover, if your insurer has declined to defend or declined to provide coverage following a covered event, our attorneys can negotiate with the insurance company and advocate on your behalf. To schedule a confidential insurance coverage consultation, contact Bellatrix PC by calling (800) 449-8992 or contact us online.

Background checks and skill tests for new hires

bear cub and skunkI have had my fair share of bad hires over the years; let me tell you. It has cost my law firm well into the six figures in wasted payrolls, management problems, lost opportunities, correction of problems, etc.  I do not spend a lot of time dwelling on it because I do not want to waste time thinking about lost investments on people.

For most businesses, the largest investment you make is in people. The biggest line item on your expenses is payroll. And your best chance at growing and making more money is through leveraging the time and labor of others.

So who you hire matters, and you should probably ask yourself a few questions before hiring a new employee and truly figure out if a potential employee can do the job you need them to do.

I admit, I do not always check references. Although I should. Probably half a dozen of my former employees had new employers call me on a reference check. Of those, more than half had lied to their prospective employers. This put me in an awkward position, because I am not willing to lie for people. But I wonder if there are other bosses who might do it just to be nice, to avoid conflict, because they want to get that ex-employee off of their unemployment account, or because the employer is afraid that telling the truth about their employees in a reference check will get them sued.  It is awfully tempting with some employees to be nicer about them than they deserve when responding to a reference.  (Of course, employers, be careful giving a positive reference about an employee whom you know is a serious liability just to get rid of them, because that could also come back to bite you.)

So that got me thinking.  Can you really trust references?  Probably not by themselves.  So I am trying something new: background checks and skill testing.

Background checks are a good idea, and I should have been doing them all along.  You need to know whether your new hire is lying about her college degree. California has some strict rules about background checks for potential hires, however.  For example, the potential employee must be given notice of the background search (with what will be looked at, in writing) whenever a background search agency is used. Also, the potential employee must consent to such a search, and he or she must have an opportunity to get a copy of the public records the employer gathers. If the employer gathers public records itself by way of doing a cheap background search, it must allow new hires to decide whether they want a copy of the public records gathered, or whether they want to waive receiving a copy (this is usually an option found on employment applications as a small box or initial line).

Most potential employees, of course, will not have any criminal records.  A bankruptcy may not indicate anything really bad, either.  Our own government cannot keep itself out of debt; can you really blame John Smith the Office Assistant for buying too many TVs? I’ve had employees with bankruptcies, criminal histories, arrests, alcoholism and other personal problems in their past and all have turned out to be great employees.

My bad employees tend to fall into two categories: (1) drama queens/anti-social or (2) incapable of doing the job, no matter how hard they try, but also incapable of seeing that.

So I am experimenting with skill, aptitude and personality testing now. I have had several former employees straight-up lie to me about what they could do.  After they were hired, they spent a lot of wasted time trying to figure out how to do things they stated that they could do already, or trying to hide their ineptitude. This not only wastes my time and money, it aggravates me because I cannot trust the person.

So far, every employee whom I have given a skills or aptitude test to has turned out well. I do not have a lot of advice regarding testing yet, because I am new at experimenting with it. But I am hopeful.

I will say this: make sure you use reputable testing agencies or batteries, especially if you are a big employer.  You do not want to get sued for discrimination because only white males from Princeton pass your tests.  I am very hopeful, however, that testing will help me identify the Dunning-Kruger Effect sooner.

By the way, I still advocate strict adherence to probationary periods, with formal reviews after 90 days!  Some people are just not good fits and will slip through the preliminary hiring cracks, only to fail abjectly once they enter your organization.  Weed them out!  Remember, there are reasons why big businesses do some of the things that they do… and it isn’t because they are just evil, Kafkaesque machines with too much money.  Sometimes they have things in place that small businesses should adopt for their own protection and success.