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].

Is It Legal For Me to Find Investors For A Friend’s Business?

Investor Introduction Maybe you have a rich friend who is looking to invest in something interesting or fun or worthy. And you have another friend who has just built a better mouse trap, but is living in his mom’s basement.

Together, the two could make millions. So you consider playing business matchmaker. Nothing wrong with that, right?

Even better… maybe you can get a cut in the business or a fee for a successful transaction. That’s just being enterprising. And your inventor friend is enthusiastically willing.

Someone tells me this story casually at least a few times a year.

And every time, I have to be a wet blanket.

Because if you are going to connect an investor with a business, you may be violating the securities laws. If things go wrong, you could be held responsible. Or worse, you could be prosecuted by the SEC and fined or put in jail.

Like many things in law, something with such good and innocent intentions can surprise the people involved by being illegal.

Watch the video to see what I mean.

Video Transcription:

Say you have a friend who wants you to introduce him to potential investors in your industry in order to raise money for his new start up business.

Can you take a percentage if he successfully raises money from my contacts?

Unfortunately, no.

Federal securities law requires a broker’s license for any person who gets paid any fee for obtaining an investor.

This is meant to protect investors from being scammed.

Even if you just make the introduction, you must still comply with this law.

If you are not licensed, the investor can later sue you for a return of his or her money.

You can still make a simple introduction to help out your friend, so long as you aren’t paid for it.

And, of course, you shouldn’t make any representations or guarantees about the wisdom of investing money in your friend’s venture.

Would you like to have a lawyer at your beck and call without it costing you an arm and a leg? Learn about our Peace of Mind Plan or call us at 800-449-8992 to find out how.

Do I Have To Accommodate An Employee Who Uses Medical Marijuana?

Marijuana in the Workplace Marijuana is well on its way to being legalized in the United States.

I’m going to make a prediction right now. In about a decade’s time, marijuana will be legal to use in the United States. I say that because we are nearing a tipping point in legalization.

By the end of the 2016 election cycle, more than half the states will likely have legalized marijuana in some way.

This presents a problem for employers who have a drug-free workplace. Some employers (i.e. defense contractors) are obligated by contract to have a drug-free workplace. And of course there are safety issues.

Still, I think the law on this is going to rapidly change over the next decade. What is an employers’ obligation to accommodate an employee using marijuana as medicine?

Video Transcription:

An employee of mine uses medical marijuana. Can I fire them for violating my drug-free workplace policy?

When marijuana was illegal, the answer was yes. But rapid changes in the legal status of marijuana as medicine makes the answer less clear.

Normally, you can fire an employee for being under the influence of drugs while at work.

But when the drugs are medications lawfully prescribed to them to treat a true medical condition, then such a firing may constitute disability discrimination.

For example, if someone uses insulin to control diabetes and this makes him or her act spacey, or be unsafe, you cannot fire them.

When marijuana is legally used to treat glaucoma, cancer or seizures, the employer may be required to accommodate the employee.

Employers also do not have the right to inquire about an employee’s health, medications or medical history, including at a hiring interview.

And in most cases, employers may not drug test current employees.

If you must keep a drug-free workplace by contract, you need legal advice to deal with such tricky situations.

Ask us how we can keep you safe from lawsuits with our Employer Protection Package by calling us at 800-449-8992 or emailing us at [email protected].

Can I Require My Employees To Be Nonsmokers?

Non-Smoking Employees When I first started practicing law, I was asked by a fitness-conscious employer whether he could require his employees to quit smoking.

After some research into the Americans with Disabilities Act, I concluded, “no.” Basically, I concluded that smoking interferes with a major life activity — namely, breathing.

The senior lawyers whom I worked with disagreed.

They had some good points at least politically. Being a smoker is not a sympathetic status in California.

But a decade has passed and the ADA has broadened. And I’ve become more experienced as an employment lawyer, so I have thoughts on other laws that inform this situation.

So this video has my thoughts on whether you can make your employees be non-smoking.

Video Transcription:

Sometimes employers ask, “Can I require my employees to be nonsmokers?”
Some employment lawyers will say it’s acceptable because it’s not illegal to discriminate against smokers.

But you could be risking a disability discrimination claim because smoking is a physical addiction that may impair a major life activity, such as in situations when the person develops lung or throat disease.

In addition, employers do not have the right to inquire about an employee’s health and medical history, including at a hiring interview.

In requiring your employees to be nonsmokers, you may run the risk of violating these laws.

Employers do have the right to designate the workplace as smoke free.

However, employers do not have the right to dictate how employees spend their breaks, such as unpaid lunch breaks, when employees are free to leave the premises.

If you are worried about your employees’ health, try offering access to a smoking cessation program.

If you offer employee health insurance, many such programs are offered as part of the insurance plans and can be promoted by human resources.

Ask us how we can keep you safe from lawsuits with our Employer Protection Package by calling us at 800-449-8992 or emailing us at [email protected].

If My Employee Criticized My Business On Social Media, Can I Fire Her?

Employees and Social Media

You can’t always fire an employee who badmouths you online.

It’s a common reaction. An employee bad-mouths you and your business on Facebook. So you fire her.

Before the time of social media (and the internet), I was in college. I also worked a job after school where I had a boss who was a strange, quirky person.

I did a good job, but he was not exactly someone I enjoyed being around. I wasn’t the only one: my co-workers and I would laugh about some of his idiosyncrasies on our commute home on the ferry.

I’m pretty sure he overheard one day (or someone else who mutually knew us heard) because when we returned to work the next day, he was pretty upset with us. My co-worker was fired. I wasn’t, but it was clear that I was going to hit a dead-end soon.

So I moved on a little while later. But I always felt bad about it. I am not gossipy by nature, and I upset someone unintentionally. He was weird, but I didn’t mean to hurt his feelings.

Anyway, now I’m a boss and a business owner, and I try to hire people whom I enjoy working with. I would probably see a couple of teenagers making fun of me as annoying. I certainly wouldn’t feel like paying them my hard-earned profits in wages if they were ungrateful for it.

But if an employee is critical of your business online, you have to be careful. You cannot just fire them in certain circumstances. As always, it is situation-dependent. So watch the video below to get an idea of when you have to call a lawyer before sacking a snickering ingrate.

Video Transcription:

My employee posted on Facebook criticizing my business. Can I fire her?

Not unless you want to be on the losing side of a wrongful termination suit.

Many states, like California, have laws that prevent wrongful termination in violation of public policies.

Free speech and free association online are protected activities by public policy.

Also, the National Labor Relations Act prohibits employers from retaliating against employees for communicating with each other about the terms and conditions of their employment.

These protections extend to online communications as well.

Getting sued over something so petty is expensive.

Instead, why not use those words as constructive criticism to improve your business?

Then advertise it to social media and your workforce. Voila! Good PR and good will with your employees.

Ask us how we can keep you safe from lawsuits with our Employer Protection Package by calling us at 800-449-8992 or emailing us at [email protected].

I’m Going Into Business With My Best Friend. Do We Really Need a Partnership Agreement?

Business and FriendshipI had a law partner for 3 months. She and I were not friends before we partnered, actually, but we became fast friends once we decided to do business together. About a month later, she joined my law firm.

It was temporary, though. Within a couple months, we disagreed on how to build and manage the business.

We parted ways shortly after that. It seemed amicable at first… until it came to the money. Then it got a little ugly (although we worked it out pretty quickly).

Now she won’t speak to me. Needless to say, we are not friends now.

Even though I did not know her long, I felt hurt and betrayed by several of her actions. I felt also some loss and grief.

I can only imagine how much worse this would have been had we been friends for a while beforehand. I do not think that a friendship beforehand would have prevented the problems — we simply clashed over business strategy and who was responsible for making certain decisions.

So here’s the lesson: if you want to keep your friend after going into business together, you better have all the boundaries and duties worked out and in an agreement.

Video Transcript:

I’m going into business with my best friend. Do we really have to sign a big, long, complicated, legal partnership agreement?
YES.

Relationships need boundaries — especially ones that involve money.

You may be longtime friends but business is not the same as friendship.

The fastest way to kill your friendship is by going into a business partnership without clear boundaries and responsibilities.

No matter how close you are, you will have different ideas and different expectations from one another and the business.

Contracts are not about trust. You must trust someone to do business with them, whether you have a contract or not. Contracts are about defining expectations so that no one is disappointed.

They are essential in outlining the rights and responsibilities of every person or company with whom you do any business. A contract will make your business and relationships smoother.

Do you know where your legal land mines are? To find out, call us for a Business Risk Review at 800-449-8992 or email us at [email protected].