Business Record - Iowa Biz

The Workplace is all a Twitter

One of the hottest social networking tools is Twitter. Twitter is a Web site which allows you to write one hundred and forty character micro-blogs, which others can read in a scrolling "feed".  Twitterers follow these feeds to connect with one another. The site has blossomed in popularity and is likely to gain even more traction since President-elect Barack Obama used the site so effectively during his recent campaign.

But a hot debate is taking place about whether sites like Twitter have a place in the workplace. While there are many positives to the site, a downside is the potential loss in productivity because employees "tweeting" away are probably not getting work done. Plus, there is always risk that somebody might say the wrong thing that could embarrass an employer, or worse, get the employer sued.

So the reaction of many employers is to ban Twitter, along with sites like Facebook and YouTube, completely. And while this may seem like a sensible solution, you really are asking for trouble from younger generation workers as well a growing number of the older set. I don't think banning sites like these will work long term in the workplace. Plus, you would be amazed by the things employees say about you online after you ban their favorite site. Trust me; sites like Twitter are here to stay so you better learn how to play the game.

The first step is to educate yourself with Twitter. The benefits to your business may be enormous. Many companies, both large and small, have harnessed Twitter to effectively market their brands.  Perhaps you could even turn that twittering employee into an evangelist for your company. Next, consider these steps in allowing employees to Twitter and/or blog:

1. Get advice from in-house and/or outside legal counsel with a good understanding of technology and social networking.  This area of the law is changing at the speed of light.  Talk with a lawyer that can help you navigate your way through these issues.
2. Update your employment policies to cover blogs and social networking sites.  Many companies have policies that cover Internet use, email, cell phones and other technologies.  But do your policies cover blogs and social networking sites?
3. Develop a corporate blogging and/or social networking policy. Make sure that employees understand the consequences of violating the policies. Make sure employees know not to disclose confidential or proprietary information on blogs or social networking sites. Tell them to think twice before posting anything that could be considered defamatory.
4. Train employees on the benefits and risks of using such sites.
5. Appoint someone who will be in charge of monitoring social networks and/or blogs for the company. Learn how to use RSS feeds to do this effectively.

Chances are someone from your company is already on Twitter and/or other social networking sites regularly. So don't wait. If you don't define how your employees use Twitter, they will define it for you. It's better to get on board before it's too late.

 

Get Rid of Performance Reviews? Not So Fast!

Improving employee performance is the goal of almost every employer. In pursuit of this goal, the mainstream approach is to use an annual performance and pay review. But a UCLA Professor, Samuel Culbert, says that employers should get rid of the performance review!

In the WSJ Culbert wrote,

"To my way of thinking, a one-side-accountable, boss-administered review is little more than a dysfunctional pretense. It's a negative to corporate performance, an obstacle to straight-talk relationships, and a prime cause of low morale at work. Even the mere knowledge that such an event will take place damages daily communications and teamwork."

I understand Culbert's point. No one enjoys the performance review process, whether you are the boss or the employee. It's also true that many supervisors do a very poor job of conducting performance reviews. Fellow IowaBiz author Victor Aspengren has said that most companies use subjective rating systems in their performance reviews, which leaves everyone in the company, supervisors and employees alike, dreading the annual review process.

What happens next is what I call the Lake Wobegon effect: Every employee becomes "above average" because supervisors are unwilling to hold employees accountable. Then, when it comes time to discipline or terminate employees, companies are often shocked when I tell them it may be difficult to discipline or terminate an employee because of their employee evaluations.

But it's not that easy to dismiss performance reviews. Employee evaluations are valuable proof in an employment lawsuit. Poor performance must be properly documented. Otherwise, the judge or jury will not believe you when you say the employee performed poorly. You should conduct the evaluations on a regular basis, usually at least once per year. And Victor's ideas on creating a dialogue with your employees is on the mark as long as that dialogue is open, honest and holds employees accountable for their performance.

Hat tip to Daniel Schwartz of the Connecticut Employment Law Blog who wrote a nice post about the professor's article.

Protect Yourself from Employment Lawsuits While the Economy Tanks

America is the middle of an economic crisis.  Many pundits say this is the worst economic downturn since the Great Depression.  Perhaps your business is tightening its belt and considering how to weather this awful period.  I am sure cutting costs is on the top of your list.

Lawyer and employment-law consultant Shanti Atkins warns that one place senior management shouldn't skimp is on essential employment law training.  Employment law training should never be considered discretionary, especially in a downturn.  In an excellent blog post on the topic, Atkins references a study published in the Stanford law review that points out what happens to employment claims during an economic downturn:

• When the economy goes into a recession, there is a dramatic increase in the number of employment lawsuits filed in federal court.  A scarcity of alternative employment serves as a catalyst for litigation.
• The single largest predictor in the long-term growth trend of case filings is the national unemployment rate.  When the economy booms, employment discrimination case filings fall in the next half-year; when the economy slumps, case filings rise over the next half-year.  This phenomenon explains roughly 95 percent of the variance in the number of cases filed.  A modest rise in the current unemployment rate from 4 percent to 5.5 percent could generate a 21 percent increase in the number of employment discrimination claims.
• The average damage award to a successful plaintiff rises in business downturns, particularly with respect to employment discrimination suits.  Because the length of time it takes for a plaintiff to find another job increases in a recessionary economy, monetary awards are elevated.

These factors should be alarming to business owners.  So what can you do to protect yourself from the rise in employment lawsuits? I recommend building an ark.  Here's how:

1. Treat Employees with Respect:  Seems like a basic philosophy, but it is amazing how many employers forget to treat their employees with respect.  Employees that are humiliated or treated in a disrespectful way are much more likely to sue your company.
2. Communicate with Your Employees:  First, make sure you have an effective employee handbook with up-to-date employment policies and publicize your policies to employees.  Make sure you follow your policies.  One of the easiest ways to land in an employee lawsuit is the failure to follow your employment policies.  Also make sure you have an open door policy where employees are allowed to voice their concerns or complaints.  Do not let complaints fester.  Deal with them right away.
3. Implement an Effective Unlawful Discrimination and Harassment Policy:  Your harassment policy should include more than just sexual harassment.  There may be other forms of harassment based upon race, religion, age or disability.  It is also critical to consistently train employees and supervisors regarding unlawful harassment and discrimination.  You should train employees on harassment and discrimination issues at least once every year.
4. Document, Document, Document:  The importance of good record keeping cannot be overstated.  If you don't have something in writing, chances are a jury or judge may not believe it happened.  Be sure to document even verbal warnings and maintain an appropriate personnel file in order to make sure the documentation is not lost.
5. Conduct Honest Employee Evaluations on a Regular Basis:  Unless your company is headquartered in Lake Wobegon every employee is probably not above average.  Evaluations can be valuable proof in an employment lawsuit.  Make sure poor performance is properly documented.  Otherwise, the judge or jury will not believe you when you say the employee performed poorly but all their evaluations are excellent.  You should conduct the evaluations on a regular basis, usually at least once per year.  I recently represented a client sued for discrimination.  A key in defending the case was the honest performance appraisals performed by management.
6. Do Not Retaliate:  Employers are often blindsided by retaliation claims.  There are a number of proactive measures you can take in order to avoid liability for retaliation claims.  It is important to avoid retaliation because recent cases have lowered the burden for plaintiffs to prove their retaliation claims and the number of retaliation claims from plaintiffs is continually on the rise.
7. Take Action and Investigate Promptly: If a complaint arises, make sure you take the complaint seriously and investigate promptly.  A quick and thorough investigation may help eliminate problems before you have a real mess.  You will need to consider who should conduct the internal investigation.
8. Comply with Wage and Hour Laws:  Ensure your exempt employees (i.e., salaried employees) are properly classified as exempt under the law.  Wage and hour claims are also on the rise and could result in a class action against your company.  This is a common area of the law that is ignored by many employers and could result in significant liability.
9. Review and Update Your Employee Handbook and/or Policies:  You should at least review your policies to incorporate any changes in the law or your manner of doing business.
10. Conduct Regular Employment Law Training: As Shanti Atkins says, employment law training is so much more than "training" - it is bottom line risk management.

You may not have predicted the economic downturn. But following these steps can help reduce the chances of a successful employment lawsuit.   To ensure that your company has done everything it can to avoid employee lawsuits, you should have your employment policies, training and practices reviewed by your employment lawyer.

The ADA Amendments: Significant Changes for Employers on the Way

It's an election year and everybody is talking about "change".  Obama's theme is "Change we can believe in" while McCain says that "Change is coming".  I don't know who will win or who offers the most change, but no matter what, our nation's employers must now plan for wide-sweeping changes regarding the Americans with Disabilities Act (ADA).

Congress recently passed the ADA Amendments Act, which President Bush is anticipated to sign and will go into effect on Jan. 1, 2009.  Not only will it have a tremendous impact on the defense of employment litigation claims, but they will require almost all business owners, human resource professionals and supervisors to adopt new policies and procedures in dealing with accommodation requests.  While courts have previously rejected the majority of ADA cases, employers will now need to act much more cautiously.

The Changes

The following lists the major areas of change in the new Act. Although the ADA only applies to those workplaces with 15 or more employees, this requirement is not as limiting as it first appears. The number includes part-time and temporary employees, and applies if an employer had 15 or more employees for at least 20 weeks during the current or preceding calendar year.

1. Broad Standard for "Disability" Definition - the new law states that it provides "a broad scope of protection" for employees, and provides that courts examining ADA cases need to provide coverage for plaintiffs "to the maximum extent permitted" by the statute.
2. "Majority Life Activity" is now just about everything - the ADA was silent on what constituted a major life activity, or in other words, the areas of life that needed to be adversely affected in order for someone to claim a disability. But the new ADA includes a thorough and exhaustive list of activities, including caring for oneself, performing manual tasks, eating, sleeping, reading, concentrating, thinking, communicating and working. It also expressly states that the operation of any major bodily function is considered a major life activity – including functions of the immune system, cell growth, digestive functions, reproductive functions and neurological and brain functions.
3. Mitigating Factors Must Now Be Ignored - When making a decision about whether an employee is considered sufficiently disabled to receive protection under the ADA, employers and courts must now ignore any and all mitigating measures being used by the individual in question. This includes medications, prosthetics, hearing aids, mobility devices and learned adaptations.
4. Ordinary Eyeglasses and Contact Lenses - Despite the provision regarding mitigating factors there is an exception for ordinary eyeglasses and contact lenses.  An employer can consider eyeglasses and contact lenses when determining if someone is disabled.
5. The "Regarded As" provision is also read more broadly - the ADA has always offered protection for those employees whom an employer wrongly "regarded" as being disabled. Previously, ADA plaintiffs needed to prove that the employer regarded them as being substantially limited in a major life activity, which was often a difficult standard to meet. Under the new ADA, a "regarded as" plaintiff need only demonstrate that the employer perceived the individual as having a mental or physical impairment.
6. EEOC is now permitted to regulate the ADA - the new ADA also provides an express mandate to the Equal Employment Opportunity Commissions (EEOC) to issue binding regulations and other interpretative guidance regarding the statute.

Overall, the changes to the ADA are extensive and include several other issues not discussed in this blog post. You are encouraged to consult your employment attorney regarding the ADA amendments and their impact on your business. For further reading I also suggest you review the following employment law blog sites for handy information on the new amendments:

George's Employment Blawg

Connecticut Employment Law Blog

Pennsylvania Labor and Employment Blog

Manpower Employment Blawg

The Most Important Legal Axiom in the Business World

My kids love to play two-square.  But every time we play, the rules of the game change. Our games may have spinnies, hardies, bus stops, back stops, or maybe rainbows.  In our last outing we were even stuck-in-the-mud, throwing a whole new wrinkle into the game.  The bottom line is that I never know the rules of the game until AFTER we begin playing.  Often I am forced to rely on a "caller" to enforce the rules of the game.

But in business we are not too far removed from our playground games.  It is always better to know the rules of the game before we enter into business relationships.  Consequently, we better remember the most important legal axiom in the business world:

IF YOU HAVE AN AGREEMENT, GET IT IN WRITING

You are probably thinking, "Duh!"  Tell me something I don't know.  But why then do so many people forget this simple principle so often?

Except for certain situations a valid contract may be either written or oral.  That's not the issue.  The problem is that ordinarily no one remembers an oral contract quite the same way.  Memories fade and sometimes people actually have been known to lie.

• Buy-outs that were to happen after three years don't occur;
• Subcontractors don't receive payments as promised;
• A franchisee doesn't receive a protected territory as indicated on discovery day;
• An employee is told a non-compete won't be enforced.

The examples could go on and on.  It doesn't matter how well you know business associates or how much you trust someone, you should always get it in writing.  Doing so is just smart business and no one involved should be offended.  In reality both parties are protected with written contracts.  And you want to make it easy as possible for the "caller" if the case goes to court.

- Rush on Business

No Billable Hours? A New Wave in Hiring Outside Law Firms

Old View: Time is a lawyer's commodity. Billable hours are our product.

New View: A lawyer sells intellectual capital. The true value of which is not measured by time at all.

Scott Turow, famed author and lawyer, wrote in the ABA Journal last year that the billable hour must die.  Turow says the billable hour rewards inefficiency and it makes clients suspicious.  Well, it appears Turow's sentiment is picking up steam, although I wouldn't expect the billable hour to die any time soon.

Pfizer, Inc. recently announced that it hired just one outside law firm for all its employment work over the next two years.  The law firm's fees are capped and the law firm's is paid one-twelfth of its annual fee each month.  At the end of the year a reconciliation occurs and Pfizer has the ability to recoup any unused fees.  Other large companies have similar arrangements with law firms including Tyco International and Honeywell. 

At least one law firm, Exemplar Law Partners of Boston, has embraced the no billable hour concept completely.  Exemplar says it is the first corporate law firm in the nation to exclusively adopt a fixed price designed to align its interest with its customers while enabling businesses to better manage their legal budgets.   

Another firm, ConvergentGC, operates from the premise that most entrepreneurs really need in-house counsel but few can afford it.  The firm is an outside general counsel firm that essentially adds a senior-level attorney to the management staff.  The firm has no hourly rates, no bills for phone calls and no bills for overhead costs such as faxes.

When I had my house painted this past month I hired a contractor that gave me a fixed price.  I had a certain budget and I appreciated knowing exactly how much his services would cost.  I can't imagine I would have hired this painting contractor had he told me he would bill by the hour with an open-ended price.  And I doubt you would either.

So the next time you hire a lawyer be sure to ask at least two questions,

1. "How much am I willing to pay for the services I need?"
2. "Can I find a competent lawyer to handle it for that price?" 

It seems the best way to hire a lawyer is to determine how much you are willing to pay for particular services and then hire a competent attorney who is willing to do so for that price.  Now that doesn't mean that a lawyer should necessarily be cheap.  But usually there is a competent lawyer out there for you if you set a reasonable budget.

So I encourage you to discuss fixed billing with your lawyer.  You just might find the lawyer is surprisingly receptive to it.  After all, no one likes to be a slave to a timeclock.

- Rush on Business

photo on flickr by col_adamson

Will Iowa Need a "Business" Court to Compete?

Business people often express frustration about our court system.  Litigation costs have skyrocketed, cases take too long to resolve and overworked judges don't have the time to adequately concentrate on certain complex business cases when the courts are clogged with foreclosures, family law and criminal law cases.  One solution that may help reduce those frustrations is the implementation of a specialized "business" court. 

As discussed in a blog post by Ohio business lawyer Terri Rasmussen the driving force behind the trend is the belief that a specialized business court is instrumental in retaining and attracting businesses to the state.  Ohio is trying a four-year pilot program and New Hampshire recently passed legislation to implement its own business court. 

The most historic of business courts is the Delaware Court of Chancery.  As a result, Delaware's Division of Corporations boasts that more than a half a million business entities make their legal home in Delaware including more than 50% of all U.S. publicly-traded companies and 60% of the Fortune 500.  Most observers say it is because of the predictability in Delaware's business courts. 

Rasmussen points out that Chicago, Manhattan, and North Carolina have had such courts for more than a decade and Rhode Island, Massachusetts, Las Vegas, Reno, Atlanta, Boston, and Pittsburgh have also instituted business courts in some form. Most recently Maine and South Carolina have implemented programs. Colorado and Michigan are currently giving serious consideration to the possibility.

I am a proponent of a specialized business court here in Iowa.  As Gov. Lynch of New Hampshire said when the approved his state's legislation this past month, "It is very important that our judicial system is equipped to handle efficiently the complexity of business statutes and conflicts..."  Businesses need to have courts that will resolve their cases quicker and with greater efficiency especially when litigation costs are so significant.  The way other states are moving on this it appears Iowa should consider a business court soon or face yet another hurdle in retaining and attracting good businesses.

- Rush on Business

photo on flickr by turtlemoon

The New Iowa Smoke Free Air Act Impacts Even YOUR Business

Iowa's new SmokeFree Air Act went into effect July 1, 2008. Many people associate the new law with bars and restaurants but may not realize the far reaching impact it has on all Iowa businesses (well, except maybe those pesky casinos).

Areas Where Smoking Prohibited:

The new law applies to restaurants, bars, food service establishments, outdoor sports arenas and amphitheaters. It also covers places of employment such as office buildings, health care facilities, and child care facilities.

Areas Where Smoking is Not Prohibited:

Smoking is allowed on the gaming floor of a licensed casino, as well as designated hotel and motel rooms.

Following the Law:

To comply with the new law, businesses must do several things. They MUST: post “no-smoking” signs at entrances to non-smoking areas; inform all employees about the provisions of the law; and remove all ashtrays from areas where smoking is prohibited. They should also ask people who are smoking in a non-smoking area of their business to stop smoking or to leave the area. Failure to comply with the law may result in a civil fine of $100, $200, or $500 depending on the number of violations. The business could also lose their business license or liquor license.

For purposes of the Act, an "employee" means any person who is employed by an employer in consideration for direct or indirect monetary wages or profit, or a person who provides services to an employer on a voluntary basis.  "Place of employment" means an area under the control of an employer and includes all areas that an employee frequents during the course of employment or volunteering, including but not limited to work areas, private offices, conference and meeting rooms, classrooms, auditoriums, employee lounges and cafeterias, hallways, medical facilities, restrooms, elevators, stairways and stairwells, and generally vehicles owned, leased, or provided by the employer.  "Place of employment" does not include a private residence, unless the private residence is used as a child care facility, a child care home, or as a health care provider location.

If you own a business you should also consider a policy banning smoking in all company-owned vehicles (and don't forget your "no smoking" signs that must be visible on the exterior of the vehicle). This is because a vehicle that is assigned to a driver who smokes must be designated as “No Smoking” for its remaining life as a company vehicle if the driver ever allows a passenger to ride with him/her. If the vehicle is driven by any person other than the designated smoking driver it must be smokefree “at all times”.

To view sample signage, please click here. The signs need to clearly display three items: (1) the international "no smoking" symbol OR the words "No Smoking," (2) the Smokefree Air Act Web site, www.IowaSmokefreeAir.gov, and the (3) Smokefree Air Act Helpline 1-888-944-2247. The Administrative Rules require signs to be at least 24 square inches in size and the type must be in a legible font.

If you are interested in the entire Act, please click here.  If you have questions about the Act you should contact the Iowa Department of Public Health or consult your attorney.

- Rush on Business

Limited Liability Protection is Not Absolute

One of the main reasons for incorporating or forming a limited liability company is protection from personal liability for business debts and claims. While corporate and LLC owners enjoy this limited liability in many situations it is important to realize that limited liability is not absolute. A corporate shareholder or an LLC member may be held personally liable if he or she:

1. Personally and directly injures someone;
2. personally guarantees a bank loan or other business debt and the company defaults;
3. fails to deposit taxes withheld from employees' wages;
4. intentionally engages in fraud or illegality which causes harm to the company or someone else;
5. mixes business and personal assets and does not maintain separate accounts for the business and personal finances.

The Wolfe Law Group has some excellent tips on how to avoid piercing the corporate veil. 
Business insurance may be helpful in certain situations to protect you if limited liability does not apply but many insurance policies contain exclusions for intentional acts.
The best practices for running your corporation or LLC is to make sure you keep your personal guarantees to a minimum, pay applicable taxes and keep all business dealings separate from your personal accounts.

Photo courtesy of flickr by Darwin Bell

Business Estate Planning & Charitable Giving

Do you have an estate plan?  It has been reported that approximately sixty percent of people in the U.S. do not have a will.  Of course having a will is critical if you have children but let's not forget about your other baby - your business.

As the owner of a closely held business much of your wealth may be tied up in the business.  If you have not planned properly you may cause tremendous problems for your heirs.  After paying probate and estate taxes your heirs may also encounter liabilities that were payable upon your death.  All this during a time where the business may have decreased revenues due to your death.

Fortunately proper planning may eliminate many of these problems.  Using buy-sell agreements and trusts are two of the ways that business owners can protect their assets and reduce taxes.

Another important life-goal for business owners is charitable giving.  This week's Des Moines Business Record has an informative article on available options for starting your own philanthropic legacy. 

Even if you are young, consider an Acorn Fund through the Greater Des Moines Community Foundation.  For an initial contribution of $1,000 and a commitment of $600 per year until the amount equals $10,000, a young business owner could start their own permanent endowment fund.  And not only do you get the deductions for charitable contributions but you may also be eligible for additional tax credits.

photo on flickr by Norma Desmond