Mark: How often do you get paid $40 to stand up and talk? Thanks so much for everybody in the group who’s been helping me out on the Thomas house thing. It means a lot to me, as I think most of you now know.
I’m here to talk today about employment law. I put some fliers out. There’s been some employment law changes you might be interested in. One of the things that I do if you look at my flat fee schedule which nobody else does is I will basically put an entire employment program together for you. It’s cradle to grave. It’s A to Z. It starts with an application, and it ends up with your last termination notice and final check.
Why do you do that? Well, you know, I always tell people, I make most of my money from litigation. In the state of California probably the riskiest, most costly part of your business is those little folks you call your employees, or even moreso, those people you don’t want to call your employees who you call independent contractors and who are going to come back and cause you serious problems.
I try to exhort my fellow business folk to get an employment program, which we call a due diligence regime, together so you have a plan for dealing with these very expensive, very costly, very risky people. I put it together in a package. It’s a flat fee package.
Essentially, what I do is I’ll do everything that needs to be done until you’re satisfied. And, here’s the important part. Khan, are you listening? Until all the employees finally sign for the handbook and they sign for the application and they sign the offer letters.
You can not believe how often I put together these programs and then I call up later and I say so, did everybody sign. They go not yet. I go well, why not. They go I don’t know, just haven’t gotten around to it, don’t want to bring it up. Or, we’ve been busy, or blah blah blah. That is absolute death.
You want a really hard lesson? I’m doing a litigation right now. We’ve gone over $100,000 in attorney’s fees and costs. You know why we’re doing this, ladies and gentlemen? Because the employer did not get the employee to sign the application, the offer letter, or the employee handbook.
They had it all. They had the name all typewritten out and everything. Just didn’t get the signature. So, guess what? We’re going to spend a year and a half or even two years in California Superior Court litigating. You don’t need to do that. All you’ve got to do is get them to sign. And, it’s even easier than that. If you don’t have a plan now, all you need to do is get a plan, work through it with me, get them to sign, and you can avoid this unpleasantness.
How many people here can afford to spend $100,000 to $200,000 on an employee litigation? See? Nobody. I bet everybody in the room has an employment program, right? No. Actually, more than half of you probably don’t. You see, that’s where the disaster is waiting to happen. Because this is extremely costly litigation, and it is very, very hard to win.
Believe it or not, the law is set up that even if the plaintiff, the employee, sues you and brings a frivolous claim, you have a very, very, very hard time of getting your attorney’s fees back. So, it is front loaded all in their favor. All you can do is basically put a plan and a program in place that will deal with that.
What does the program start with? It starts with an application. You’d be surprised how many employers don’t take applications. What is an application? An application is an opportunity to start communicating with the person who wants to work with you. You can find out what they know, what they’ve done, where they’ve been, all that sort of stuff that’s helpful.
But, here’s another thing you probably haven’t thought about. An application is also a form of protection for you, because it can also be an agreement. One of the things I insist on in all of my applications is they sign ‘even if I don’t get hired, if I want to bring a discrimination claim or some other type of claim against you we’re going to arbitrate it.’ How’s that? That’s one form of protection that you could have, not even hiring somebody.
Then, we go to the next part – when you have an offer letter. You know how many people in this room have trade secrets? I won’t go into what a trade secret is, but you have trade secrets. Probably the most common trade secret is what you call your customer or your supplier list. You know how many people hire employees, give them access to all of that, and when the employee walks out the door they take them with them?
So, every offer letter I put together has an agreement about trade secrets which includes very specifically customer lists and supplier lists and says by the way, if we part ways some day in the future you agree that those are trade secrets, and you’re not going to take those with you, and you’re not going to use them. Is that a good thing? Oh yeah. Why?
Because I have a client right now who had a manager in one of the restaurants that had access to all those things is walking out the door going to start a new restaurant and guess who is going with him? All of the customers, all of the suppliers. Of course, everybody shows up at my door and says what can I do about that. Well, let’s just say it’s very difficult. If you have this regime in place it becomes a lot simpler.
Then, we go to the employee handbook. How many people have an employee handbook? Not everybody. An employee handbook is basically a playbook. It says this is how we’re going to do things. One of the most important things in it, even if you don’t pay attention to anything else, because a lot of employers don’t, is that it has an arbitration agreement that says if we have a dispute later we’re going to arbitrate it. That’s the saving grace. Even if you screw everything else up, having an arbitration agreement is going to help you.
Then, you have a disciplinary section of this regime that deals with when you have disputes while you’re working with the employee. Everybody asks me why do I have this. One, it’s a communication device. You can have communication back and forth. It memorializes that communication, and it also protects you. Because it shows you’re not a really nasty arbitrary beast who’s just doing mean things to people for no reason at all.
Then, there’s the termination thing. We have a termination module which deals with what happens when they leave. Well, you want to memorialize that. You want to memorialize that you paid them all the stuff that they were owed. You want to memorialize that yes they’re not going to take any trade secrets with them and some other stuff.
Then, you part ways. Why do you do that? Probably 50 percent of the litigations that I have are wrongful termination. They include all kinds of allegations that they weren’t paid their wages, that they were extorted into agreeing to things that they never agreed to, and this is all basically he said she said. So, if you have all of this written down you just pull this out and say that’s not really the truth, is it. It saves you a lot of heartache, especially if you have to go in front of the labor commission.
Because the labor commission turns around, looks at it, and says that doesn’t really jive with what you’re saying. This is very important stuff. If you don’t think that it’s very, very expensive to deal with all this stuff, it really is. As I tell people, I make money off the litigation. I make a lot of money off the litigation, unfortunately. All I’m saying is for you guys if you don’t want me to make a lot of money, do this regime and basically have it in place so when something does come up.
I’ll give you an example. Probably once every 15 years an employer will have a problem. That’s not a lot. But, that one could kill you. When you look at this plan that you have in place and all the problems that you can avoid in the meantime, it just makes sense.
Business Growth Innovators Member: Protests.
Mark: Yes sir?
LeTip Member: but if you put one of those things, can employees go back and say well this was beforehand? If we put these contracts in place effectively, can they go after you from previous moments?
Mark: That’s a very vague question.
Business Growth Innovators Member: For example…
Business Growth Innovators Member: Retroactive.
Business Growth Innovators Member: Retroactive, yeah. Can they go back and say well we didn’t have this agreement before, so I’m going to go after him for the years before where he didn’t have one?
Business Growth Innovators Member: Mark wants…
Mark: Once they sign an agreement, they agree the stuff before that is governed by the agreement. Here’s the cool part. The stuff going forward? Definitely covered by the agreement. Here’s the deal. You want to get the agreement signed as soon as possible.
Business Growth Innovators Member:Yeah.
Ron: Two minutes, but I will ask a question.
Mark: Sure, Ron.
Ron: Since I raised my hand.
Ron: Actually, not a question, but I have predominantly independent contractors scenario as opposed to employee employer relationships.
Mark: And Ron is well advised on that.
Ron: Yeah. Because the person who is doing all that for me is Mark. I just want to say Mark’s helping me out with a ton of different things, and I run everything by him. It makes me feel good every single time I’ve got something going on that requires legal documents I just send it over to Mark.
That’s not really a question. But, how do you deal with a growing independent agency and the government trying to clamp down on this employee employer versus independent contractor scenario?
Mark: I think, as I discussed, we’ve discussed, I’ve discussed with a lot of people who do this, especially the sales commission independent contractor agreements, the best thing to do is to put in the clauses that I put in. Right?
Mark: And, basically, the golden ticket is having separate commercial general liability insurance in place. When you coordinate that with these agreements it makes it very clear to all concerned that yes these are two separate entities, or people, that are doing things separately. Because nobody in their right mind who is an employee would buy insurance where they have their employer as an additional insured. It just doesn’t compute.
If you do that, that’s your golden ticket. If you don’t, you might have problems. Essentially, when I put these agreements together you’ll see every agreement has that in it. And, it has indemnity, and all this other stuff – stuff that only people working at arm’s length would do.
You see, that’s very important. Because all the other stuff is helpful, but stuff like that makes it very clear because it’s right there in front of you. It’s physical. It’s something you can see, something you can really come to grips with. That’s really the best way to do it.
Business Growth Innovators Member: Anyway, if an employee or independent contractor [Inaudible 0:10:47] with you, should you still have them sign something that would cover you for retroactive stuff [Inaudible 0:10:53]?
Mark: I’m sorry?
Business Growth Innovators Member: If an employee or independent contractor [Inaudible 0:10:57]
Business Growth Innovators Member: …do you still protect yourself with…
Mark: Yeah. I think what you’re trying to get at, if I understand correctly, is can you basically get an agreement, like, when they’re going away, and say… Or they’ve already left. Yeah. That’s not really a good idea. Here’s the thing. I have so many people call me up saying I’m firing so and so, can I make them sign a settlement agreement… No, no, it’s the same thing. Or, after they’ve walked out the door. By then, ladies and gentlemen, it’s too late.
Business Growth Innovators Member: Yeah.
Mark: Right? It’s too late. You want to do it while they’re working for you or before they start working for you so that it’s very clear from the beginning. Because just think of it from a common sense standpoint. When somebody’s walking out the door, they probably are not having all happy feelings with you anyway. Then, you say would you please sign this settlement agreement so you won’t sue me. What do you think the chances are that that’s going to be successful?
Here’s the final thing. How does that make you look? It makes you look cheap and petty and kind of overreaching. You don’t want to do that. That’s why I think putting a program in place would probably be the best thing long term.
Thank you very much ladies and gentlemen.
The Law Offices of Mark D. Holmes, APC specialize in the following areas of business law:
- Business Litigation
- Contract Law
- Corporate Law
- Real Estate Law
- Commercial and Maritime Law
- Business Transactions: contracts, buy-sell agreements, asset sales, incorporations, LLCs, employee handbooks
I offer free consultations; communicate often and in detail; accessible by email and cell phone; twenty years experience in business transactions and litigation; and I have actual business experience!
4 San Joaquin Plaza
Newport Beach, CA 92660