Archive for February, 2015

7 Basic Principles of Avoiding Legal Conflicts With Employees

As an employer, even if you are committed to complying with employment directives, you can still run the risk of going through some legal problems. Some legal firms, for example, assert that any employer needs to always be prepared for any eventualities. Some of these problems can lead to expenses, negotiations, court appearances, or worse, tend to tarnish your establishment’s reputation.

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As much as employer-employee relation is concerned, one of the best ways to prevent problems is to avoid unhappy employees in the first place. This will keep your business safe from issues that might urge them to seek the intervention of the legal system.

This is a difficult mission to accomplish. But since it can save your company thousands or even millions of dollars plus your company’s name, you can apply a few basic principles to avoid getting into a lot of disputes with your workers. Here are some of the ways to avoid them:

1. Treat your workers with respect.

Respect is one of the most important things that can make anyone feel that he is valued. If you treat your employees with respect and kindness, they will also respect the management in return. And if they have a problem, this respect will prompt them to bring the matter to your attention instead of bringing them elsewhere.

2. Do not embarrass your employees in the presence of other people.

Even little children in your family get resentful if you embarrass them in public. If your have a concern for a particular employee, your best move would be to get his attention and talk to him one-on-one. This will make him feel that you value him as an employee. You should make private any personal information your worker discloses to you. You shouldn’t break his trust.

3. Be available for your employees especially when necessary.

Whether you like it or not, as an employer, you are responsible for your employees’ morale and well-being. You should be available for your employees when they feel they are not happy with certain management decisions. Employees should be made to understand management prerogatives and goals. Otherwise, they can become legal issues.

4. Value your employees’ suggestions and let them know it.

No one knows the job better than the person who handles it everyday. Your employees’ suggestions deserve attention when it comes to their job, safety, and general welfare. You should value them and try to implement good ones.

5. Avoid discrimination in the company.

Senseless discrimination is one of the major causes of employee low-morale. You need to be consistent with the way you treat your workers to avoid problems of this nature.

6. Evaluate your employees’ performance on a regular basis.

Employee performance evaluation is one of the most important aspects of business administration. This can help to let workers know where they stand in carrying out their duties. It can help to alert workers if they fall short of expectations so that they can have an opportunity to improve. Employee evaluation can be your best defense against a legal battle if you have to fire a worker for cause.

7. Make decisions based on the employee’s job, don’t make things personal.

If there’s a need to reward or punish a worker, you should base your decision on what he has or hasn’t done that cause the damage. As an employer, you must not make personal grudges or attachments part of management decision. Being objective can help to keep you out and away from legal problems.

These principles are simple and fundamental, but they can help to keep you away from legal problems that might cost you millions and countless sleepless nights.

Determining the Difference Between an Independent Contractor and an Employee

In my practice advising business owners, they ask this question all of the time. What is the difference between an independent contractor and an employee? I have found that a majority of business owners are improperly classifying their employee or contractors, which could lead to serious trouble down the road. We answer this question by looking at substance over form, i.e. the actual job, not what duties are written on paper.

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If you browse the IRS website, you will find that the IRS sets forth a general rule for defining an independent contractor. The IRS website states “the general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done.” This is a very broad definition and can be subject to interpretation. Further, the IRS site states “you are not an independent contractor if you perform services that can be controlled by an employer (what will be done and how it will be done). This applies even if you are given freedom of action. What matters is that the employer has the legal right to control the details of how the services are performed.” Again, this can be subject to interpretation.

So as a business owner, how can you be sure that you are classifying your workers correctly to avoid any unforeseen legal issues? You must look at the facts of each situation, what the worker’s job actually consists of. Some of the factors to consider are: who directs the person’s work? Does he/she have a boss or work independently? Do you provide the equipment needed for the job or does the worker? Does the worker have a set schedule with set meal/break times or do they come and go as they please? How are they compensated? Do they have a written contract with a start and end date? Are any benefits provided to them? Are they required to report to someone or just provide a finished product? One example I like to use when trying to distinguish between an employee and an independent contractor is as follows: Let’s say you need your house painted. You hire a painter to do it. You tell the painter that they need to paint between 9:00am and 5:00pm, they can take an hour lunch and you will provide the supplies for the job. You will pay them for all hours worked. This painter will likely be deemed your employee. On the other hand, you hire a painter to paint your house. You pay $3,000 for labor and materials and only care that the job is complete in 2 weeks. This painter will likely be deemed a contractor. Please understand this is merely for example and is in no way meant to opine on the painting profession.

As you can probably tell, this is a very gray area of the law, but one in which comes with high penalties if not handled properly. Whether you are employing independent contractors or employees is a factual question, a question that should be answered from the start to avoid long term trouble. Do not take this lightly. As a business owner, you should be working with competent legal counsel to help in the analysis and to save you money in the long run.