There are several very common problems my clients have when they get to the point in their business where they are actually starting to operate in the black. Luckily many of these problems can be avoided with a little bit of planning and careful consideration. These new problems usually occur when a small business expands to the point where they need to take on employees. Most of the time hiring, training, compensating, disciplining and eventually firing employees is like walking through a mine field and should be carefully planned and executed.
If you are a small business with employees of your own, you may have noticed a trend lately relating to ex-workers suing their employers for supposed violations of their employment rights. This happens because many small business owners do not have the proper training or legal assistance to correctly comply with federal labor laws. Many small businesses also fail to properly keep records of employees or employee hours or decide to “pay” employees through other means such as providing housing or food in exchange for work performed. Although this is never advisable, at the very least, the employer should keep very precise records of this arrangement, the hours the employee is being compensated for and the value of the housing or food being provided. Without detailed records, unscrupulous employees can argue that they never received compensation for their services and when brought into federal court, it’s virtually impossible for the employer to prove they fairly compensated the employee.
At the same time, there are many small businesses who don’t realize or care what the applicable employment laws are and don’t treat their employees with respect or fairness. Those employers should be sued and forced to do what is legal and ethical, but many others have done nothing wrong and do not deserve being sued.
A second common problem small businesses have with employees happens when they rely too much on a particular person with little character or loyalty. Many businesses, especially service-oriented businesses, need to spend large amounts of time or money on training their technicians. This can sometimes be a double-edged sword. Training makes your employees more efficient and valuable, but if they decide to leave your employment (because they are not good employees or because you are not a good employer), this investment can be completely wasted.
Worse than losing your investment in employee training is having a worker who uses their position of trust and who has access to sensitive information or company processes, steals information and then directly competes with you by starting their own business or working for your competitor.
How can a small business avoid these costly problems? Some of the time you cannot, but you can protect yourself by having a well written and thorough non-compete agreement with the employee that will expose them to serious legal consequences if they violate their position of trust.
The bottom line is that small business owners need to educate themselves about the rules and regulations that they are obligated to follow for their particular business. They also must make sure every decision or agreement they have with an employee is clearly defined, understood and written down. The best way to accomplish these two tasks is to hire a pro-business attorney who can guide you through the difficult path you and your business are taking. You need someone on your team who believes in you and who cares about the success of your business.
It is critical to the long-term success and stability of your business to find a professional who understands the legal consequences of your business decisions and who can help you structure your small business in a way to avoid unnecessary litigation.