R. Shawn McBride recently spoke with Cathleen Scott about Employment Law. Here is the transcript: https://www.facebook.com/rshawnmcbridepublic/videos/1478379978860570/
R. Shawn McBride with you live here and I have my friend Cathleen Scott who’s a great employment lawyer. Works out of California. Her firm also has offices in California. So we’ve been talking to her for a long time, we’ve known each other for a while and we’re always comparing notes and I thought it would be great to just sit down and talk to employers about what we’re seeing and mistakes people see in employment loss. Cathleen, you want to introduce yourself a little bit? Let people know who you are and …
Cathleen: Absolutely. Hi, thanks for having me and good morning everyone. I’m Cathleen Scott, I’m a board-certified labor and employment attorney in my practice. I’ve been practicing almost 20 years now. We do both employee and employer sided and so hopefully all the business owners who are out there listening . . . I hope to provide you with some good tips on kind of the dos and don’ts when it comes to employment and your particular business.
R. Shawn McBride: Now let’s jump in a little bit. What are some common mistakes you see, things people aren’t thinking about. I know most business owners are busy, they’re running their business day to day, a lot going on and this is kind of a secondary thing until it snaps up and bites somebody. So what are some things people aren’t doing that can cause some problems in the future?
Cathleen: So the most common type of claim an employer would be exposed to, particularly if they’re a small employer, and I would kind of put that under 20 employees, is being sued for unpaid overtime. And people are like, Oh, but I get this, everybody knows you gotta pay overtime. There’s a lot of myths out there. And so one of those examples of a myth is that well, I pay all of my employees salary so therefore I don’t owe them overtime. And so that, I think, more than anything else, is one of the most common mistakes employers make. They have this belief that because they’ve put an employee on a salary basis that therefore, they don’t ever have to pay them overtime. And so that’s probably not true. For overtime you really, there’s three main buckets. So step one is paying an employee’s salary, but step two is figuring out if they fall into an exemption bucket.
R. Shawn McBride: Right. And there’s really only three.
Cathleen: Yeah, so that could be very pricey because not only do you owe the back wages, you’d owe attorney’s fees and costs as well.
R. Shawn McBride: Yeah, so you’re getting really hit with a big sticker right there.
Cathleen: Yeah, and you know there are no defenses. If you make a mistake, you’re on the hook. So this, I didn’t know or I wasn’t aware or, you know . . . I tried to do it right.
R. Shawn McBride: Yeah, so kind of hand in hand and tangential to the idea of not paying overtime is not having good records. Because often the employer gets it right from an exemption standpoint, but might not have the proof to say, Oh, but I have detailed wage and hours records, right? And show how many hours this particular employee worked in a given week.
R. Shawn McBride: So all the employers who are out there listening, do yourself a favor, number one, keep records.
Cathleen: Yes. The best record is something the employee signs off on at the end of the work week, where they say, yup, this is how many hours I worked.
R. Shawn McBride: Yeah, and I guess that’s probably true. A lot of people with salaried employees you don’t think to keep track of their hours, but I’m guessing from our conversation here, that it would be advisable to have some record of the hours just in case you would have a reclassification. You at least then have something to help.
Cathleen: Because here’s the kicker. The federal law that regulates overtime was written in 1938. It’s probably the most pro-employee statute that’s out there. It affects every employer who has two or more employees. This is everybody. What the law says is, if you don’t have records then the employee, and often it’s a former employee, disgruntled usually, they have the right to just use their recollection, and their beliefs about the hours that they worked. So it’s sort of a penalty to the employer for not keeping the records, and a benefit to the employee because they can just say, Oh, I worked 60 hours a week, I worked 75 hours a week. Without those records to prove it, the employer’s going to be in a bad situation.
R. Shawn McBride: Right. I think it was a big surprise to me to find out that hours worked is very broad. Right? This could be something-
R. Shawn McBride: It could be somebody just checking their cell phone on Saturday night.
Cathleen: Breathing air. You know having now all these little handy dandy devices. You know, most of you who are listening are probably watching on an iPad or on a computer. Well, your employees are using those, too. And they might be checking their work email at home, they might be getting a text from you at eight o’clock at night saying, hey, is my meeting confirmed tomorrow morning? And that’s compensable time, so- Work is really very broad, so if they’re breathing air and they’re benefiting you, in your workplace or even in their workplace at home, you’ve got to pay for that.
R. Shawn McBride: We can add up real quick and I’m going to step out on a limb here and say this is usually pro-employee, right? I mean the employee is probably at the office sometimes talking at the water cooler you’re paying for that, and then they go home and check email, you’re paying for that, too.
Cathleen: Exactly. And the scary part is it comes with the data, too. Another sort of issue is if they’re using their employee cell phone, and they’re working on your business, that’s their cell phone, they’re using your data, you owe them for the time, but then another trickier employment issue is what happens to that data when they leave? Do you have a policy in place that kind of deals with how do I get that data back safely? How do I make sure that I don’t have my trade secrets, my customer list, my number one client information out there in the hands of my employee.
R. Shawn McBride: Yeah.
Cathleen: So I battle that and to segue into what is really the second biggest issue is, no written documents during the employment that talk about what will happen after separation.
R. Shawn McBride: Yes.
Cathleen: That is really more than, the next big issue is really, Wow, how do I make sure that my business interests are protected? I worked so hard to build my company, I trained my sales team, I get my clients and customers best customer service and I have an employee who leaves and they can take it all with them. How do I prevent that?
R. Shawn McBride: Right, that’s very valuable. I talk to a lot of companies. You don’t realize it, but for many companies today, particularly given the internet and all these other channels, a lot of times one of your most valuable assets is that customer list, that contact base, the people you’re working with, and if you have an employee walk out of the door and set up shop across the street or go work for your biggest competitor, you’re at a real disadvantage.
Cathleen: You are. Especially if you haven’t had the benefit of any advice from a labor attorney or a corporate attorney like yourself to be able to say, draft this document during the employment, have the employee sign off on it now, so that in the event that happens, you have legal recourse against them.
R. Shawn McBride: Right, and I think you hit on something I was just going to bring up. So in a perfect world you have all these documentations in place before the employee shows up, before they show up you give them the manual, do you want to start working here, please sign our employee manual, everything’s in place when the employee starts on day one. But most employers don’t live in the perfect world.
Cathleen: True. It’s good for business.
R. Shawn McBride: It’s good for business. Most employers may have employees that never sign an employee manual or never looked at these kind of issues, so what would you counsel them at that point? And I know this may be a little state law specific, but let’s say we have a Florida employer, and they’ve got an employee and they didn’t do this paperwork in the beginning.
Cathleen: Well, they’re not completely out of luck. I mean there are Florida state law protections that they could still have a legal course of action against the former employee. It’s just going to be much more expensive for them to obtain the protections of the law without that written document. But it is possible. It’s called a tortious interference claim but those can be brought. So they’re not completely out of luck. But they should use that as a teaching moment to say okay, I don’t ever want to be in this situation again, I’m going to make sure I tighten up, get a hold of my local or corporate counselor or employment lawyer. Look, these documents are not overly complex. They’re not that difficult to draft. It’s a very simple solution to a very important problem.
R. Shawn McBride: How does it look doing it midstream? I know we’ve worked and I don’t do employment law regularly, I’m a corporate guy, but you know this has come up tangentially in Texas. We worked with an employment firm and we had a client who we implemented a lot of this part-way through, and under Texas law we got comfortable that we could tell them, okay, you need to sign these documents now to continue your employment. And so we could probably do something similar in Florida, where we could say-
Cathleen: Absolutely. No time’s a good time, because it’s always difficult to shake things up in your workplace. But continued employment, if you do it in the middle of employment, better to do at the beginning, but it’s not difficult if you don’t. For some reason employees seem to be more open minded to rolling out changes at the beginning of a year, so making goals now to start things in January of next year to have a new set of documents. It’s absolutely appropriate under Florida law, to require an employee to sign them at the threat of, you can’t work here unless you do. And that’s okay, but you should do that in conjunction with counsel, depending on what state you’re located in, and where you do business.
R. Shawn McBride: Right, you want to be very careful about this, and obviously you want somebody to go over the documents you’re going to have the employee to sign because you want to make sure they accomplish what you’re trying to accomplish, you know, get the protections you want.
Cathleen: Right and you don’t want to look like the bad guy when you’re the employer. So for our employer clients, what we often do is we’ll do the drafting of the handbook, the drafting of the job description, any restrictive covenants, non-competes. And then we’ll come into the workplace and actually present the changes. And so we’re kind of viewed as the bad guy. But that has two very important qualities, I mean one is the employer can say, this is the advice of my attorney, so it’s not like they’re trying to torture their employees.
R. Shawn McBride: Right.
Cathleen: The other aspect of it is, in addition to being the advice, it also becomes, they know that we’re serious about enforcing these things because they’ve spent the time and money to have an attorney come to talk them and have it signed. So the perception is, okay, it’s a big deterrent, you know.
R. Shawn McBride: Yeah, there’s definitely something to be said about having the attorney be the bad guy. You know, that’s one of our assigned roles after we come out of law school is to be bad guys and help our clients, but you can send the message differently when it’s coming from this third party. It’s like they’re saying this, not necessarily I’m saying it.
Cathleen: Right. And I feel like for our firm, we probably do about 50-50 employee versus employer side. A little heavier employee right now maybe 60/40, but we feel like we have a lot of credibility in that position because we see these things when the employee comes in. When they’re post separation, they walk in the door with this document and they say, what are my rights? Is this enforceable? How does this go? And that really brings up what I think is really the third big issue employers kind of on a don’t list is, be really sensitive to the way you let an employee go.
R. Shawn McBride: Yeah.
Cathleen: I can’t tell you how many times an employer will walk into an office like ours and say, I feel like I’ve been mistreated, and it’s always over something relatively minor, but then when you dig a little deeper, you might find something a lot more serious. For example, an employee might walk in and say, I was terminated by a Post-It Note. And that’s actually a true story. Or my employer objected to my unemployment, or refused to pay me my last week’s pay, and that’s what sends them into a lawyer’s office. Then we dig a little deeper and we realize, oh my goodness, they were misclassified this whole time. Or oh my gosh, they were mistreated or some other employment laws were broken.
R. Shawn McBride: Yeah.
Cathleen: Sometimes the simplest of issues become complex and so from an employer’s standpoint, how can you avoid that? Challenging unemployment is a big one, I think that is really a big motivator for people to come see an employment lawyer. So my advice to any employer out there is think long and hard before you want to object to everybody’s receipt of unemployment benefits and recognize you might be pushing them into the hands of an attorney and maybe under that microscopic view, that may not be a place that you really want to be at that moment in time.
R. Shawn McBride: Right. Yeah, just for the people that aren’t as familiar with the attorneys and our ethics rules, I mean our ethics rules require we work for the best interest of our client. And so that means no stone goes unturned. An employee shows up in Cathleen’s office, it’s what is every avenue of recovery do I have to help this person? And that’s our job. And that’s one of the reasons a lot of people love their attorney, right? They hate attorneys but they love their attorney, because they’re trying to work with them.
R. Shawn McBride: When you get a good smart lawyer on the opposite side, they’re going to be looking at the stuff, so anything you can do to avoid things escalating to that level is great.
Cathleen: Right, that’s right, Shawn. So some of those things if I had to make a little checklist would be one, think twice before you deny an employee their last paycheck or before you don’t pay them their accrued vacation time, or any time off that they might be entitled to. Because those type of claims, that you might feel really entitled or emboldened on, wow, you know, I don’t really want to pay that versus I’m angry, they left, they didn’t give me notice, but you might very well be sending them into the lion’s den to try to come up with other reasons and violations that might have happened during employment.
R. Shawn McBride: Yeah, I think I see that. That’s definitely a good thing for people to think about. Take the long view of how things are going to play out. Don’t make things overly contentious.
Cathleen: Exactly. On that same note, another common mistake would be how employers deal with complaints.
R. Shawn McBride: Yeah.
Cathleen: Especially small businesses. Because small business owners are often spread very thin, they’re the CFO, they’re the CEO, they’re also the head of Human Resources, they’re wearing all these different hats and so when an employee comes to them and says, geez, I’m having trouble getting along with Sally, or so-and-so did this to me, often the response can be somewhat negative because just as a matter of time, they’re pretty strung out and they kind of hope that everyone can work and get along. So my other last sort of big topic of some dos and don’ts for employers out there is, when someone comes to you, an employee comes to you and they have a complaint, the first word out of your mouth should be, thank you for letting me know and I promise to look into that. And to take really a lot of caution and make sure that you don’t tune things up by putting your own emotional energy into being angry about the complaint, ’cause that could be misconstrued as retaliation and retaliation is the number one box checked on EEOC charges for discrimination. So let’s learn from the statistics and know that we could probably . . . we control the workplace a lot with our own behavior and our own personalities, so some of it can be just be more open to hearing dissenting viewpoints and complaints, not turn it into something more than what it is.
R. Shawn McBride: Yeah, and you’re really hitting on something that I’m passionate about which is culture. It’s very important in an organization that you have a certain culture and while it’s tangential to the employment law issues, but if you have that right culture where employees can talk, they can raise issues, they can talk about problems before they become big problems, you can cut a lot of these off at the pass, and I’ve had some employers that have very strong cultures, it will cause employees to eject themselves. Right? If you have a good culture and you are doing business a certain way that you want to do business, employees that don’t fit will often leave voluntarily before you even get into this whole mess of issues.
Cathleen: Absolutely, and that’s why they call it Human Resources. You know, it is our most valuable resource, as business owners is to keep the people who are our first line of defense or answering the phone, keep them happy. That’s good for business. And it’s good to prevent lawsuits, too. Because often people that feel like they work in a place with great culture, are more loyal to that culture, and less likely to go see an employment lawyer or to lodge a complaint.
R. Shawn McBride: Yeah. You’ve given us some great stuff. There’s one more thing I wanted to visit along which has been a common issue that’s come up, is this employee versus independent contractor. We’ve talked this entire time about employees, and in this world, particularly with the internet being out there and everything happening, there’s a lot of people who view everybody as independent contractors, but the government is really pro-employee. They think more people are actually employees than independent contractors, or when you get in these reviews that seems to be happening.
R. Shawn McBride: What tips can you give people for getting this right?
Cathleen: So yeah, that’s a very good question. Especially here in the south, we’re one of the most hotbeds for misclassification cases, in part because we don’t have unions. And so it is very common for small businesses to classify someone as independent contractor. It’s a costly expense if you get it done wrong because the IRS is going to come after you for back taxes, self -employment taxes, and the employee then could later come back to you if they’ve worked overtime, even though they were classified. A couple of really scary points to think about, even if you get it wrong, even if there’s a contract that says, I’m an independent contractor, that’s not enforceable for unpaid overtime. So that’s real scary, so recognizing that risk, I would always recommend that you err on the side of classifying someone as an employee, but here’s the guidelines, the hallmark test is really about control. So a true independent contractor doesn’t need training, doesn’t need guidance, doesn’t need to be told how to do their job, and they have a lot of autonomy. They have an autonomy to schedule as they need, they have their own tools, they have their own truck – the cable man’s a good example.
R. Shawn McBride: The cable guy? I always talk about the roofer. The roofer, you tell the roofer to put a roof on your house, you have no idea how to put a roof on your house, they show up, they get a roof on the house.
Cathleen: That’s right. And so if there’s a lot of control being exercised over a person, they’re probably not an independent contractor. The next thing is about the length of time. If the relationship is more permanent, it’s not just a short three to six months, it becomes a more regular steady-type of arrangement, that looks a lot more like an employee than an independent contractor. So I would definitely, you know, the longer relationships last, the more likely it’s an employment relationship. Often it can start as a true independent contractor, but when it works out for a long time, it’s probably going to morph into that employee situation and you’ll want to take a look at it. But the most, most, most, underscore this, best thing that you can do if you’re going to hire someone and classify them as an independent contractor, they must, must have their own separate licensed corporation in the state where they are working. And that corporation needs to be responsible for their own workers’ comp, and for any other insurances that are necessary. Most states look at the fact that if they’re not, if you’re not paying a true employment ID number, that that’s not going to be a true independent contractor. So if you’re just paying someone by their social security number and you’re not an established corporation, that’s big red flag to both the IRS and employment lawyers that maybe it’s truly not an employee. Truly not an independent contractor.
R. Shawn McBride: Right, and that’s great things to think about. And I think the important takeaway from this is this is complicated stuff, if you’re out there and you’ve got people working for you, whether they’re employees or independent contractors, just stop and get an evaluation done. Look at where you’re at right now and get your rest, because one of these issues, I mean we’re talking tens of thousands, maybe even more money, and to stop and just do a quick review, truss up a few issues, get yourself moving forward, maybe do that once year, every six months or so,
R. Shawn McBride: And a lot of people have probably never done one of those, it’d be great to stop, do one here in the next couple of months, really assess where you’re at, adjust some things, and take a lot of these risks off the table.
Cathleen: Absolutely. And I should mention also, have a written agreement as you kind of alluded to there. Definitely a written agreement, and that should be written by an attorney, you know these forms that you can download, these Zoom sites or whatnot, that’s not going to be state specific, it’s not going to be fact specific to your situation, and it’s a good trap for the wary.
R. Shawn McBride: Yeah, and you don’t know how good these forms are, they’re coming from everywhere. Again, like Cathleen said, just saying somebody’s an independent contractor, that’s not going to make them an independent contractor. You can say whatever you want til you’re blue in the face, they’re gonna look at it. And then every state has a different test, right? There’s a small dewpoint test, there’s state-specific multipoint tests on whether somebody’s an independent contractor or employee, so you really want to address it to your locale and-
Cathleen: Keep in mind the IRS is not a party to that agreement. And so they have the right to come in and say, geez, I think it’s an employee, so even though you have this nice, fancy contract, we’re gonna go ahead and assess you back taxes. And that’s an assessment almost always against the employer not the employee.
R. Shawn McBride: Right, and let’s think about it. States are economically motivated, right? They want bigger coffers for workman’s comp in their insurance fund, so they’re pro-employee, too. You know, they want to have more people in the employee bucket so they have more resources flowing through.
Cathleen: Right. So I don’t know that you’re really saving much by having an independent contractor versus an employee.
R. Shawn McBride: Exactly.
Cathleen: You know, the risk is so great that it’s really got to be the exact right fit or it’s definitely a trap.
R. Shawn McBride: You’ve given us some wonderful stuff to think about. You want to give people your contact information in case people want to reach out to you.
Cathleen: Absolutely. You can find us at www.FloridaLaborLawyer.com. I’m Cathleen Scott, my partner is Lindsey Wagner. We also have a second website www.ScottWagnerLaw.com. We’re located both in California with offices in Burbank as well as in South Florida here with offices in both Jupiter and West Palm Beach. We offer consultations for employees and employers, both by Skype, in person and by phone, whatever works great. And our phone number is 561-653-0008. It’s probably easiest to find us online and just contact www.ScottWagnerLaw.com. Thanks so much for having me, Shawn.
R. Shawn McBride: Thanks, Cath. I’m R. Shawn McBride, www.McBrideAttorneys.com. As you know my mission is to help successful private business owners build companies to stand the test of time. And part of that is getting these right people like Cathleen involved, to go over people’s businesses and their plans, so if you have specific questions and want to follow up, let us know, we can try to get some content directed to exactly what you need and we look forward to talking to you again in the near future. Thank you!
Cathleen: Thanks, guys.
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