Lawyer Ethics: An Ethics Post Revisited

The last two weeks have been about as hectic as any I have had in recent months. A good time to revisit the archives. Check out this post on Lawyer Ethics. The post started a buzz on several different blogs the week it was written dealing with lawyers and ethics.

An apt summary of the post is that sometimes the non-lawyer and lawyer worlds clash as to what constitutes the right ethical decision. The primary case cited in the post involves an attorney faced with whether to tell the grieving parents of two murdered children where the children's bodies were buried. The attorney knew because his client murdered the children and told the attorney where the bodies were located.

After reading the above facts, what would you do if you were the attorney? The answer likely depends on whether you have attended law school and, if so, how well you did in your Ethics 101 class.

Divorce: A Mediation Post Revisited

I don't think "Find A Divorce Attorney" is at the top of most people's New Year's resolutions, but that seems to be the way it is going in my circle of friends. In addition to my friend in Arizona last year, several others have brought the topic up of divorce lately. I thought it would be a good time to revisit a post I wrote on Divorce Mediation. An apt summary of the post is that more often than not both parties to a divorce will be happier if most of the issues can be taken care of through mediation.

My advice: give mediation a try, especially if children are involved.

Thanks for the Shout Out Inter Alia

Like many of you I love reading other legal and political blogs. One blog I check often is Inter Alia. I noticed that Inter Alia gave a shout out to this blog yesterday. Thanks Inter Alia.

Labor Law: Employee or Independent Contractor?

One of my colleague’s clients recently found itself in trouble with the IRS and its insurance company for incorrectly designating several of its employees as independent contractors. The employees had been with the company for at least a year when the company decided to restructure the relationship to “save money.” The company laid the employees off only to hire them back as independent contractors the following week. The idea was that by designating the employees as independent contractors the company would not have to pay payroll related taxes and could cut down on the amount it spent on insurance benefits.

Several months after designating the employees as independent contractors, one of the employees wrecked his truck while working for the company. The company was held liable for the accident, but because it did had not identified the driver as an employee for insurance purposes it was prohibited from claiming coverage under its insurance policy.

In addition, it is my understanding that the company has recently had penalties levied against it by the IRS for failing to pay employee related taxes.

Autonomy versus Control
The company failed to understand the biggest factors in distinguishing an employee from an independent contractor: (1) the ability to control how the individual performs the job; (2) whether the individual uses his own or the company’s equipment; (3) how the individual is paid; (4) where the individual works; (5) when the individual works (i.e. set work day schedule).

Recommended Precautions
What could the company have done to avoid problems with its insurance and the IRS? Consider the following:

The company may have been able to address the above factors and ensure the individuals received the treatment the company wanted them to have by (1) having the individuals sign an agreement acknowledging their status as independent contracts; (2) requiring the individuals to obtain their own business licenses, tax identification numbers, places of business and other clients; (3) allowing the individuals to control the manner in which their work was performed (i.e. does the company give “instructions” to the individuals or merely make “suggestions.” Instructions are indicative of an employee, Suggestions are indicative of an independent contractor); (4) not hiring former employees and designating them as independent contractors. The company may have considered hiring the individuals through an employment agency.

When In Doubt, Designate As An Employee
But probably the most important precaution the company could have taken is to have treated the workers as employees when it had doubts as to their correct classification. The company may have even asked the IRS to give an opinion on the classification. Trust me, it would have been far better for the company to have taken the above steps than to attempt to clean up the mess they are now in.

Labor Law: Hiring Checklist

2006 ended with one of my small business clients running into a flury of employee problems. Employees on drugs, allegations of sexual misconduct in the workplace and theft to name a few. One of his employees was brazen enough to use the business gas card to fill the tanks of ten personal vehicles. I guess the guy thought it was some type of "friends and family plan." The business caught him because his purchases maxxed out the credit limit of the card and because he purchased the gas at 11:00 at night when all of the company vehicles were tucked safely in the company parking lot.

It is my opinion that the employee problems the company has run into is largely a result of its hiring practices. It seems my client is still trying to run his 10 employee business the same way he ran the business when he had only one employee.

In addition to assisting him with putting together an official Employee Handbook, Confidentiality Agreement and Non-Compete Agreement I suggested he consider the following checklist when hiring employees:

Employee Hiring Checklist

1) Draft a written job description for the position you want to fill;

2) Let current employees review the job description and make suggestions on possible alterations;

3) Screen applicants by requiring them to provide a resume with references;

4) Write down interview questions, interview applicants and evaluate the effectiveness of the questions after interviewing each applicant;

5) Put together an applicant appraisal form and complete the form after each interview;

6) Call references (employers, schools, etc.);

7) Perform background checks (DMV, credit, criminal background, etc.);

8) Ask the applicant about any confidentiality agreements he or she may have signed with former employers.

9) Provide the applicant a written offer or written rejection letter;

10) Make all offers contingent upon successful completion of drug, skill, physical and psychological testing.

11) Write out the new employee's terms of employment and have the employee sign it prior to beginning work; and

12) Have the new employee review and sign your employee handbook, Confidentiality Agreement, Non-Compete Agreement and any other applicable agreements.

You may have other items you would add to this checklist. Feel free to copy this checklist and add to it as best suits the needs of your business.