No one likes to be involved in a lawsuit — especially since they can be so expensive. However, if it should happen to your business, it’s important to not only hire the right lawyer but also to make sure you’re getting your money’s worth from that lawyer.
You need to be aware of how much the litigation will end up costing you in order to make an informed decision about whether or not you want to go through with it, or to settle.
“You might want a very long, involved budget that says how much it’s going to be for certain things. Try to get that in writing,” says Gerald Knapton, partner at Ropers Majeski Kohn & Bentley PC.
“When the bills come in, you and your accounts payable staff should follow and make sure that it seems to be staying within the budget. If the actual invoices exceed the budget by more than 10 percent, have a discussion with the lawyer to find out what’s going on.”
Smart Business spoke with Knapton about what to look for when hiring a lawyer — questions you should ask and how to make sure your dollars are being used properly.
What’s the first question a business owner should consider when looking for a lawyer?
“How much is this going to cost me?” Employers need to have that clearly in mind, but it’s hard to tell sometimes. It’s important to understand the costs on the average case and then try to position yourself at the bottom end of that range, if at all possible.
The best way to do that is ask your lawyer if they have data. Lawyers are resistant to answering how much a case will cost, but push them. Write down the estimate and confirm it in an email, and don’t stop there. Once you’re 60 to 90 days into the case, come back and ask for a revised estimate. That is the key, because while a good, honest lawyer will give you their best shot at the beginning, they are just estimating based on their experience.
What price points should you negotiate with the law firm?
You should negotiate the hourly rate, costs and what’s going to be included in the costs at the beginning. You also should spell out in your retainer agreement the form of the bills. If you don’t do this, some law firms won’t bill in tenths of an hour, which is the standard.
Make sure the firm does not block bill — that is, if there’s a day when they worked 10 hours on nine different matters, have them break it down and explain how much time for each of those discrete items; they’re kept honest by having to put down actual time for actual work done.
What do you do in the case of a fee dispute?
As soon as the bills appear to be exceeding either what you’ve paid in the past, or what your budget said it was going to be the cost, you complain. You work your way up the chain talking to the relationship partner at the firm, then the managing partner of the office, and if necessary, you go up to the firm’s managing partner. Usually, if you’re not asking for free services, that works well and you wind up getting a good hearing.
You can always complain to the L.A. County Bar Association; they have a wonderful program — the Mandatory Fee Arbitration Program — where a client can come and ask professionals look at their bills.
The L.A. County Bar Association Dispute Resolution Services (DRS) allows you to do both mediation and arbitration. If it comes to the point where you and your firm really can’t agree, then you might mention the idea of Mandatory Fee Arbitration to your firm. The lawyers will treat you differently because they don’t want to go through this program. If a client requests it, a lawyer has to go along with it.
What are some other cost-saving tips?
If you can shift away from an hourly rate and go to a flat fee, or a monthly cap, that can save you approximately 5 to 10 percent. Remember that 97 percent of cases are settled. You always want a provision in your agreement that says if the case is settled, the fee will be adjusted.
It’s also worthwhile to look at the amount of documents that are going to be at issue, which is the biggest single factor driving cost in today’s litigation. Electronic programs are now being used to sort documents, and that’s been developed to enable you to perform predictive coding. You can run some samples and find out with 99.9 percent probability all of the documents that might be implicated by your request, especially with the in-house help of a sophisticated IT department. This will cut your costs down dramatically.
In addition, there should be continued discussion about how the documents will be handled. Who’s going to do it? How can we do it more cheaply? Can we do predictive coding? Can we do it some way that will reduce the cost of that?
What else can you do if you’re going to trial?
The first thing you ought to do, if you’re a defendant, is tender this claim to your insurance company. If you don’t tender, the insurance companies will probably deny the claim based on failure to tender. You may even want to try to buy insurance; you can sometimes get insurance with the disclosure that it is existing litigation.
Gerald Knapton is a partner at Ropers Majeski Kohn & Bentley. Reach him at (213) 312-2016 or firstname.lastname@example.org.
Insights Legal Affairs is brought to you by Ropers Majeski Kohn & Bentley PC
While there are benefits to classifying a worker as an independent contractor, such as not having to pay overtime or worker’s compensation, you can face severe penalties for misclassification including back pay and litigation.
“You want to make sure you are correct on the facts of the law when you establish an independent contractor relationship,” says David McLaughlin, a partner with Ropers Majeski Kohn & Bentley.
There are several legal factors that determine how a worker should be classified.
“Employers and principals should be careful to examine the facts of each relationship and then apply the law to those facts,” McLaughlin says. “In other words, it might be time for a gut check on these factors.”
Smart Business spoke with McLaughlin about the consequences of misclassifying workers and how to play it safe to avoid the potential financial Armageddon of misclassification.
Why is it important for employers to correctly classify workers?
Both California and federal agencies are cracking down on independent contractor misclassifications. There’s a new California law imposing a penalty of up to $25,000 for each violation where a worker is willfully misclassified. The Department of Labor and the IRS are going to start sharing information as part of a misclassification initiative to try to catch more violations. If you have a worker who is not characterized as an employee then the employer or principal does not have to pay payroll taxes, overtime, meal and rest periods, unemployment insurance, disability or social security. So there is a benefit to an employer having an independent contractor, but if you fall into a misclassification situation then you may face a wage claim and penalties.
How does an employer know if a worker is an employee or independent contractor?
The definition of an independent contractor in the Labor Code is any person who renders service for a specified recompense for a specified result, under the control of his principal as to the result of his work only and not as to the means by which such result is accomplished. There are slightly different tests depending on which agency is pursuing the misclassification. When the case is in Superior Court of California, the main consideration is control plus 11 other factors. The key is the right to control the worker both in regard to the work done and the manner and means by which it is performed.
Other factors are: Whether the person performing the services is engaged in an occupation of business distinct from that of the principal; whether or not the work is part of the regular business of the principal or alleged employer; whether the principal or worker supplies the instrumentalities, tools and the place for the person doing the work; the alleged employee’s investment in the equipment or materials required by his or her task or his or her employment of helpers; whether the service rendered requires a special skill; the kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the principal or by a specialist without supervision; the alleged employee’s opportunity for profit or loss depending on his or her managerial skill; the length of time for which the services are to be performed; the degree of permanence of the working relationship; and the method of payment, whether by the time or by the job. Whether the parties believe that they’re creating an employer-employee relationship may have some bearing on the question, but it is not determinative.
The analysis is not black or white. Each of these factors should be considered but they need not be unanimously established. The existence and degree of each factor is a question of fact. The legal conclusion to be drawn from those facts, however, is a question of law, which a judge can decide.
What is the impact of an employer getting a worker to sign an independent contractor agreement?
The contract or contractor’s agreement is not determinative of whether that person is in fact an independent contractor. It’s one of the factors considered and it’s probably one of the easiest things you can do to satisfy part of the test. A contractor’s agreement will have little value if the employer or principal controls the manner and means to get the work done.
What are the risks of misclassifying employees as contractors?
The misclassification of a worker can expose employers to a wage and hour claim and attorney fees to defend that claim. Employers have exposure to waiting time penalties related to wage claims. Business owners also have exposure to other workers who are similarly situated, leading to a potential class action lawsuit.
In addition, there is exposure to stiffer monetary penalties for willful misclassification. These penalties may include a requirement that the employer publicize on its website a court or agency finding that the employer committed a serious violation of the law and which invites other misclassified employees to contact the appropriate labor agency.
California and federal interest in identifying independent contractor misclassification creates danger for principals using independent contractors. Now, more than ever, it is critical for employers and principals to carefully evaluate independent contractors to confirm they are properly classified. Reclassifying workers to employees has many dangers. California businesses that are considering this should seek legal counsel to help with understanding and navigating the potential risks and ramifications.
David McLaughlin is a partner with Ropers Majeski Kohn & Bentley. Reach him at (650) 780-1717 or email@example.com.
Insights Legal Affairs is brought to you by Ropers Majeski Kohn & Bentley PC
The ubiquitous nature of technology allows businesses to acquire and share information nearly instantly across multiple platforms. And while this can be a great thing for networking, marketing and gathering information, it can be potentially devastating for a business if the technology is used inappropriately by an employee, says Todd Roberts, a partner at Ropers Majeski Kohn & Bentley PC.
Smart Business spoke with Roberts about the risks of electronic media and steps you can take to mitigate them.
Can an employer use social media to screen candidates during the interview process?
As time has gone on and as the labor market has become tighter, employers have been more aggressive in their efforts to screen prospective employees. One way they are doing that is to ask for not only the username of the applicant’s Facebook page but also for the password so that they can see what’s been posted and get to know that applicant in an unfiltered way.
Before employees were more sophisticated about the security settings of Facebook, it was not uncommon for the information that they had posted to be able to be viewed publicly, and for those who were hiring to access those web pages. Apart from the legal issues that are implicated, many prospective employees are completely put-off by what is perceived to be coercive and intrusive conduct.
There’s a clash between the privacy rights of prospective applicants who are looking for a job and business owners who are looking to hire them. There is legislation that is now pending both in California and at the federal level that would restrict, if not prohibit, employers from asking for Facebook account information that includes passwords.
Until the legislation is enacted, however, employers are free to ask for an applicant’s Facebook password, and if the prospective employee doesn’t want to give it, he or she can’t be forced to do so. However, declining may disqualify them for employment under the circumstances. There is definitely a move afoot to prevent that type of perceived invasion of privacy.
Is a business owner able to censor social media use by employees?
There is example after example of employees who have been terminated for acts of disparagement against the employer or other misconduct posted on their Facebook page. There is some movement at the federal level through the National Labor Relations Board, which has stepped in on behalf of workers who are members of a union. Those workers have contended that disciplining an employee for complaints about the employer on a Facebook or other social media page is unlawful conduct in violation of the National Labor Relations Act, because it’s protected concerted activity. These are laws enacted in the 1930s that the NLRB is trying to apply in the digital age.
How can business owners protect their company from improper use of social media by employees?
Some employers prohibit the use of Facebook at work and restrict access to other websites that are not reasonably related to the business. More recently, employers have been forced to adopt social media policies that restrict employees from making statements about the company, that appear to be on behalf of the company, or engaging in any use of social media that would cast the employer in a potentially negative light. There is no ‘First Amendment’ issue because private employers have the power to restrict the speech of their employees in the workplace.
The first step is to draft an electronic privacy and social policy, but the key really is in the implementation and the followup. You can have a 100-page manual consisting of all these regulations, but if an employer isn’t doing anything to enforce the policy, it becomes less likely that a court is going to enforce it, either.
The next step after the adoption and implementation of these policies is to widely disseminate it to employees by way of training sessions. Each person should also be asked to sign off that they have read the policy, understand it and agree to comply with it. Where most employer’s trip up is in the enforcement phase. If an employer becomes aware of misuse or violations that are occurring but turns a blind eye, it becomes more difficult to justify discipline over time.
How can employers address email, cell phone usage and other forms of electronic media?
There’s some overlap, not only with social media, but also with the use of new technologies — email and text messaging are most prevalent — where employers and small business owners can get into trouble or be exposed to liability.
There are also multiple cases in which someone is using their cell phone for work-related activities even if it’s on their day off or otherwise on their personal time. In this instance, the employer could be sued for an accident in which the employee is involved, because the actions involved circumstances arguably benefitting the company at the time of the accident.
Having an electronic and social media policy in place outlining the responsibility of the employee in regard to use of these programs and devices, and then policing and enforcing the policy, is vital to protect the company from unwanted lawsuits or damages.
Todd Roberts is a partner with Ropers Majeski Kohn & Bentley PC. Reach him at (650) 780-1601 or TRoberts@rmkb.com.
Insights Legal Affairs is brought to you by Ropers Majeski Kohn & Bentley PC