An article in today’s Open Forum, by American Express, provides an analysis, and warning, for small business and family business owners about the potential liability pitfalls there are with regard to employees, and the regulation of employment relationships by federal, state and local authorities. This article explains the risks that every small business owner and family business faces everyday from just three major areas of violations.
The article, entitled “3 Legal Landmines You Must Avoid“, discusses Wage and Hour Violations, Termination Retaliation Claims, and Employee Misclassification Violations. The article also provides some useful legal advice on how to avoid these types of claims.
The article provides a clear illustration of why small business owners need asset protection planning. Labor violations typically result in fines, penalities, or damage awards against the company only. Professionals, such as doctors, lawyers, architects, engineers, etc., statistically have greater exposure to employment law violations than to professional malpractice claims. If the small business owner, or professional, is directly involved with the actions that gave rise to the liability, there may be personal liability for the business owner, and personal assets could be at risk. In that situation, having assets legally structured to be protected from such liability may be critical to retain the assets accumulated over a lifetime. Waiting until the claim is made can eliminate access to some of the most benefiical asset protection techniques that are otherwise available.
We recently had the occasion to work with a couple who own a rapidly growing business. In the last five years the business has grown from start up to now employing over 100 employees throughout the southeast. They have maintained a high cash position in the company to ensure availability of funds to fuel the rapid growth. A recent visit by the U.S. Department of Labor (DOL) has thrown their business world upside down. The potential liability threatened by the DOL auditor is significant. They now have retained an experienced employment lawyer and are appropriately disputing the potential charges of labor law violations.
Their objective in working with the Coleman Law Firm has been to provide what protection they can for their business assets to reduce the potential losses and to eliminate the possibility that the value of the business assets will be a determining factor in how high the fine or penalty might be, as well as to protect from potential litigation from the disgruntled former employee who filed a claim with the DOL. A result of these business owners waiting to engage in effective asset protection planning until after claims were made, is that a number of options that were available prior to the arrival of the DOL auditor are simply not available (or, more precisesly, no longer effective) now that a claim has been filed. There remains many options available at this time and we are working with these clients to put some of those options in place. Having the full arsenal of weapons that can be used against spurious or improper claims by former employees, or others, would have made the task easier to implement, less costly, and more effective.
In the “olden days” there was an adage that went: “An ounce of prevention is worth a pound of cure.” Another one was “it’s too late to close the door, after the horse is out of the barn.” You don’t hear those quotes so often in today’s world, but both of those sage remarks apply directly to asset protection planning.
Copyright 2008-2014 – The Coleman Law Firm, PLLC