EntreLeadership - A Conversation with an Employment Attorney

Episode Date: April 7, 2020

Tune in to hear Daniel Tardy and J.K. Simms respond to some business owners' fears around Coronavirus.   Give us your feedback on these daily, COVID-19, bonus episodes: Text DAILYBONUS to 33444 �� Get access to the EntreLeadership Weekly Report Tool, FREE, for you and your team for 3 months: Text TEAMHEALTH to 33444 or visit entreleadership.com/weekly-report   Follow us on social media to stay plugged in to everything we’re doing to help the small business owner win: LinkedIn Instagram Facebook Twitter YouTube Learn more about your ad choices. Visit megaphone.fm/adchoices

Hey, this is Alex Judd, and this is a bonus episode that our team recorded specifically to bring you hope and practical action items that you can use as a small business owner to tackle this whole coronavirus situation. So here's Daniel Tarty with employment attorney J.K. Sims. Hey, guys, Daniel Tarty and Entree leadership and Ramsey Solutions here. Hey, we're coming to you guys as frequently as we can right now because so many small businesses are dealing with new issues and new challenges. that they weren't even thinking about back in January. And today I'm honored to have a good buddy and a longtime friend, JK Sims. JK is an employment law attorney and specializes in issues related to business owners

and their employees and all the litigation around things you should know when it comes to if you're going to change the agreement with your team, essentially. And so I know JK, there's a lot of questions right now, very fluid situation. things are changing quickly with what our administration is pushing through, and Congress has put down two significant pieces of legislation that are affecting small business owners right now. So tell me, you mentioned before we jumped on here, you've been busy. You've had a lot of business owners calling you. What are the types of questions that people have right now? What are people asking you?

Yeah, I mean, it's been really busy. I mean, I think back to, gosh, I feel like all of this started on like two or three weeks ago, but they've all kind of run together. But they're just trying to navigate this. They're trying to figure out what does this legislation, which we can talk about, how does that affect me? Does it apply to me? What do I do? How do I pay for it? Because they want to stay afloat.

I mean, they don't want to have to lay people off, I think. What I'm hearing from them is kind of that there's some fear, you know, which you're hearing, I'm sure, as well. Well, it seems like business owners have never been in this exact situation where they're having to make some of these pretty extreme decisions this quick. And I think we would say there's the risk of overreacting also, right? And getting misinformation. Sure. What would you advise a business owner just as a general, you know, before you make a big decision related to your team? Layoffs or, you know, severance issues, time off, furlough.

And we can get into some of the details on that. But just as a good guideline, before you make a big decision, where would you start? Yeah. I mean, I think first you should familiarize yourself with this new legislative. because there has been some misinformation about it and how it might apply to you. But I think kind of taking a breath and looking at your contracts and your expenses that you have, there might be some ways that you could have a dialogue with your other contractual commitments that you have to where, let's say there's a term, I won't get too much in legal weeds on some of this stuff,

but a term called force major, which is in most contracts. And that is if there's an act of God, how does that impact our duties? under this? Is this qualifying generally as force major? We talked to one of our vendors and they said, hey, this isn't force major. Of course, if you're a vendor saying that, you're trying to keep the business, where does it fall? It very much depends on the language. Some force major clauses actually say or government action, right? And so a quarantine, if you've got that language, so the language is important. And the state law have to do a disclaimer. Every state is a little bit different on this. But the language using that clause is critically important. So if you see government

action there that has caused the ability to perform under this contract, so that's one thing. Another thing is your contract might have a where the market forces have changed so much. There's been a material adverse change or material adverse effect that impacts the party's ability to perform under the contract. So again, that kind of just opens up a dialogue. Everyone in the business community. If you're a vendor, you're a supplier, you're a business owner, everyone's trying to figure it out. So pull your contracts, see what the language is in that contract, and then maybe that prompts a conversation with a professional to dive deeper. And then, too, I mean, because you mentioned layoffs. I mean, there are a number, you know,

obviously business owners, they don't want to have to do that. But they also, they want to see how can we keep operating. And you've got a number of options there as far as what that might look like. Is this a furlough? Are we just going to say, hey, we're going to kind of hit pause. We're going to keep you on. We're going to keep you on for a while. You're going to still get your benefits. We don't have work. And so we can't pay you. And we hope that changes. So that's different than a severance. They're technically still employed. They're just no work and no pay for the season until you get through it. And they can draw unemployment. Again, every state's going to be different on that. But I think in pretty much all states and

now with the Federal Act, you're going to have unemployment in that situation available to you. Again, they're still going to get their benefits. So that's an office. Of course, a termination is another option. I mean, some companies, they might end up just having to close. And who knows. But I think in all of that, you want to minimize your risk when you get to that. One of the points to definitely emphasize on that is make sure that if you're making those types of decisions. Because even if it's a furlough, that's an adverse employment action.

So we're going to see a lot of litigation come from all of this. And I was a practicing attorney in 2008. in 2008 when a lot of people got let go. There was a lot of employment lawsuits fired, filed business owners got sued, right? And they had to demonstrate in that that why was this person terminated? Why were they a casualty in this? And so being sure that you're using legitimate non-discriminatory criteria. You're looking at your business saying we've got to cut these positions. And because if you're, if there's a disparate impact on certain protected classes or on any protected class, they're more likely to go to, you know,

to the EEOC, file a charge of discrimination, file a lawsuit. And so there's just a lot of risk out there. And I think if you get to that point where, let's say, you've gone through and I've looked at our expenses, maybe we've held back on our payables for a while, we've talked to our firm some about how, you know, we're really busy right now. But the question is, when will people pay us, right? Attorneys are probably not really high up on the list as far as people that are going to get paid, and that's fine.

And we kind of realize, in fact, I've told, because normally the first of the month is when we send our invoices. And so for my small business owner of clients, I'm like, let's hold off for a few weeks and let's see what happens. But yeah, so you're looking at that, but then you say, maybe I have to, we get to the point we have to make these decisions and terminate. Just being sure that you're minimizing your risk in that. Using legitimate, this is the legal buzzwords, legitimate non-discriminatory reasons and criteria. Which essentially, I think that means that you're, you're looking at the whole versus individual people. And you're going, the whole business has been impacted by this broader situation out there. And I've got to essentially maintain objectivity in terms

of how I'm looking at making cuts. It's not, here's this person that's, they drove me crazy the last month. This is a good time to go ahead and give them the boot. You know, you're really looking at if I've done everything I can to minimize expenses and then this is a last resort. And then in terms of just documentation and making sure that you've, if you ever ended up in, you know, litigation someday, I think that there's probably certain things that business owners should do to document and make sure they, you know, what did you communicate to the team? How was it communicated? We see this a lot, especially in small business, where you just take action and then later you're wishing you had a few emails to pull from and things like that. Because if it wasn't written down, it's kind of like there's two different versions of that story. Right. What's good practice just in terms of keeping things documented? Yeah, I think, well, just as a general practice being sure, I mean, we say a lot of times in what I do. If it's not in the personnel file, if it's not documented, it didn't.

happen, right? So I think that if you're making these decisions, identify the positions that you're eliminating. And so certain, say, business units are going to maybe become less sustainable because maybe they lost certain contracts and say, well, well, that business unit, we're going to have to, we don't need as many people in that business unit anymore. But just identifying what's the business unit documenting. And then you have to internally, demographically, what are the demographics. If the EEOC were to receive a charge of discrimination and they saw that all of the people who were terminated as a part of your, say you had to reduce your force, were 50, 60 years old, that all happen to be a protected class. That looks discriminatory, right? And so just again,

we're using across the board legitimate criteria and making sure that it's not having a disparate impact. And that's documented, just, I mean, that you are just documenting that, that here are the factors that went into it in why we have. had to make the decision. Okay, good advice there. Earlier you mentioned getting familiar with this new legislation, the HR 6201 and then also the CARES Act just came out. I understand getting familiar with it, and I also understand these are 800 pages long.

How do I get what I need to know without sitting down and line by line and going through all the legalese? What's the best way to get familiar enough? Yeah, I mean, it's tough because you're talking to people watching this. busy running a business, right? You don't have time to sit and read a 900-page piece of legislation. And so you've got to think, where do I, what's a good source for me? Where can I find it? Some that I would recommend. Well, first let me start by telling you that you don't want to rely upon most of your media outlets as far as summarizing a piece of legislation. It's no offense to

anybody, but it's, you know, you are talking, like you said, about a 900 piece of legislation, 900-page piece of legislation, and you don't know who's summarizing that. So the government resources are very helpful. So the Department of Labor for the Coronavirus Response Act, very helpful. They've got an FAQ on there that answers, and they're adding to it every day almost. Kind of executive summary. Exactly. Here's what it means for you.

Here's where it applies. A fact sheet. So the Department of Labor, Department of Treasury, with the Act that was just passed, the stimulus bill, which is the CARES Act, they're a very good resource. I found one of the best is to be the U.S. Chamber of Commerce page. They've got very helpful, factual material. There's no agenda on it other than they exist to kind of help businesses. So those are some that I think of. The government resources, Department of Labor, Department of Treasury, where that's impacted, are very helpful resources. So you're an employment attorney, and I mean, clearly you've got a

propensity towards saying people should work with you in a time like this. But if I'm a small business owner and I'm trying to cut expenses, the idea of having, you know, one more attorney that I need to pay, is this a time I really can't afford to not get that second opinion? Can I do it myself and read and make these decisions? Or should I really be working with a professional right now? Yeah, I get that question a lot, even not in these times, but it's kind of an overwhelming thought for sometimes. And you think, okay, if I go hire an attorney, you're talking about $10,000. that's going to cost me. And really, I think just having a conversation, meet with a couple of attorneys, a few attorneys, talk to them on the phone, Zoom with them now. You may not meet with

them. But in seeing, you know, in having a frank discussion on, I want to get some advice on navigating this. I've got these decisions to make. How much is that going to cost me? Just have that discussion up front. You might be surprised. It's actually, you're talking about if I spend two hours with you, it's not, you're not talking about a big time. It's maybe 500,000 bucks. worth the advice to get the direction. Yeah, for sure. I mean, because, again, finding somebody who's a specialist, you're busy running a business and you're not going to be an expert on the exemptions under these acts or what are the tax implications of this. And there are just, there's a lot that kind of falls from it. You know, spending the time that you would otherwise spend trying to kind

of figure it out. Yeah, you don't want to be in court later going, I wish I had spent a thousand bucks. I wish I spent a thousand dollars. And done this right the first time. Talk to us a little bit about, I want to dive in on the CARES Act because so much of our tribe is on the Dave Ramsey plan. We don't do debt no matter what, especially loans and especially the SBA. And the way this legislation was pushed down from my understanding is your loan originator is going to come through an SBA network, a typical 7A loan that would then convert to a grant later if you meet the conditions of not letting your team go. But what's the gotcha? Is it fine print there? Is it really free money?

you know, and if I'm thinking about keeping my team on board versus saying no matter what, I don't do debt and I have to fight. I mean, that's a big decision for a business owner right now. Yeah, I mean, a great example there of kind of relying on maybe media reports or summaries of what an act says. And then even I got an email right after it passed that said, here's my understanding. And it was essentially it's free money that there's, I mean, it's a loan, but it's not really. I mean, it's really a grant.

And, you know, I should just go apply for that. Well, there is fun print. And so you should read the fine print. And the Department of Treasury just, I think last night, released some guidance. So go to the Department of Treasury's website. They have a four-page document that gives you really the terms. But a lot of it we're still trying to figure out, much like when the coronavirus, the paid leave act came for two weeks.

We continue to get kind of daily updates, more information, because the act itself leaves questions. And then it's the role of the agency to kind of fill in, What are some of these questions? Where are there unintended consequences? They get letters like from the Chamber of Commerce saying, how are you going to deal with these things? So there are still things about the CARES Act. We don't know. But what I do know from reading it is that there are, you cannot assume that if you go and apply for that loan, that you will never have to pay that back. That there are strings attached to that in that what they want to do, and it's a, I mean, they're trying to keep people from losing their money. jobs and trying to keep the economy running in that way. And so in the same way, the paid leave act and what they finally did on some of that. But do read the fine print. Where are you getting that information? Go to the Department of Treasury. And I think if you do end up cutting your workforce and if you do end up reducing pay, that's going to trigger and you might not get

the full kind of, you know, where it becomes a grant and not alone. So there are some catches on it for sure and to be to be cognizant enough. Well, I'm hearing there's three kind of, if you think about being in a rock and a hard place, there's really three big rocks right now that I think most small business owners are challenged with. One is they may not have enough revenue coming in to keep their team and they're facing maybe having to let them go. But on the other side of this, we talked about if you act too quickly on that or you're not doing your due diligence to make sure you're doing that objectively and non-discriminatory ways,

you could end up in litigation later. And the best offer that the government's offering right now might have some strings attached and maybe too good to be true. And so I think in all these things, there's value in slowing down, getting a second opinion, making sure you really understand, you mentioned earlier, unintended consequences. And we don't want to underreact, but we also, if we overreact too quick, everybody is kind of this frantic, chaotic, go now, figure it out. And this is not an area we want to move quickly without really understanding what direction we're going and the consequences of that ultimately. Yeah, I mean, a great example is after the paid leave act was first passed. So that was on March 18th, which gosh, that seems like, well. It feels like a year ago.

It's been a long month. That was passed on March 18th. There were a lot of questions when it was, when it was first passed. And I had a, once we saw what that looked like, I had more than one client tell me, if I have to do this, I'll just fire them because I can't afford to do it. I'm trying to stay operational. Now the government's telling me I have to give paid leave to these employees who can't come to work because their child's, you know, because the daycare or the school situation, which is a tough, tough position that workers were put in. But in each of those conversations, I said, we're going to get some guidance because it's

not going to take effect yet. let's see what happens. And I think the Secretary of Labor will hopefully put some relief in there. And we saw that they did with the department. So yeah, I think taking a breath and not overreacting on it. So if you can afford to not make a decision the week after the legislation is released, right? Because there's kind of a normalizing period where more clarity, more guidance, and then you can make a more informed decision. If you can afford to wait a week or two before making a big action, just because the Congress approved it, there's still kind of this. period of like, let's figure out what everybody really thinks this says and how we can take action. That's right. I mean, I think what we're seeing, and they're acting quickly on these, and they have to, and they're doing that for the good of the economy and workers and small business owners. And, I mean, we saw that past 96, I think 96 almost unanimously in the Senate. So that never happens, right? So everybody was on board, but it was quick. And so what we're seeing is it's about a two-week process before we even really get to a point once it's passed, where a lot of the,

questions that we have get get answered. So, yeah. J.K., this has been really great. Before we jump off, any final words of encouragement or advice for small business owners out there who are navigating these turbulent waters? Yeah, I mean, it's just really tough times to be in charge of anything, and I feel the weight of it when I talk to clients. And so I think just as best you can, taking a breath, like you're saying, I think is good. Being careful on where you're getting your information from. And knowing that, that the people that you're working with, the people that you owe, maybe you owe a rent to in your building, they're trying to figure this out too. So there is kind of, I feel in this business

community, there's this idea that we're all in this together, you know? And so I think just walking with that knowledge, hopefully everyone kind of, maybe you're, as far as your rent check being due today, maybe on April 1st, maybe your landlord will give you some grace on that. In some states, it's actually becoming mandated. So I don't know, we're going to, that's an evolving situation we're going to see too. But I think. looking where you get your information from and just taking the time to breathe a little bit and let the dust settle if you can. I mean, I realize that's maybe easier said than done. Well, as a principle, I think you're spot on and this has been invaluable. Thank you so much.

And it sounds like the theme is, you know, when in doubt, don't go it alone, get some advice, over-communicate. Communicate with your vendors, with your customers, with your legal counsel, if you have access to that. And if you don't, consider making a couple phone calls and just get some advice because you don't want to regret later that you act it too quickly to something that you cut off your nose in spite of your face, and that's not what we want. So, JK, thanks for joining us today. Thanks, my pleasure. Well, guys, in the Entree Leadership Tribe, we know you guys are fighting and you're scrapping and you're doing everything you can to lead forward with confidence right now. We want you to know we believe you have what it takes, that together we're going to weather the storm, we're going to get through this thing, and we're going to come out stronger on the other side.

So keep fighting, keep leading, and we'll talk to you again very soon.