Thursday, December 9, 2010

What Issues, Opportunities and Risks Face Business Owners in 2011

As a General Counsel to business owners, I am often asked my opinion about opportunities and risks that business owners should be aware of as the new year approaches.  In this down economy, there are a lot of opportunities for businesses with some liquidity to acquire distressed assets with appreciating potential.  There are also a lot of quality labor talent willing to work for less.  These economic times also make current and former employees more apt to sue you for wage disputesRegulators are also coming down on wrongfully classifying Independent contractors.  Finally, technology has created employee privacy issues that need to be addressed.  These are just a few of the opportunities and risks that are out there.
Buy Your Own BuildingWith commercial property prices hitting rock-bottom, it's a great time for owner-operators with some capital to buy their own buildings. It will be an investment with a big long-term payback. Clients of ours who did this in the last downturn in the 1990's are collecting big checks now.

Finding tenants for any unoccupied space will not be easy if you don't use the entire building. You can overcome this by sweetening the deal to include giving potential tenants a small equity stake - after paying yourself a preferred return on your invested capital. Finding financing will be difficult but not insurmountable, especially if you have a decent balance sheet.

Upgrade Your Talent.  Take advantage of the deep pool of talented and hungry job applicants to upgrade your labor force. Spend more time evaluating the performance level of your current employees. Compare them with the available talent and make appropriate changes. Given the high quality of job applicants, it's unlikely that you'll have to pay more for more talented and motivated workers.              

Independent Contractors.   Many businesses have reduced costs by hiring as independent contractors workers that should legally be classified as employees. This saves on tax payments, unemployment compensation, workers compensation, benefits and other employment-related costs. But regulatory agencies are being pressed to generate revenues. For them, going after companies for wrongfully classifying employees is low-hanging fruit. Expect a greater level of scrutiny in this area. Take a hard look at your contractors. If they don't qualify, convert them to employees before you feel the lash of the regulator's whip.

Employee Privacy and Technology.  What can an employee say about you on Facebook, Twitter or a blog? Can you ask for passwords? Can you fire them for negative content? Get them to change it? What if it contains misinformation or confidential information? These are just a few of the many issues blossoming with the increasing uses of social media websites and the technology that is spreading it. If you haven't thought about them you'll need to - and develop new policies or upgrade existing policies to minimize the risks.
Non-Wage and Hour Class Actions.  Wage and hour violations have been so much the subject of class action lawsuits that new cases for plaintiff's lawyers are harder to come by. This group is now starting to focus on working condition class actions, which may be the next wave of cases. Portending this is Currie-White v. Blockbuster Inc, a 2009 case on the employer's failure to provide seats for its cashiers. The plaintiff's lawyers are after penalties, which potentially are $100 per employee per pay period for the first pay period and $200 for each subsequent pay period. Other potential violations are the failure to provide suitable lockers or closets, changing rooms or "suitable resting facilities". It's a good time to review the wage order applicable to your business to make sure your working conditions are compliant. 

I would like to thank Gerald D. Block of The General Counsel, LLC for bringing these risks and opportunities to light in his newsletter.  If you have any questions or concerns regarding any of the above, please contact me at The Out-House General Counsel or press the call me button on my blog.


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