Archive for the ‘Rogue Employees’ Category

Fox Moulder’s motto was “Trust No One.”  Lawyers can understand this paranoia.  Divorce lawyers know spouses cheat.  Criminal lawyers know clients steal and worse.  And as a business and employment litigator, I know that private businesses can be be hurt by the people they trust the most, their employees and their business partners.  This includes both majority and minority shareholders, members of LLC’s, and partners in partnerships.  Sadly, this also includes family members in a family business. 

I refer to all such persons as “partners,” because that is how people generally think of one another.  I think that the term itself, partner, holds a special meaning of trust to the business person, as it should.  It’s no coincidence that the word also means a person with whom one has an intimate relationship, also founded on trust.

With trust, sometimes comes blindness, willful or otherwise.  Maybe this will work fine for you, and you and you, but someone reading this blog has a partner who is cheating them.  The obvious form of this is that the cheating partner is taking more than his or her share from the business.  He is paying his car payments from the company accounts while you pay for your own car.  He secretly increased his salary by 50% without informing you. Maybe’s he’s paying for his mistress’ apartment.  Or his cocaine addiction.  Or his son’s college tuition.  Maybe he’s going on shopping sprees with the company credit cards.  Maybe he fires you when you complain.  Or cuts your salary and forces you out.

Sometimes the partner who is not in charge of the books can cheat as well.  By submitting false expenses. By moonlighting.  By directing the business to his own secret company or a friend’s company.  By accepting and taking the customer’s payments.  Maybe both of you are cheating the other in your own way.

I’ve seen all of these things, and much more happen.  It’s human nature to be tempted in financial matters.  It’s easy to tell yourself that you deserve it, because you work hard.  Your partner is lucky to have you.  Or to tell yourself that you’ll pay back the money next month.  There is always some justification in your partner’s mind; they do not think of themselves as having done wrong.  But partners generally owe one another a strict fiduciary duty of good faith and fair dealing.

The message is obvious.  You need to be aware.  If you sense something is wrong, it probably is.  Be involved in all aspects of the business.  You also need access to the company books and financial records on a regular basis.  You generally have a right to this information.  You want a sharp CPA working for the company who will catch these issues before the problem gets too large. 

If you discover that your partner has cheated you in some way or the other, you do have legal recourse.  I have helped a number of “partners” in these most difficult situations.  Even ones who were not 100% clean themselves.  Call me and start to take some control of the situation.

By Adam P. Whitney

617.338.7000 

 

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Now former lawyer Susan Friery seemed to have it all. She was a practicing lawyer in a respected Boston personal injury firm. She was featured in a calendar of “Beautiful Lawyers,” shown in spandex and striking a yoga pose. And she was a trained and experienced doctor who had graduated from the medical school at Columbia University.

Friery really is a lawyer and is not hard on the eyes, (http://www.dailymail.co.uk/news/article-2107747/Most-beautiful-lawyer-suspended-years-lying-medical-degree.html), but it turned out that she made up the doctor stuff. She had actually attended a few medical courses at a state school. Friery duped her employer for years. Hook, line and sinker. So much so that they sent her to law school (she started at the firm as a medical consultant and paralegal). They later made her partner. She worked on prominent cases and surely made a lot of money. Friery listed her M.D. “credentials” on the firm’s website and in court pleadings.

The law firm surely has egg on its face. Reportedly, no cases suffered and no clients were harmed. That’s very lucky for the law firm. Things could have been much worse.

The lesson for employers is obvious. Employees can be very devious. Employees fudge their resumes. They moonlight. Some of them lie, cheat and steal. Even the nice and pretty ones who look good in spandex. It’s up to you to verify things. Friery’s case should be a lesson to at least verify professional and academic credentials. Not doing so could end up causing you serious problems.

Many readers seem to relate to the sports theme after my Sean Payton post, so I’m sticking with it this week with Andrew Bynum, the young star center for the L.A. Lakers. Although I’m in Celtics country, I greatly admire Bynum’s game. At a solid 7 Feet and 285 pounds, he should be and can be a force down low. He’s only 24 yrs. old and already really good. He could be great . . . if he listens to the coaches and sticks with the program.

But not if he goes rogue. Recently, the Lakers coach benched him for taking a three point shot. Worse yet, he stated in the post game interview that he will keep taking them. I’m with the coach on this one. Bynum should be unstoppable on the post. He easily scored over Kevin Garnet, a still formidable defender at age 35, a few weeks ago in the waning seconds of a close game. Obviously, the Lakers want and need Bynum posting up, not taking three pointers.

Sticking with the sports theme, Bill Belichick is famous for coaching players to “just do their job” and stay in position. This is generally good advice for any company. Employers need employees to do what they do best, to bring the most value to the company. The Lakers aren’t paying Bynum $15 million to go 1 for 7 at the three point line. They could pay me to do that for half that amount, maybe even less.

The lesson for your firm is make sure that your most talented employees are doing what they do best. Sometimes it is up to you to make sure that people have the support they need so they can focus on doing what brings money to your company. You don’t want your best sales persons with great people skills spending all day doing filing and filling out paperwork. You don’t want your billable employees doing routine, non-billable work that someone else could handle. The Lakers can find other three point shooters, some even better than me with my guaranteed 1 for 7 ratio of three pointers. But they will not find another center who has the size and talent of Bynum.

As most sports fan know by now, the NFL has suspended the Saints’ coaches. The NFL suspended the head coach, Sean Payton, for a year; Gregg Williams, indefinitely. The NFL has alleged that Williams instituted a scheme whereby players were paid a bounty for making big hits and hurting opposing players. The NFL has alleged that Payton failed to make sure that this was not occurring, after being instructed by the NFL to do so, and that Payton covered up the scheme.

Additionally, the NFL fined the Saints $500,000, and took away their second round draft picks for this year and next year. The actions of these coaches has dealt a great blow to an otherwise successful organization. Loss of leadership. Significant cash. Loss of future talent. Three things near and dear to NFL franchises.

You may think that the lessons do not apply to your business. If you are an accounting firm, for example, your C.P.A.’s are probably not spear-tackling a rival C.P.A. who is in the middle of a compliance audit (if they are, call me; you have other issues).

But I bet that your industry has rules. And although your business probably does not belong to a professional sports league with its own rule, I bet that your business has government watchdogs waiting for you to screw up (this is true for any employer regarding employee issues). The more successful you are, the more the government would love to make an example of you. One rogue employee can get your company in a lot of trouble. I’ve seen it happen time and again to good businesses. You are usually responsible for the actions of your employees, so it’s your job to make sure that they are playing by the rules. Don’t turn a blind eye just because you are getting a small competitive advantage.

And when you find out that your rogue employee is not playing by the rules, don’t cover it up as Peyton allegedly did. As I’ve said before on this blog, cover-ups are almost always worse than the crime. If you have the intestinal fortitude to self-report the wrongdoing of an employee, discipline the employee, and fix the situation, the government zealots will come down a lot less hard on you (this must be done carefully, with legal advice). If you cover up the wrongdoing, they will come down twice as hard, and they will not believe any of your explanations.

“Bob,” a new hire, seemed to be a capable, though not stellar employee in the mornings. Apparently, however, he turned his lunch hours into happy hours. Employees began to notice that he turned into Mr. Hyde in the afternoons. He did little work in the afternoons and even fell asleep at his desk on a few occasions. Other employees even complained of excessive flatulence in the afternoons. Bob was demeaning toward the female employees. He boorishly tossed Hershey Kisses at them and asked them to join him for drinks after work. They somehow resisted his charms. Poor Bob was promptly terminated before he caused the company any real problems.

Hiring the wrong person is a costly and time consuming endeavor, even if you promptly terminate him (in fact, most employers do not promptly terminate; human nature being what it is, employers do not want to think that they made a bad decision). The question becomes, how do you hire the right person in the first place?

A careful vetting process is important. If you read my blog often, you know that one rogue employee on your staff can ruin your whole day, or your whole year. While many management lawyers will caution you against Google and social media searches, you won’t hear that from me. While there is a theoretical risk that you will find some “prohibited” information on someone’s Facebook page, it’s well worth the theoretical risk to vet the job candidate. I say to do a complete as possible internet search to look for legal reasons to reject the candidate.

Also, you should really check references and ask probing questions. Be wary of references that provide vague answers or faint praise. Listen carefully.

Conduct a second interview and ask tough questions. Most interviews are cursory and the employer does all the talking. Make sure that the candidate can handle the position and is right for the position.

It’s only mid-January, but Francesco Schettino has made a strong case for Rogue Employee of the Year as a result of the crash of the Concordia, the cruise ship that capsized off Tuscany. You can find the full story here: http://www.huffingtonpost.com/2012/01/16/costa-concordia-ceo-capain-crash-disaster-cruise-ship_n_1208791.html?ref=business&ir=Business

The Captain apparently thought his personal judgment was superior to that of his company, which had a programmed course for the ship. The result was a crash against a reef that capsized the boat, the deaths of at least six people (with sixteen more unaccounted for), and the risk of 500,000 gallons of fuel leaking into pristine waters. It has also been alleged that the Captain abandoned ship before the passengers had been evacuated.

Having an employee who causes injury or death to customers or members of the public is the worst thing that can happen to a company. In addition to the tragic loss of human life in the Concordia crash, the company expects to lose $85 million to $95 million. That’s before the lawsuits start flying, which could conceivably double or triple that number.

There are two lessons here for employers. The first lesson is that employers have to take reasonable precautions to prevent tragic accidents. This it obvious to employers who have company vehicles, and for employers in inherently dangerous fields, such as construction. You may have to drug test and have a strict policy on drugs and alcohol (but, see my post on having employees pee in a cup https://damnedif.com/2011/03/21/you%e2%80%99re-damned-if-you-don%e2%80%99t-get-legal-advice-before-having-your-employees-pee-in-a-cup/).

Even if you have a safe office environment, you still have to be careful about employee drinking and driving (see my post on holiday parties https://damnedif.com/2011/09/27/you-may-be-damned-if-your-drunk-employee-leaves-the-company-party-and-kills-someone-in-a-car-accident/).

The second lesson is that employees who do not follow company guidelines will get your company in trouble, no matter what industry you are in. Off-the-course employees can get you into trouble with government regulators, expose you to lawsuits, alienate customers, etc. It’s up to you to identify the danger areas and take safeguards to protect your company. In the case of the Concordia, the company had its set course, but it’s not clear if the company adequately trained the Captain in the specific dangers off the coast of Tuscany. As you read this, someone in your company is cutting corners, or veering off your set path, and they may not even appreciate the risks. You can’t always prevent rogue employees from doing this, but you can at least educate all of your employees on the consequences of their actions.

By Adam P. Whitney

Sometimes business and family don’t mix well. Family business disputes can be particularly emotional. I’ve seen it all, brothers against brothers, sisters against brothers, sons against fathers, etc., etc. Jealousy and greed can bring out the worst in family relationships. A wise judge recently told me that (when it’s sibling against sibling) sometimes it all comes down to who got the better bicycle for Christmas when the parties were growing up. It’s not really that simple, but there is a kernel of truth there.

I’ve represented both employers and employees in family businesses. When things go bad in these situations, things can get really nasty. The adage that the ones you love can hurt you the most holds true here. I recently settled a case for a fired stockholder-employee for $1.4 million, who was fired by his elderly father after working for the company for thirty years. We alleged that his sister, also a long-term employee, manipulated the elderly father into turning against my client, who was a superstar salesman. This case was reported in Massachusetts Lawyers Weekly as one of the biggest settlements of 2011.

http://masslawyersweekly.com/2012/02/15/son-fired-from-family-business-after-30-years/
http://masslawyersweekly.com/files/2012/01/LargestVS2011.pdf

It’s inevitable that if you have a private business, you will have to consider whether to have family members work there. Sometimes private businesses grow into a family; sometimes your family grows into your business. The more successful the business, the more pressure there will be to hire family members. You may have siblings who need a job. You may have adult children who you want to bring into the business and eventually take over for you when you retire. You may start a business with a son or parent or sibling. All of these things are very common. Things are always hunky dory at the beginning. Maybe even for years.

But, inevitably, personal feelings will get in the way of running the business. Your family members may feel that they are different than other employees. They may feel that the same rules do not apply to them. They may overvalue their worth to the company. They may think of themselves as an owner when they are not. They may be jealous of you as the owner. The opposite is true too. Sometimes the family-member employee is taken for granted. Sometimes other family members are jealous of the other family-member employee who is a superstar, as in my recent case.

If you make decide to hire a family member, here are some general guidelines to avoid some nasty problems:

– Treat your family members like other employees and hold them to the same standards.
– Similarly, try to separate personal feelings and issues with business issues.
– Consider carefully the issue of stock ownership (see my post on terminating stock-holder employees). There are a lot of issues here, such as buy-sell provisions, which are beyond the scope of this post.
– Have clear written employment agreements and comply with the law. Family members can and will sue you for violations of wage statutes, etc.
– Communicate frequently on expectations for salary and ownership potential for the future. Your adult child may think that you are retiring at sixty and giving her the business. You may plan to work until eighty and/or sell the business. These different expectations can lead to big problems.
– Similarly, don’t let issues and problems build for years. Family members can turn into Rogue Employees, too.
– Consider arbitration clauses. Although I’m not always a fan of arbitration, you may not want your family’s dirty laundry aired out in court.

If you are a private business owner or a stockholder in a close corporation, I can help you with these issues. Call me at 617.338.7000.

Adam P. Whitney.