Human resources can be dirty word among those in business or launching companies, particularly for those who want to do things differently with the start-ups they hope will disrupt or replace existing business models. It's a department regarded as mired in process, red tape, even political correctness, and it often gets lost in the shuffle. And if HR is the dirty word, "employment law" is truly obscene.
But that antipathy to HR and employment law can cost dearly. The HR woes playing out in the media spotlight at places like Github and Uber should serve as an alarm bell to any company thinking they can pay short shrift to employment law and HR expertise. Studies have borne this out -- the eight-year-long Stanford Project on Emerging Companies, for example, was conducted during the first dot-com boom and found that companies that treated HR seriously went public faster and were the least likely to fail. Other studies have found that ignoring HR is one of the biggest mistakes that tech startups make.
As an employment lawyer, I often hear employment law referred to as "commodity work" -- in other words, the type of work anyone with basic competence can perform, and so companies often pick the lawyer or law firm that offers to do it the cheapest and then they use that firm as little as possible. That's ironic, because companies choosing this approach often end up paying much more in the end. Doing HR and employment law well, and early, can have huge value. This isn't about employment lawyers making more money. In fact, if more companies took employment law and HR seriously from the outset, employment lawyers would be making a lot less.
The failure to treat employment law and HR seriously is puzzling. Employees, after all, are many companies' biggest budget line item, their biggest potential liability and their biggest asset. So to entrust the proper and strategic legal management of them to the cheapest bidder -- to regard employment law as mere "commodity work" -- is foolhardy.
I often get calls from people from small businesses, or even established businesses, who did not turn their mind to employment law or HR legalities in the early stages. They only call me after something has blown up, by which point it's too late. I can only be reactive where if I had been called much earlier, I could have been proactive and avoided a costly mess.
More than once I have spoken to an employer (most often their in house counsel, in fact) who is stunned by the range a court might consider reasonable termination notice given the circumstances. Why? Because they'd failed to draw up contracts governing the employment relationships, or they had contracts which were ineffective or unlawful, so ending those relationships was exponentially more complicated and more expensive than it might otherwise have been.
Those employers with no contracts or poorly drafted contracts often (but not always!) learn from their mistake so ask us to draft new contracts for their remaining employees -- a good move except that's not so easy. A contract signed after someone has started working is often not enforceable. It can be done, but not overnight, not easily, and not without more expense than if it had been done correctly in the first place.
And it's not just the employer-employee relationship that needs a legal definition. People start businesses or partnerships together only thinking about success, and not properly considering what happens if someone leaves or if it fails. Partnership agreements, shareholder's agreements and the like are hardly frills and should contemplate a variety of possible "ends" to the relationships they govern. Are you your own employee? Are you being paid by your company or working in exchange for an equity stake? Get advice at the earliest possible stage. If things go wrong, you'll be grateful that you did.
I often act as plaintiff's counsel for executive employees: I am the person who capitalizes on the mistakes made by the other side when they didn't obtain, or wouldn't listen to, good strategic employment advice. I cannot count the number of people who have been through my office who might never have landed there, might never have had anywhere near the same entitlement, might have stayed in their job, or might have left it without bad blood had the other side been proactive instead of reactive, strategic instead of bullying, and acted at every turn with a thorough understanding of employment law.
A good employment lawyer hired by an employee who is unhappy or has been dismissed will make the most of a company's HR and employment law mistakes, and it will be expensive.
The cost to a company doesn't end there: bad blood on a small "street" or within an industry can have significant unforeseen costs as well. If a dismissed employee is angry after leaving the company because of the aforementioned bad blood or bullying, then lands at another position where they can opt to help or hurt that company -- what do you suppose the average person would do?
Employment law isn't straightforward; it's complicated and it is changing all the time. Currently, decisions coming out of lower courts on enforceability of employment contracts and the interpretation of compensation plans are all over the map. It's getting more difficult for counsel to navigate, and even judges are getting it wrong -- or, at least, arriving at vastly different answers to the same questions. And given shifts in employment laws over the last decade, I've seen countless employers fail to make the necessary adjustments, costing them huge sums in avoidable settlements, payments and trials, not to mention goodwill and employee morale.
Good employment counsel will partner with organizations to really understand their culture, their people and their business, helping set them up for success. It's among the smartest money any company can spend -- and a lot less than they may inevitably be forced to dole out when someone like me comes knocking on their door on behalf of an employee.
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