Business Owner's Toolbox to Prevent Liability
Watch Who You Hire
Do background checks before hiring employees – if they end up being a criminal and steal from your business, it is likely that they are also stealing from your customers and you could be liable.
Employee Files
Create an employee file for each employee. This file should contain their W-4 and I-9 along with any employment, non-compete or trade secret agreements that they may have signed. Also, include in this file, employee write-up forms in case of unsatisfactory performance.
Properly Pay Overtime
According to an article in BusinessWeek Magazine, overtime litigation is a hot topic. The Fair Labor Standards Act dictates which employees can be exempt from overtime pay. It is important that you regularly audit your payroll and employee classifications. If an employer misclassifies an employee, the employer could be liable for twice the amount of unpaid overtime as well as the employee’s attorney’s fees.
Draft an Employee Policy Manual
* Include a disclaimer: THIS IS NOT AN EMPLOYMENT CONTRACT
* Make no promises in the manual
* Do not use the words: “Employer shall” or “Employer will,” always state “Employer may”
* Also Include: grievance procedures, prohibited activities and specific consequences.
** Employee must sign a form acknowledging receipt of Employee Policy Manual
Cutting Ties with Employees
Former employees can remain a danger. Be sure that you don't fire someone for an improper reason. Always document reasons for termination and inform the employee of the reasons. If possible, have the employee sign a write-up slip for each violation of the employee manual or unsatisfactory performance. This slip should be kept in the employee's file.
Inc. or LLC, Alone, is a Ticking Time Bomb
Personal assets are not automatically protected if you incorporate or form an LLC. As a shareholder of a corporation or a member of an LLC, your liability is limited to your ownership interest. However, this limited liability is only good so long as 1) a shareholder meeting is conducted annually; 2) personal assets and liabilities are kept separate from the business’; 3) accurate corporate records are kept; and, 4) the business is not undercapitalized.
