Entrepreneurs as First-Time Managers

Ah, to be an entrepreneur and work for yourself. The world needs a better burger, craft beer or boutique hotel, and you find the financing and courage to make your vision reality. You open up, hire staff and promote your dream. It’s all good, right? Fast forward a few months and you discover that the majority of your time is not spent on bigger, better burgers or beer, it’s spent managing people and trying to stay compliant with ever-expanding regulations.

The rude truth of entrepreneurship is that your life’s dream will comprise a small portion of your workday, and the majority of it — managing employees — is a task for which few have been prepared. Take a labor management course in the nation’s top business schools and the professor won’t discuss exempt vs. non-exempt employees, compliant meal period policies and documentation practices. They do, however, discuss those concepts in the employment law courses in law schools. Therein lies the problem and your downside. Your people are your best assets, but if your employment policies aren’t compliant, those best assets can create balance sheet wrecking liability.

Let’s talk about five things that new employers often learn by expensive error and trial.

Exempt vs. Non-exempt Employees

There’s a misperception that paying an employee a salary spares the employer the need to pay that employee overtime. In California, there are conditions which must be met for an employee to be considered exempt, i.e. not subject to overtime compensation. Unless those conditions are satisfied, even salaried employees are entitled to overtime pay, meal periods and other items typically associated with hourly employees. If the employer misclassifies the employee and fails to provide overtime, meal periods, etc., the employer is liable for the employee’s back wages, penalties and any legal fees associated with their recovery. Misclassify several employees for extended periods of time and the liability can bankrupt your dream.

Meal Periods and Breaks

Another area where first time employers stumble is meal periods and rest breaks. In California, non-exempt employees are entitled to uninterrupted 30-minute meal periods and 10-minute rest breaks in the course of the workday.[1]Your servers and bartender may want to skip lunch to work through a rush, but in doing so, those well-intentioned employees have created liability for you. In our experience, litigation attorneys find their best traction with disgruntled former employees and non-compliant meal period policies. A fired employee will say just about anything (“They never let me take lunch!”) and unless your documentation can prove otherwise, you’re going to be liable for back wages, overtime pay, related penalties and legal fees.

State-Mandated Training

California has a dizzying array of state-mandated training requirements — Cal OSHA, food-handling, harassment, security guard training, etc. — which new employers often overlook. These training requirements vary by industry, employer size and job category. Unfortunately, litigators know that many employers overlook training requirements or fail to document them properly. Fortunately, this is an easy fix. Identify all the mandated training requirements for your industry — restaurant, retail, gaming, etc. — make sure all employees receive the training and record the date/time, their attendance, the trainer and length of training.

Consistent Application of Policy

In California, over 85% of our workforce falls in some sort of protective class. When we’ve had to terminate an employee, we’ve seen some take a distorted view on the way out the door. In this “I’m a victim” world, the termination wasn’t related to their failure to follow stated time/attendance polices or performance standards. Instead, it was the result of some sort of favoritism or bias by management. This can be very frustrating and the burden of proof is on the employer to disprove the claim.

The best defense against such claims is to show consistent, documented application of your employment policies and practices. Every employee and incident is different and you can consider mitigating circumstances, but it’s best to be as fact-based and consistent as possible when enforcing policy infractions. You may want to accommodate a great bartender by overlooking her tardiness and term a lousy bartender for similar nonsense, but that inconsistency can be tough to explain under the harsh fluorescent lighting of a courtroom. Be consistent!

The Burden of Proof is on the Employer

It’s an unfortunate fact that terminated employees will lie on unemployment (EDD) and discrimination (DFEH) claims. Furthermore, there’s no shortage of lawyers in California who will embolden employees to file claims with the hope of bullying a settlement from the employer. There’s almost no downside for employees to lie on unemployment claims, workers compensation and DFEH claims or even in hearings and depositions. And the burden is on the employer to disprove even the wildest employee claims.

Your best defense against shady litigators is documentation. The employee’s claim that “They never told me!” can be debunked by the signed acknowledgement that states otherwise and real-time documentation of training or counseling sessions. The good news is that judges understand that employees stretch the truth and will give you credit for clear, consistent documentation. It’s often enough to show that you have it.

Conclusion

So how do you avoid the traps listed above? Have a qualified employment practices attorney review your policies and practices, job descriptions, applications and other HR documentation for compliance with current law. If you don’t have appropriate policies in place, that attorney can help you get into compliance. Second, be disciplined and consistent in your adherence to your HR policies — maintaining training requirements and applying your policies as evenly as possible. Finally, build documentation habits throughout your organization to back up your defense against third party challenges. Use software tools like JobStats to monitor training requirements and document employee issues to defend your dream against unintended missteps and third party challenges.

About the author

Kyle Kirkland is President of Brick HR, Inc., the developer of JobStatsdocumentation software. As owner, President and General Manager of Club One Casino in Fresno, California, Mr. Kirkland has extensive experience managing employees in gaming, food and beverage, facilities, security, administration and managerial positions. He has direct experience in dealing with the challenges California employers face and how to mitigate the related risk. Mr. Kirkland is also the president of the California Gaming Association, a non-profit trade association which represents California cardrooms.

Prior to joining the gaming industry, Mr. Kirkland served as the chairman of Steinway Musical Instruments, the world-renowned musical instrument manufacturer, a position he held for 17 years. Earlier in his career, Mr. Kirkland worked at Bain & Company, an international management consulting firm and Drexel Burnham Lambert, an investment bank specializing in high yield securities. Mr. Kirkland has served on the boards of several public and private companies and non-profit organizations.

Mr. Kirkland holds an A.B. degree from Harvard College magna cum laude in Economics and an MBA degree from the Graduate School of Business at Stanford University.

He can be reached at kyle@jobstatsapp.com.