Best Hiring Practices with Patrice Perkins
Patrice is a lawyer, she is the founder of Creative Genius Law. She actually specializes in helping creative entrepreneurs make sure their IP is protected and, really, that their whole businesses are set up to make as much money as possible in the best way possible from that intellectual property. But, as part of that, of course, she also has to talk to them about the employment issues around their businesses as well. And so she's graciously agreed to talk with us about those legal issues today, as well. Hey, Patrice. Hey.
Hey, it's so weird to have you there instead of herein the audience with me. It feels weird to me too. But I like you up there, you look good, you look good. So let's just start off with a question that's actually a hold over from our last session, which is, tell us the difference between an employee and a contractor, and what we need to be thinking about as small business owners as we choose which we are going to hire. Absolutely. So it comes down to one word and ...
that is control. Yes. I think we can all relate to that. And so when it comes to independent contractors, we can have very minimal control over how they are performing the work and how they are getting to the end goal. As a business owner, all we can really control is the outcome. So that very specific thing that we ask them to do. Also, we can't control where they perform the work, you can't require an independent contractor to come on site. You can't require them to work on sites for a specified number of hours and, for a lot of us, even though we may be doing business behind our computer screens, you can't require them to be available for a specific time schedule. So it goes back to control. Now, with the employee, the employee you can have them on site, you're providing their equipment, you're providing the specifications of how they are performing the job, and so those are the key differences. Some of the smaller differences are, with the contractor, they are working typically on a per-project basis, right? It's a very concrete start and stop, and I find that's a huge area where a lot of small business owners get it wrong, because we want to have contractors working with us forevermore. It needs to have a concrete start and stop. From a tax perspective, they are responsible for their own taxes. And then also the other thing you should be aware of is that with contractors, you're not paying them, or you're not covering them under workers comp, I heard someone mention that. So you're not covering them under any sort of insurance or anything like that. And then the other piece of it is that they are in the business of providing the service that you're hiring them to perform. So what that means is that, as a contractor, my business may be virtual assistance business, or providing executive assistant services for people and so what that means for you, the business owner, is that you can't restrict them from taking on other clients who may very well be in the same industry as you. And so, I think that's an important thing for us as small business owners to keep in mind, as well. Yeah. What are, and this might play into exactly the same kinds of things you were just talking about but I wanna nail this for everyone. What are some of the big mistakes you see small business owners make with hiring contractors? Is that it doesn't have an end date, right? So when you're hiring contractors, you need to be hiring them for a very specific project. A start and an end date. You can define that project by the outcome that they're going to produce for you. If it goes on longer than that, then you need to already be thinking about how you're transitioning, or how you're going to transition them from contractor to employee, which is what this is gonna set you up for today. Yeah, absolutely, okay, awesome. Let's say we're thinking about hiring an employee. One of the fears that has been expressed here, and I heard this a lot when I was preparing for this class, was the amount of commitment that comes with hiring an employee. What kind of commitment are we getting ourselves into when we hire an employee? And also maybe can you talk to us a little bit about at-will employment? Absolutely. we're committing from a training perspective because we are training them on all of the behind-the-scenes of our business. We are committing in terms of a potential liability perspective because, once we take on an employee, we're essentially responsible for how they're treating our clients and what the end result is that they're putting out there. So, from a liability perspective, that could be huge. And so you want to make sure that once you hire an employee, you have firm protocols in place for them so they know exactly how to produce that result that you're looking for. In terms of at-will, that's a gift for us, the business owner. Yes. As the employee, not so much. And so what that means is that you don't have to give someone notice when you are firing them. So you may have been employed somewhere before and they'll say you'll get 30 days notice or you'll get 10 years notice. At-will means that's not required. You can get rid of anyone at anytime for any reason. So going back to that fear that you may feel around the investment in this new person, or even the long-term financial commitment, you do have at-will working in your favor. And every state has at-will provisions. And so I want to add there is that, in a couple of states, there are exceptions to at-will, meaning some states have a public policy exception, meaning if the reason why you want to get rid of your employee relates back to a public policy concern, so maybe they told you that what you were putting out there wasn't good for your it created a health risk, and you fired them because of that, then that may fall under a public policy exception. Also, you can't get rid of someone for a reason that's discriminatory, right? And so that's going to be the case no matter what state you're in. So what I would encourage you to do is to look at your state's rules on at-will and to see if there are any applicable exceptions to your at-will laws. Okay, perfect. Thank you so much for explaining that. Does that answer some questions for you guys? Awesome, next I wanna talk about actually the process of interviewing people. Because one thing that was drilled into my head when I was hiring for a big company is this is what you can ask and this is what you cannot ask. And I think if you haven't hired before, that may be a fear you don't know you have but maybe one you should have. So what are some of the things that we can't ask about in an interview process just to stay on the right side of the law? Yeah, so it is a scary topic because, from a legal perspective, there's actually four different statutes that govern this, right? So it's not all neatly packed into one little place for us. And so, just in terms of the categories that you guys should be aware of, you can't ask questions around race or ethnic background. You can't ask questions around gender or family status. So that goes to the woman who has the tile, your potential employer can't ask you questions around that. You can't ask questions around a person's disability and you can't ask questions around their age. And so what I would encourage you to do, and I know you guys are gonna work on this later is once you have your job description fleshed out, you want to make sure that you have standardized interview questions and that each question on your list speaks specifically to a knowledge or a skill that's required on that job description. Anything that falls outside of that you probably shouldn't ask, but I think that's a great starting point for you to ensure that you're in line with the legalities of it. A huge question that I get here actually is around previous arrests or criminal history. You can't ask anyone about prior arrests. You can ask them about convictions but not prior arrests, so I do want to put that out there. Okay, awesome. I did not know that, that is fascinating. (chuckling) Okay, I know IP, intellectual property, is really important to you. It's really important to your clients. And when you're bringing in an employee, that means you're sharing a lot of your intellectual property with them. How do you protect your IP, which is something that a lot of our businesses are based on. How do you protect your IP in this new crazy relationship with an employee? Yes, I love that you asked that question. So the first part of it is you want to have everyone who comes into your company sign a confidentiality agreement. And that actually can stand for employees or contractors, right? You don't want them to walk away with the secret sauce so that's the first thing right. The next thing you do is identify everything in your company that you consider to be a trade secret. So a trade secret is just secret sauce that can have financial value. It can be a marketing strategy, it can be a vendor list, it can be a recipe, it can be a specific way that you weave a basket. So, anything that is your secret sauce that has financial value and so what you wanna do internally is come up with a list of your trade secrets and then create an internal policy on how you will keep them secret and that's the only thing that's required by law. You have to actually treat them as a secret. That's important when you're hiring because then you want to train those employees on how to handle your trade secrets. One of my favorite trade secrets is the Coca Cola formula. Right, and so they are large companies that are protecting their trade secrets from employees. So that's the second thing and then the third tip I want to give to you guys is I just seen a lot of issues around employees come to a company, then they leave and then they've got all this cool stuff they created and they claim it's theirs individually, right. And so you want to protect your business from that scenario and the way that you do that is that when your new employee comes in, you have them disclose all of their pre-existing inventions. Or in our world that maybe pre-existing creations. They give you a list, you sign off and approve it as theirs and then that way anything that is created on the job, within the scope of their employment is clearly your company's intellectual property. That prevents a dispute on the back end if they leave your company. Fantastic, we are learning all sorts of things here. All right, I have one last question for me and then I would love for you to make use of Patrice's incredible brain and experience and ask her some questions as well. So, we've interviewed now, we've found these candidates, we are ready to make an offer. When we make an offer, what are the things that we need to avoid as part of that offer, and what are the things that we need to make sure we communicate as part of that offer? So, I want you to say as little as possible when you make the offer. You want to communicate the expectations of the role right, so you may reiterate what was in that job description, so that expectations are managed on all ends. What you want to stay away from is anything that may contradict that at-will employment that we spoke about a few minutes ago. You don't want to make any promises about promotion, any promises about bonuses, unless they're guaranteed, any detail around what can serve as the basis for firing. Essentially, you want to say as little as possible and stay away from saying something that may contradict with your right as an at-will employer, if that makes sense. The other thing that you guys to focus on in that offer letter is the conditions of employment. So we spoke about the confidentiality agreement, which I would love for you to request of them or have them to sign, and then we spoke about the list of pre-existing inventions. Anything that you would consider to be a condition of employment, you want to spell out in your offer letter. You also don't want to attach a time frame to the offer right. Those are the things I would focus on. Say as little as possible and that's what you keep out of it. That's fantastic, because I know, I know me, and I'm like prone to being like and we're gonna do this and we're gonna do this, it's gonna be great and we're gonna be friends, forever, right. You don't want to do that right. You said about leaving out anything that we're that pertains to a time frame. So do you mean that in terms of like how long you expect the employment to last? Or how long you're guaranteeing employment? Exactly so we're all good people and we want to give the very best to our employees. So from a legal perspective we need to stay away from after one year you will get this bonus, and you will get this promotion. And this is a one-year position, we want to stay away from those concrete time frames, because should this relationship go awry you don't want to have put yourself in a situation where you've created an implied contract with them and you no longer can get rid of them at-will because you've told them this will last for one year. So I know that may be difficult because we want to, you know, people want to plan for their futures right. But as a business owner, we just have to kind of, just stick to the basics with that. We can't make any promises. You can tell them, you know, that you see a big future right here, but you can't get into those very specific promises of I will give you this and we will do that. I love it, what other questions do you have for Patrice? Megan. I'm kind of along that same lines but what about any type of like trial period or like pay at a certain like for the first three months I'm gonna pay you this much, and then after that, you'll get a raise or is that kind of, not, does that go along with what you're saying as far as like don't make any of those promises. So if you absolutely need to include that in your offer, what I would do is make sure you lead with the fact that this is an at-will employment, and what that means and have them sign off on that. Then, should everything go well, this is your intention for them and then you can lay out what that structure looks like. Okay awesome. What is at-will? I must have missed that, what does that mean? Can you share what at-will employment is again? It's kind of, just quickly, it's a term that it's a phrase that we use to describe the relationship that we have with our employees. So, at-will, basically means someone doesn't have had to engaged in bad behavior for me to get rid of them, OK. So that's the easiest way to put it. They didn't have to have had a fallout with a client of mine, they didn't have to have broken one of my company policies. I can get rid of them at any time, for any reason and I don't need to justify it. That's what it means. And I think that can extend too, you decide to take the business in a different direction and you don't need that person anymore, right. They can be wonderful, and a wonderful employee and do their job really, really well, but you may not need them anymore and you can get rid of them, correct. Exactly. Yeah, LaShonda? What's the difference between a paid contractor and a paid intern, or a contractor and an intern?
Yeah, intern is a great question to ask about. (several people laughing) Intern is such a dirty word. I would be very careful about interns you guys. Legally, there is no free work, OK. So an internship by law tends to be a training ground for someone. The work that they're doing within that internship cannot replace the work of what would typically be an employee. So you can't technically have or legally have an intern answering your phones or doing admin work. The Department of Labor provides excellent guidance on what an internship is, so it's a training ground, I always recommend some set mentor hours, if you have an internship. Excellent record-keeping about what you're training them on, what they're taking from it and there's never a promise of employment. So that's what an internship is and the reason why I laughed and called it a dirty word is because a couple of years ago specifically in the movie and publishing industry there was a huge fall out around interns, if you guys watch the movie, Black Swan. Look that up when will you. There was a huge fall out where the interns raised all types of Hell because they were doing all of these things that should have been done by a paid employee and not being compensated, and it was an excellent legal dispute where, for the first time, we really saw the court on the side of intern rights. So I will caution you about that. Also, if you're going to pay your intern you're getting into even darker territory and the reason is because most folks want to give interns a stipend, Right. And not minimum wage. So you're adding another layer of complexity to it. So what I encourage folks to do, who do want to hire interns is to work with your local colleges and universities. Hire them through one of their programs because their programs are legal, they've been vetted and so it just adds a safeguard for you as a business owner. Brilliant, thank you for asking that question, such a good one. Yeah, Maya. Hey Patrice, what are some sort of broad considerations around legal considerations around hiring a remote team, so a virtual team. The key is that your offer letter or your contract needs to specifically state the state where you're residing or where your business is headquartered. Because, if any dispute arises with any of those people you need the agreement to be based on your state's law and you need to have to show up in court in your state. So that's the key because, it is, it can be a bit of a wild wild west and everyone is hiring people from everywhere and so that comes down to you making sure you have a solid contract and stating the contract is to be interpreted according to my state's law and legal disputes are resolved here. And that's honestly the best feedback I can give for you about it because you can't possibly understand the law of every single place where each of your contractors or employees may live, and so that's how you protect yourself as a business owner. Okay, brilliant. We've got a couple of online questions for you Patrice. So let's see, all right Jennyann asks, hey Jennyann, she says I would like to know the logistics around allowing volunteers, apprentices and interns. What about hiring teens as interns. We talked about the intern piece a little bit, but I would love to know about volunteers as well. Because I see, I mean I know there's a lot of breweries who like to use volunteer labor and I'm always like, I don't think that's legal, so can you speak to that? So I always advise clients to stay away from volunteers unless they're in a nonprofit space. Because it's just, by law, what we consider to be a volunteer is probably not. So those breweries are, could probably be, in big trouble if they are.
I know. (laughing) So what I would say, is you always want to give them a letter that kind of outlines, again, with the interns is how this is a training experience. I wouldn't advise you to take on volunteers at all. What was the third category that she mentioned?
She said apprentices. Okay apprentices, you know those are interns so treat them the same. You want an offer letter that shows how this is a training experience and what you are offering them in the exchange for it. So, if you're determined to have volunteers I can't advise on that. No volunteers you guys. But the interns, what they are getting is a training experience, period. And that they are signing off on that. Yeah awesome, and she also asked about hiring teens. Any guidance around getting around, you know, minors as employees? Well obviously, we're getting parental consent. And then I would encourage you to speak with your your insurance provider about it. Because depending on the nature of the work that you're performing you may need to get an extra rider to cover them especially if they're going to be on-site. If they're going to be online, you should be familiar with California has special laws around children under a certain age, 13, and so you should be familiar with those laws. I would actually advise to keep them away from being online, but definitely, insurance would be my biggest recommendation for you. Consult with your insurance provider. If they get hurt or injured or even if they come in contact with someone that presents a risk you, the business owner, should be covered in some way. Wow, all right awesome. Let's take a look at our second online question. What about hiring family members as employees? Does anything change compared to hiring strangers? Is this a bad idea? Patrice what about hiring family members? I don't think it's a bad idea at all, however, I think that because they're family members we can have a tendency to treat them, hire them under a different process, right, an abbreviated process. So I would say all of that criteria that you would apply to outside team members, you apply it to your family members. So they're going through the hiring process. They are signing off on the letter. You're making sure they're covered under your insurance and so you're treating them exactly the same. Because we never know. I mean, families fall out every day, right. Yeah, for sure. Do you guys have any final questions for Patrice, LaShonda? How do you feel about barters and trading services when it comes to hiring? Great question. I heard bartering? How do you feel about bartering or trading services as a way to get work done in your business? I think it, it can be fantastic. Again the key there is consistency in the process. Just because you're bartering with someone you still need to make sure that you're treating them the same in terms of managing the expectations of what's required of them or what's expected. Having them sign off on the same documents and then being clear about what that barter entails. From a tax perspective, I would actually keep a clear record of the value of services that are being traded and you would have a conversation with your accountant about that. Excellent, anything else for Patrice? Maya?
Could you speak a little more to insurance because that's something I'm not very familiar with. Yeah, what kind of insurance do we need to have as it relates to hiring people? Yeah, overall your business is going to have professional liability insurance. Then you may have a commercial policy, which would protect people who are coming on-site. So that would come into play if something falls off the wall and they get damaged. But for someone who may mess up on a client file, that would be covered under your professional liability insurance or errors and omissions is what is what it's also referred to. So, I have a relationship with an insurance broker versus just an agent, because the broker is able to kind of shop around to different companies. They may have very industry specific relationships, but they have a broader knowledge base than an agent. And so for you in particular, talk to that insurance broker about hiring, you know globally or across borders and then make sure you talk to them about the specifics of the work that you're doing in the new digital age there are provisions that are very specific to, you know, even digital or online businesses and so make sure you disclose all that to your insurance broker. Yeah, and actually let's finish up right there with hiring across borders. What are the legal things, even if just like the basics of what we need to think about when it comes to hiring someone in a different country and what are the things we need to think about when we're hiring people in different states if we're here in the US? I would go back to making sure that they are clear that any legal disputes are resolved in your home state. That's the best advice that I can give you because you don't want to have to show up all over the globe in court right. And so, just making that really clear and then that's it, that's really the rule of thumb. And then as you build out your team you may want to connect with local counsel in those areas. I would be focused on maybe having hubs around the globe where you hire folks as opposed to just hiring folks that come from everywhere that way eventually you can build a relationship with counsel in that area and so if there is an issue that comes up you have counsel that you can go to in that specific area. But it's going to start with what you say in your contracts and your offer letter right now. Beautiful, Patrice thank you so much. Tell us more about where we can find you online. Maybe where we can read more of your great content and advice. Absolutely, so you can find me at CreativeGeniusLaw.com. You can find me on Instagram @creative_esq and you can also find me on Instagram @CreativeGeniusLaw. Yeah and Patrice's Instagram is so fascinating (laughing) because she shares sort of like the behind the scenes, like legal look into IP cases and just all the things that we need to be thinking about as creative entrepreneurs that maybe we don't think about on a regular basis. So kudos to you on that account and also everybody go follow her. Patrice Perkins this has been absolutely illuminating and fascinating, thank you so much for sharing your wisdom and knowledge with us. Thanks for having me. Thanks Patrice. (audience applauding) All right, you guys get some questions answered? Anything surprise you that Patrice went over? Megan? It actually doesn't seem as scary as we maybe thought it was. Yeah, well that was the main reason I wanted her to talk about at-will employment and the actual commitments that we get in when we hire an employee. Because, I think a lot of us have worked in jobs where there was a very particular policy for letting someone go, maybe there was a very particular performance management system that you had to go through and sign off on. You probably got the impression that firing someone was like really a big deal, that you had to have all this proof for why they needed to get fired and there's good reason for that, in a lot of ways. And, at the same time, the legal, the legal confinement around that, constraints around that, a lot more minimal than what we think on a regular basis and so I really wanted to make sure she talked about that and so I'm glad you picked up on that too. Anything else, Sharon? Yeah and let me know if this is too simple of a question I didn't want to waste her on it. So obviously I'm a solopreneur looking to grow and I'm thinking I need to reconfigure my business structure like maybe I need to be an S-corp or an LLC if I'm gonna have employees and I have these different angles like I have an online store and I'm teaching workshops and I produce a music festival. So I have all of these tendrils that do, the music festival does utilize volunteers, but it's under my business umbrella. So I'm just wondering what you think, like is an S corporate a more appropriate next step? Is a LLC more appropriate? This is where I get to say, again, I am not a lawyer nor am I an accountant. I can give you some direction but it is not legal advice nor is it tax advice. I will say the very first step for you, especially because you do have a couple of different kind of entities, it's a little more, there might be, really, the way to think about it is you may have some really cool opportunities, business structure-wise. And so you're gonna want to talk to a tax attorney and an accountant. Would that be her or? You can certainly try, yeah. She might not be the best person for you. I would say probably there's, you're gonna want to find someone local to you who can advise you around this. And because, well, for lots of reasons, accessibility being the number one reason and they're going to talk to you about what you need, what all the different kinds of revenue streams you have, what your vision is for your business, going back to that from earlier lessons, and they're going to to kind of figure out what configuration for your business is going to make sure you get to keep the most money and what kind of structure is going to protect you the most in terms of liability. So, likely, the next step for you is incorporating as an LLC which you can which can still be taxed as a sole proprietorship, just the way you've been being taxed to this point. There's some more paperwork that's involved with it. You get an extra number that's not just your social security number and all of that good stuff. But, a whole lot doesn't actually change but you add on, when done properly, you add on this extra little layer of protection, financially speaking. The next step after that is normally maintaining your LLC incorporation but being taxed as an S-corp. And again, that's something you're gonna want to work on with someone who knows what they're doing, not me. So like tax attorney, like I could ask my tax lady for starters. Exactly, that's where I would start and if she doesn't have the expertise to be able to actually advise you, she's gonna know somebody who does, who works with her other clients as well. And so always start with somebody you know, right. Somebody you know has either gone through the process already, has the contacts for you and you can go from there. And that's gonna teach you the process of who you might be looking for if even let's say maybe you don't like the tax attorney that she recommends, but now you're gonna know better what the conversation needs to look like, what you need to be look out for. You can go off and find that person, vet that person, that you are gonna really like and that you do gel with. So yeah, so the nice thing about an LLC is that it's actually pretty versatile and it can protect you early on and it can protect you later on as well. It gives you that the liability piece, plus it gives you some tax advantages later on as well. Talk to a professional. (people chucking) We can talk, but talk also with a professional. Any other leftover questions? Awesome, was that helpful? Yes. Awesome I knew I was so excited that she agreed to talk with us cuz I knew that was gonna be really helpful.