At What Point Should A Young Company Think About Hiring Employment Counsel?

I have a friend who is a BSD in the venture capital world.  I reached out to him a while back because I had read that one of the companies his firm was funding was about to undergo a significant expansion.  I asked my friend if he wouldn’t mind introducing me to the company’s general counsel, so I could get my foot in the door in helping the company establish a solid platform for management of employment issues which were bound to arise, given their imminent hiring.

To my surprise, my friend rebuffed me.  “To tell you the truth,” he said, “it’s really not something that’s on their radar at this point.”  I let it pass–there might have been a variety of reasons he didn’t want to make the introduction.  But, suppose he was telling me the truth, that he thought the general counsel of this emerging tech start-up really didn’t need to be thinking about who to use to prevent and, if necessary, deal with employee “issues.”

If he was telling the truth, I think he was mistaken.  This is particularly true given that the company was domiciled in California, unquestionably the most hostile legal environment in the world for employers. 

Granted, I don’t think selecting employment counsel is on par with raising funds or gaining market share. If the company fails, there won’t be employees to make claims or file lawsuits.   On the other hand, meeting and potentially retaining a legal expert to review the company’s policies, draft or revise a handbook and perhaps conduct some training is neither time-consuming nor rocket science.  It is certainly not expensive.  Particularly if the ounce of prevention establishes, at the company’s early stages, a solid foundation which prevents even one otherwise avoidable employment lawsuit.

I have seen up close organizations that started and grew without a solid, systematic adherence to employment laws.  In each instance, I’ve become involved only after the company has been sued and we are trying to frame a defense.  At that point, the company’s management invariably recognizes its shortcomings and vows to do better going forward.  Unfortunately, this only happens after the company is forced to spend tens of thousands (or more) in settlement and defense costs.

It is not unusual for small employers to look to their “business” counsel for guidance on complying with employment issues.  This is the lawyer that drafted their articles of incorporation or negotiated a lease.  However, it is more common for this to occur only after there has been a claim or suit.  Before that time, my friend is right, it’s literally “not on their radar.” 

I’m partial to the idea of working with a lawyer that concentrates his or her practice on employment defense, rather than a business generalist.  There are lawyers who do nothing but employment advice and counseling, which is who I–a litigator–will look to if I’m confronted with a particularly unusual question.  The problem for the commercial lawyer in advising on employment issues is the rapidly changing nature of employment laws.  An additional problem arises when the claim goes further, and ripens into an administrative complaint with the Equal Employment Opportunity Commission (EEOC), California’s Department of Fair Employment and Housing (DFEH) or similar agency, or if there is a civil lawsuit filed.  While the company’s business lawyer might be a wizard at negotiating a complex lease, he or she might struggle when conducting a deposition, drafting a solid motion for summary judgment or representing the company in front of a jury.

I have all the respect in the world for entrepreneurs.  And I expect there are a thousand and one issues and headaches to successfully navigate without having another lawyer stick his or her nose into how the company runs its business.  But the last survey I saw said that the average verdict or award in employment lawsuits where the employer lost was over $400,000 (and this was a few years ago).  I’d argue that it’s never too early to put retaining an employment lawyer “on the radar.”

About Alex Craigie

I am an AV-Preeminent rated trial lawyer. My practice focuses on helping companies throughout Southern California resolve employment and business disputes. The words in this blog are mine alone, and do not reflect the views of the Dykema law firm or its clients. Also, these words are not intended to constitute legal advice, and reading or commenting on this blog does not create attorney-client relationship. Reach me at acraigie@dykema.com. View all posts by Alex Craigie

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