Posted on April 21st, 2020
Below find a full transcript of this video.
What’s up, fellow entrepreneurs? It’s John Fagerholm again. And today I wanted to talk about two topics together because they’re sort of bookend each other.
They’re two topics that I by far probably get the most questions and calls about. And I mean people that call me to ask me for my advice, and also just randomly when I meet strangers and they own a business and we start talking, these are the two questions that they ask more than anything else.
One is about hiring, the other is about firing.
So let me give you my take on hiring first because that’s the first step, and then firing second. And it’s going to be more of a take related to my experience and the experience of my clients and what I’ve seen with the problems in hiring and in firing.
Okay. So, starting with hiring. First of all, there certainly are limits to … Well, you’ve got to comply with the law and the law is that you can’t discriminate in hiring.
So, based on sex, age, sexual orientation, I mean you guys know the rest of that.
I’ve done several videos on all of that. Also, there’s some issues in Los Angeles County anyway, there’s issues related to a law called ban the box that started in 2017.
I actually thought that was going to be a law that was going to create a lot of problems, but so far I haven’t seen too much action there.
I’ve also done a video on ban the box, so I won’t talk too much about it here, but really it relates to hiring someone and doing a background check and finding out that they have a criminal record and what you’re required to do before you just move on to hiring somebody else, is basically what ban the box is.
So there’s specific things that you have to do. Whereas if it were someone else and it wasn’t a criminal issue, and you just didn’t want them and it wasn’t a protected reason, then you could just move on.
So anyway, hiring. I think the biggest problem in hiring for companies is that when it’s time to hire, they need someone now and they don’t spend the time to find the right person. So what I think you should do, first of all, is even if you have to have a temp or whatever else you need in that position.
I think you should first of all take time and make sure you have the right person. So I think interviewing a good handful of people, seeing who they all are and seeing what’s out there in the market, I think really going through the resumes, I think requiring them to perform some task or something.
For us, we always require a writing sample. That’s what lawyers do. Let’s see how you can write. I think really checking into their previous jobs. I think asking them, okay, let me have a number and a name and call two or three positions.
Because what I’ve found is that if you really like the person, you’ll sit on the phone and say, well if their former employer really likes the person and they really did a good job, they’ll get on the phone and they’ll tell you all the good.
If the former employer didn’t like them, they’re not likely probably to say something bad because hey don’t want to take that kind of risk, but they’re more likely to say something like, “I can verify that this person worked here on these dates in this position.”
And that’s typically, I mean it’s not a serious red flag but it’s the beginning of something, because, and I know a lot of companies that that’s their standard answer to everything.
But when you get the right person and that employee had done a good job for them, they’ll tell you. So, I think you do that.
I think you go and you check their references and you make sure everything lines up. And then really I think you just go online and just do a quick name search, look at their Facebook, look at whatever their social media is, and just make sure that they fit your culture.
Now remember, when I say fit your culture, I mean whatever your culture is. I don’t mean discriminate based on the protected reasons like sex and ethnicity and all the ones that are protected. So obviously that could be a problem for you.
And then I think you should always do second interviews.
You pick your two or three or more depending on what the position is that you think are good and you do another round of interviews and you really ask the poignant questions. You introduce them to everybody.
You ask your staff and the people that are going to be working with them, what their opinion is.
And it seems like a lot of work, but it’s in the beginning that you have to figure it out because the best way to avoid a bad employee is to make sure you’ve hired a good one.
And it’s tough. I mean, you’re never really going to know, but sometimes there’s warning signs.
So if you get someone in there and they start. You ask them, why are you leaving this position or why did you leave your last position?
And they start saying how terrible the former employer was, that’s probably a warning sign right there.
Or if you have someone that looks like they’ve quit a bunch of jobs and they don’t hold a job for very long, that’s always a warning sign. It costs money to hire and it’s time-intensive and there’s a train up period. So when you have someone, you want to keep them.
All right. So that’s kind of the gist of what I think you should do in hiring. And that’s how we hire.
I mean, it doesn’t matter if it’s a lawyer or a legal assistant or anywhere, we do the exact same thing.
Second, firing. Now firing is a little more complicated because the problem with firing anyone in California is that anybody can sue for anything, and they do.
That’s a huge, huge number of lawsuits, especially in LA County, are employment based actions.
And typically what happens is you let somebody go, they file for unemployment and then if they’re denied the unemployment, then they file a workers’ comp claim or some other claim.
I think the way you terminate someone is based on what you know about that person. So if the person isn’t going to be a problem, then maybe it’s just a matter of like, “Hey look, this isn’t working out, so we’re going to have to let you go.”
If you think the person’s going to be a problem, then I think you always do a severance agreement with a general release. And when I say always, I mean you always offer it whether they accept it or not, as you know, not up to you.
With a severance and a general release, what typically happens is you say, “Hey, I’ll give you two weeks extra pay.”
First of all, you’ve got to pay them everything you owe them the day that you terminate them, or there’s penalties that apply and you don’t want to deal with any of that.
But on top of what you owe them, you say, “Hey, I’m going to give you another two weeks pay,” or whatever you decide and negotiate with them. “And in exchange for that, I want to get a general release of all claims,” basically indicating that there aren’t any outstanding claims.
Now what that does is number one, it gives you a peace of mind. And number two, it prevents the former employee from then coming back and suing you.
And why that’s important is, so for example, let’s say you had to pay $5,000, even $10,000. I know that’s a lot of money, but the cost of defending yourself is so much greater than what you’re going to end up paying them that it’s just worth it.
Now sometimes they say, “Well, I’ll take the severance, but I’m not going to sign a general release.” And then you just say no thank you because all you’re doing paying them money and they’re likely going to sue you anyway.
There are some things you’ve got to do specifically to make the contract valid. I mean if you’re just going to download it offline, you’re taking a risk.
There have been people that we’ve given a severance to and signed a general release, well my clients, not me. And then they’ve come back after they’ve spent their money and tried to sue.
But what we’ve done is just sent that general release to the opposing counsel and usually it goes away. I don’t think I’ve even had one case where the opposing counsel kept trying to push for anything because there’s nothing there. They’ve released it all.
So one thing you have to be careful with, with general releases, is age. So if the person is 40 or older, then you can’t just pay them on that day and have them sign away.
That’s not really how it works. They have up to 21 days to accept or reject. And then from the time that they accept, they’ve got seven days to revoke. So if they’re 40 or older, you never pay them money at the time that they sign it.
You pay them that money on the eighth day, once you know that they haven’t revoked the agreement because I’ve heard of people that signed a settlement agreement and then, with someone over 40, paid them and then that person over 40 spent the money or whatever and then still came back and sued and the contract is revoked.
So now you have to go after them for the money. But more legal fees for a few thousand dollars, it doesn’t make sense.
Anyway, terminations are always tough in California because there’s that huge risk, but as long as you follow all the laws, make sure that your payroll is tight, make sure you didn’t misclassify, make sure that you have your workers’ comp insurance, because that happens a lot.
People get fired, then they file a workers’ comp claim. If you think it’s going to be a problem employee or if you’re not sure, it’s just worth it. And if you’re a company that has a lot of turnover, then there’s other options to that, which is basically maybe temporary employment if you know that the turnover is high or for a set amount of time.
I mean, there’s a lot of options. I can’t go through all of them here because they’re so circumstance specific.
But overall, take your time in hiring and if you’re terminating, try to get a severance and a general release.
It’s worth it in the long run.
