“Help! I Can’t Fire My Wife” – What Family Businesses Need to Know About Avoiding Lawsuits

We’ve all heard the cliché saying, “It’s cheaper to keep her.” While it may be relevant in divorce, and a good reason to strive for a happy marriage, it may not be a good mantra for business. The greatness of American business is rooted in “Mom and Pop Shops” — small, family-owned, businesses with a minimum number of employees. The appeal of these small businesses are low start-up costs and exclusive control. However, exclusive control is just a facade as Mom and Pop still need to be compliant with the law.

California employment laws are expansive and evolving. According to the Department of Industrial Relations, thirty-two employment-related laws were amended in 2016, and in 2015, there were over 110 amendments or additions. In other words, unless Mom and Pop receive yearly training, they are already falling behind. This is the same for any company, but the difference is that larger companies can terminate their payroll personnel if a mistake is made. Pop can’t exactly fire Mom if she miscalculates overtime.

So, what is Pop to do? The answer is simple: get Mom some help so she doesn’t make a mistake. If a mistake is made, consult an attorney before it becomes a lawsuit. Here are three tips from an employment lawyer to help Mom and Pop avoid common obstacles in operating a business.

Tip #1: Keep Accurate Records

The backbone of wage and hours laws is record keeping. For example, in a lawsuit for unpaid overtime, an employee has the initial burden of showing that the employer likely failed to pay proper overtime. The burden then shifts to the employer to prove that all overtime payments were correctly made. If the employer failed to keep accurate records and cannot prove that overtime was paid, then a jury can accept the employee’s estimate of damages, even if approximate. If Mom and Pop keep accurate records, it can make a big difference at trial or, better yet, stop the lawsuit from ever happening.

Tip #2: Document Discipline

Mom and Pop would probably prefer to treat their employees like family. The problem is that employees who get fired quickly turn into disgruntled ex-family members. The best defense against a wrongful termination claim is to prove that there was a “legitimate business reason” for the termination as opposed to a discriminatory reason. Legitimate business reasons may include elimination of the employee’s position, financial considerations of the employer or employee misconduct. Mom may feel bad about recording employee misconduct, but it should have the same priority as keeping accurate financial records.

Tip #3: Take All Complaints Seriously

In California, employers have an affirmative duty to investigate employee complaints about discrimination and harassment. A failure to do so can have severe financial consequences. Therefore, Mom and Pop should never dismiss a complaint – even if it appears to be false. It may even be a good idea to hire an attorney to conduct an independent investigation. However, under no circumstances should a complaint be ignored. Mom and Pop should even keep a written record identifying how the complaint was resolved.

Unfortunately, one article cannot solve all of Mom and Pop’s problem, which they should have a good employment lawyer. Visit this blog frequently for more practical information on employment and labor law.


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