Five Things Businesses Should Revisit Starting The New Year

Start the New Year Right

A new year always brings change.  The changing of the calendar is accompanied by a renewed sense of hope and optimism to maximize your business opportunities this year.  Part of optimizing your business is ensuring you are keeping up with the changing times.  As with any year, laws change, best practices change, and your policies and procedures likely need to change with them.  Here are five things every business owner should revisit at the start of this year to make sure your operations are above board.

New Year Checklist for Business Owners

1.     Review your employee handbook.

Employment laws are constantly evolving.  Occasionally they are small tweaks or adjustments to existing laws that require minor policy changes.  Other times, they reflect a significant shift in public policy and require significant and abrupt adjustments to your employment practices.  Either way, it is recommended that you have your employee handbooks reviewed on an annual basis to ensure your policies are compliant with existing law and you are treating your employees fairly.  California public policy vigorously protects employee rights.  Even minor inconsistencies between your handbook policies and California and/or Federal law can expose your business to liability.

If your handbook has not been reviewed in the past few years, it is likely your current policies are missing key provisions or updates.  Even within the past two years alone, California has introduced several new laws that impact the rights and obligations of businesses and its employees.  Laws relating to independent contractors, hairstyle discrimination, minimum wage/salary requirements, organ donor leave rights, COVID-19 reporting, California Family Rights Act expansion, and more, have been enacted.  If your handbook does not address these or other issues, it is time for a revision.  

2.     Review your corporate documents.

You likely recall reading through your company’s bylaws or operating agreement shortly after its initial formation and then promptly tucked it away in the corporate binder.  Perhaps your business has expanded, and you have taken on investors or partners.  The rights and duties of you and your investors are governed, at least in part, by the terms of your bylaws or operating agreement.  It is important that that the company’s stakeholders understand their rights and limitations.  It is also possible that the provisions of the governing document do not accurately reflect how you and your partners want to operate the business.  To avoid a future dispute, it is recommended that your governing documents are reviewed and amended to keep up with current business operations.

It is also crucial, especially for business formed as a corporation, that your business documents significant corporate actions in the corporate binder.  If your business sold or acquired substantial assets, merged with another business, took on new investors, changed officers, or other significant events occurred, the transaction should be accompanied by a resolution and minutes of the meeting reflecting the resolution’s approval.  In addition, California law requires corporations hold director and shareholder meetings at least annually to address company business.  Minutes of the meetings should be included in the corporate binder.  LLCs and partnerships enjoy greater flexibility than corporations, but it is still recommended that meetings to address significant events are held and minutes taken and placed in the company’s binder.  If your business has not kept up with its annual documentation, the start of a new year is an excellent time to get caught up and develop good habits moving forward.  

3.     Review employee/contractor agreements.

Many businesses utilize contracts for certain employees and independent contractors.  Tyler Law has previously written about the substantial change in California public policy regarding the classification of employees and independent contractors.  Employees and contractors provide different services and their relationship with your business is vastly different.  It is vital that the contractual relationships with employees and contractors accurately reflect the relationship and clearly outline the parties’ rights and obligations.  It is easy to get in the habit of reusing old contracts for new hires or new contactors.  As mentioned previously in this article, the laws surrounding employee-employer relationships are constantly changing.  Your contracts need to reflect the changing times.

A few examples of revisions to your businesses contracts that may need to be made include the following items:

• Arbitration provision in employment agreements.  The right to arbitrate employee disputes is under attack in California.  AB51, introduced on January 1, 2020, bans mandatory arbitration clauses in employment agreements; however, the law has been stayed pending the outcome of a lawsuit challenging it as a violation of the Federal Arbitration Act.  Businesses interested in arbitrating disputes with their employees will need to keep an eye on this situation.
• Often businesses only have employee contracts with senior level employees.  Senior level employees tend to be salaried instead of hourly employees and therefore treated as exempt from overtime and wage and hour laws.  Being a salaried employee alone does not qualify an employee as exempt.  Exempt employees must meet certain salary and job duty requirements.  Businesses need to ensure the compensation and duties are adequately stated in their contract.
• In contractor agreements it is important to articulate that the contractor controls the means and methods by which it will accomplish the task at hand.  It is also important to establish the independence of the contractor’s business from your business, which should include provisions regarding the contractor’s insurance requirements, who is supplying materials and tools, and any subcontractors or employees utilized by the contractor.

Getting your contracts in order for the coming year will help protect against potential issues that could detract from your ultimate goals.  

4.     Review policies and procedures.

Being aware of the current laws and updating your employee handbook are two key steps in protecting your business.  The third step is implementing policies and procedures to ensure the handbook is being followed and to address situations that are not covered in the handbook.  Handbooks are the general rules that govern the employee-employer relationship.  Not every situation can (or even should) be covered by a handbook.  A few examples of procedures that should be reviewed include the following scenarios:

• Meal break and rest period policies are a common problem area.  As a business owner, you are aware your employees need to take meal breaks and rest periods.  Hopefully, you have procedures in place to ensure your employees know the break requirements and have put a schedule together that allows for breaks to be taken in a timely matter.
• Protecting your businesses confidential and proprietary information is critical to the long-term success.  You have likely spent significant resources building up a customer base or a unique process for providing the service that made you successful.  Do you have safeguards in place to guarantee the security of this information?  Safeguards could include proper IT support and security, physical safeguards to protect access to sensitive documents, and carefully crafted confidentiality agreements.
• Employee leaves of absence can lead to unnecessary stress or confusion.  How much time is an employee entitled to take?  Is the employee entitled to pay?  Is the employee entitled to benefits while on leave?  Can I check in on the employee while on leave?  What if I must replace the employee to continue operations?  These are all common questions and concerns.  Leave procedures can help alleviate the concerns.  It is helpful to have forms or checklists for the variety of leaves that guide your business through the leave process.

The start of the new year is an excellent time to revisit existing policies and implement new ones to help your business operate smoothly.   

5.     Review newly enacted laws.

A new year brings new laws.  Educating yourself on the new laws applicable to your business or industry is a key step to continued success.  There are thousands of sources available to business owners in this internet age to help keep you updated on legal developments.  As a business owner you can conduct your own internet search, sign up for industry publications, subscribe to newsletters from legal experts, or meet with legal counsel to conduct a thorough review of your business.  Remaining informed is often the first and most difficult step.  As a business owner you have hundreds of things to worry about every day.  Keeping up with legal trends and new laws is far from the most exciting item on your list.  Which is why we encourage you to evaluate your business early in the new year when the inspiration to make changes and improve operations is most active.