Episode 16 | The Basics for Building Your Workforce - As a business grows, a very exciting step is adding the company's first employees, but it is also one that should be very intentional and well-considered. Frantz Ward attorney Megan Bennett joins the podcast to discuss the importance of developing job descriptions, considering the terms "employee" and "independent contractor," and how to develop policies and procedures to ensure a legally compliant business.
Podcast First Aired: October 19, 2021
Guest & Host
Alanna Guy: Welcome back to the next episode of Frantz Ward's podcast series, Shoveling Smoke. I'm Alanna Guy, an Associate at Frantz Ward, and I'm hosting today's discussion with my friend and colleague, Megan Bennett. Welcome, Megan.
Megan Bennett: Hi Alanna. Thanks so much for having me today.
Alanna Guy: Of course. All right. Before we dive in, here's a little background on Megan. Megan practices exclusively in the employment area, and she focuses on advising and defending clients on a variety of employment issues, including discrimination, retaliation, and harassment. Megan also handles workplace investigations and specializes in assisting federal contractors in compliance with federal regulations. Megan is a native Clevelander and a proud Dayton Flyer. She enjoys running and cooking and serves on the West Side Catholic Center's Board of Directors. So, Megan, tell me, is this your favorite time of year to go for a run?
Megan Bennett: It is. The temperature in the fall is the perfect temperature for running, and so one of my favorite things to do is to go on a long run in the Metro parks. The leaves are changing colors, they're falling down. It doesn't matter how old you are, but you love kind of hearing that crunch under your feet. And that whole atmosphere is enough motivation generally for me to add another mile or even another two miles to my run.
Alanna Guy: Wow. That sounds very lovely, and I'm also very impressed. All right. So, last month I spoke with our colleague, Chris Koehler, about the fundamentals of starting and building a business. Today, Megan is going to talk about the next steps of that.
Megan Bennett: Yeah, Alanna, I wanted to build upon what you had discussed last month. The whole point of starting a business is that hopefully it grows into something bigger. So, our clients who have started small businesses during the pandemic are likely at that point now where they're thinking about hiring employees, and that's a really exciting step for a new business, but it's not one that business owners should take lightly. So today I'm going to discuss a couple of things that are important for new businesses to think about when they're taking that step to hire employees.
Alanna Guy: Sure. So when clients are thinking about hiring employees, is that something that they can start thinking about far in advance or should think about far in advance, or is that something that you can really help them throw together last minute once they're ready to build a workforce?
Megan Bennett: That's a great question, Alanna. The best advice I can give to new business owners that are thinking to hire employees is to sit down now to develop a plan and structure as to how they want their workplace to look and to run. Taking the time to develop that structure now will help companies develop a workplace from the very beginning that's not only compliant with the various federal and state employment laws, but also is following human resources best practices. This will help the company avoid some of the very, very common HR pitfalls that we very commonly see in businesses later down the line.
Alanna Guy: Okay. That makes sense. So then, can you tell us about a first step once a company has decided they want to develop that workforce and hire employees?
Megan Bennett: Sure. Well, before thinking about the person that a company wants to hire, business owners need to think about the position that they need. The first step in the hiring process is really sitting down and determining what job duties and responsibilities the business needs fulfilled by that hire. What type of training or education should this person have? What responsibilities are essential to this position and to growing the business? Once a business owner has outlined these ideas, it's best to summarize these then into a written job description or potentially multiple job descriptions because this process may help you realize that you need to hire more than one person to meet the business needs.
Alanna Guy: Definitely. Tell us a little bit more about why that job description is so important and, honestly, what would happen if the client wants to skip that step?
Megan Bennett: The written job description is important for a couple of different reasons. First, it can ensure that a business owner is hiring the best candidate for the position because the job description outlines exactly what a successful candidate should have experience-wise, as well as what types of job duties here or she should be able to perform. Second, it's a great guiding tool for the rest of that individual's employment with the company. For example, the job description establishes a written set of expectations for that employee. This not only gives the employee accountability, but it also can be used by a manager to assess employee performance.
Alanna Guy: Clients oftentimes when I'm talking to them, they already know who they want to bring in. They want to involve someone specific in their business. And so what would your advice be to those clients who already have people in mind that they want to involve in their business?
Megan Bennett: You're right, Alanna, that does happen a lot with a lot of new business owners. But in that situation, I caution business owners to not skip the original steps that I just discussed. Take the time, establish the job duties and the parameters of the position and what you need that person to do to develop your business. Hiring an employee, especially a friend or a family member, which I see a lot of in emerging new businesses, without establishing those clear expectations is likely going to lead to performance issues and other workplace or even personal conflicts.
Alanna Guy: That makes a lot of sense. So, hypothetically, let's say a client does not take your advice and develop a job description, they skip that step. What's the type of risk that they're opening themselves up to?
Megan Bennett: Well, let me be pretty clear. There's no law that says you have to have a job description, but they can be very helpful in limiting legal risk. For example, let's take the Americans with Disabilities Act. If an individual with a disability comes to a business owner and requests an accommodation to perform his or her work duties, the job description will act as a guide as to what the essential duties of that position are and then whether the company can accommodate that individual's disability. Job descriptions can also be very helpful in determining whether an employee should be classified as either exempt or non-exempt from the minimum wage and overtime pay requirements under the FLSA, the Fair Labor Standards Act. And those are just two of the many ways that job descriptions can be very helpful in mitigating legal risk.
Alanna Guy: That's great. So, now when I'm talking to a lot of clients, recently the trend has been, "All right. Let's just make them a consultant. Let's get a consulting agreement. Let's make them an independent contractor. We don't need any employees." Can you tell me a little bit about your thoughts on that?
Megan Bennett: Yeah. That's actually one area where I see a lot of new businesses getting into trouble. A lot of them think, oh, I don't need to hire employees. I'll just make them independent contractors. That's just easier. This is another thing I really want to caution new business owners about, because the terms, "employee" and "independent contractor," those are legal terms. There are specific legal definitions to those terms, and there are specific differences between the two. So if a business is misclassifying a worker as an independent contractor, when really they should be classified as employee, there could be legal consequences for that company.
Alanna Guy: Megan, can you elaborate on some of those differences between the employees and the independent contractors?
Megan Bennett: Honestly, Alanna, the differences between them and the pros and cons of using an independent contractor and employee could really be its own episode. But in the most basic terms, to make sure I'm answering your question, a lot of companies tend to jump to using an independent contractor rather than an employee because the company doesn't need to provide that worker with benefits or contribute to the unemployment compensation fund or pay that worker worker's compensation taxes. However, the downside is that a company doesn't have very much control over an independent contractor. So the company has limited ability to provide performance reviews for that worker or to require that worker to attend trainings or certain meetings or to even issue discipline to that worker. So there's really pros and cons to using both, and I encourage any business owner to talk to an attorney first before just immediately deciding to hire workers and classifying them as independent contractors because they might think that's the easier solution.
Alanna Guy: Okay. Fair. Sounds like I might need to rope in another one of our fellow associates and have them talk about the topic in more detail and really dive into those differences and the pros and cons there.
Megan Bennett: That would be a great idea.
Alanna Guy: We'll see about that one. All right. So we have the job description. We've decided whether or not the worker's going to be an employee or an independent contractor. What's the next building block that the business should be taking?
Megan Bennett: The last big piece is creating policies that govern your employees and your workplace. Oftentimes small businesses start with a very loose casual atmosphere with no policies or procedures in place. And that may work now, but once the company grows, lack of consistency, different treatment amongst employees, these types of situations can lead to bigger problems, such as allegations of unfair treatment or even worse, allegations of discrimination. So I suggest starting with that structure now and developing workplace policies from the very beginning,
Alanna Guy: That makes so much sense, Megan. I mean, so often we hear about companies in the news when they're dealing with a harassment or discrimination scandal, and then they're having to face the dreaded court of public opinion. So definitely sounds like this is a way to try to avoid that. And to avoid it, what are some of the policies that are most important for a business to have in place?
Megan Bennett: The most critical piece is developing strong anti-discrimination and anti-harassment policies. Legally, in Ohio, employers are not covered under the employment discrimination statutes until they have at least four employees. I mean, you hit the nail on the head with the court of public opinion. This is the time when you want to look at the practical side of things rather than just the legal side of things. Do you really want to be running a company that doesn't have a strong policy against harassment and discrimination in the workplace? Probably not. So I encourage new businesses to start from the beginning with building a workplace culture where discrimination and harassment are not tolerated.
Megan Bennett: In addition to anti-discrimination, anti-harassment policies, other important policies to include are attendance, conduct and discipline policies, as well as some type of practice or procedure for evaluating employee performance. I've said it a couple of times now, but I really want to hammer this home. Developing a structure to a new workplace is key to running a legally compliant business. I'm happy to help any new business with developing that structure by either drafting an employee handbook or answering any other questions that I can.
Alanna Guy: Okay. So, to conclude, we have first, figure out what your company needs for it to be successful and then develop job descriptions to help you get there. Secondly, talk to your lawyer about whether to classify your workers as employees or independent contractors, and third, get your policies in place for the company that you want to grow into. Megan, thank you so much for taking the time to chat today.
Megan Bennett: Thanks for having me, Alanna.
Alanna Guy: Okay. That's it for this episode. Thanks for joining us, and we look forward to our next discussion. Shoveling Smoke is a production of Evergreen Podcasts. Our producer and audio engineer is Sean Rule-Hoffman. Thanks for listening.