Dear Mary, I’m having a hard time with my employees. One of them is going through a divorce and can’t seem to focus on work, and the other one is constantly late and often calls in sick. They have both been with me a long time and I don’t want to fire them, especially given the current economic climate. I’m not interested in their personal issues, but my business is suffering. What’s the best way to handle this?

From a legal standpoint, the best thing you can do to get your employees on track is to set clear standards. It sounds like you either don’t have an employee handbook, or that you aren’t enforcing its terms. Make clear rules, make sure your employees understand the rules and their consequences, and enforce the rules uniformly.

There are several online resources that can help you put together an employee handbook. In general, the handbook should explain what your expectations are for your employees. It should also clarify the employer’s legal obligations and your employees’ legal rights.

You will need to discuss how and when the employee will be compensated and what deductions the company will take. This is a good time to also explain your company’s policy on benefits, overtime pay, bonuses, timecards and breaks. Do not assume that your employee will begin the job understanding the finer points of worker’s compensation and wage and hour laws.

If you are concerned about your employee’s tardiness, now is the time to address punctuality, attendance, and the consequences of missing work. It’s not enough to just say that your employee shouldn’t be late — you must enforce your policies and document incidents that violate the employee handbook. Meet with your employees on a regular basis to discuss and review their performance, attendance and punctuality.

Set clear standards for your employees with regard to their obligations. For example and depending on your specific business, you may want to require that your employees keep client/customer information confidential.

You also need to cover discrimination laws and how both you and your employees are expected to comply with them. There are many other areas you should cover, including employee records, probation, termination, safety and security of the workplace, appropriate computer and software use, vacation policies and much more.

You may want to start with a template that complies with California and federal law and go from there, or you may want to have an attorney review your handbook before you present it to employees.

Sometimes it’s hard to enforce rules with an employee who is suffering serious personal challenges. Setting standards is half the battle; the other half is helping your employee to leave their personal issues outside of the workplace. A business owner I know tells her employees to leave their problems in their car when they show up for work. When they leave the office at the end of the day, their problems will be waiting for them.

Mary Luros is a business law attorney with Hudson & Luros, LLP, in Napa, and can be reached at mary@hudsonluros.com or 418-5118. The information provided here is not intended as legal advice, nor does it form an attorney-client relationship with the author. The author makes no representations as to the reliability or accuracy of the above information. In a perfect world we wouldn’t need disclaimers — or attorneys.

Dear Mary, I run a pretty successful two-person business. My wife and I are working on our estate plan and I’m not sure how to handle my partnership interest. I think my partner should just take it over, but I want my wife to benefit also. If something happens to my partner, I don’t think I could work with his wife and I’d rather take over the whole thing. Is this possible?

I strongly recommend that you plan for your business’s future. Often, people invest in drafting wills, trusts, and powers of attorney, but it’s also important to invest in an estate plan for your business.

A popular tool to protect the future of a business is a buy-sell agreement. A “buy-sell” is a binding contract between you and your partner that governs what happens if one of you passes away, and should also address other situations where either of you can’t continue with the business. You can agree now that if one of you passes away, the other can acquire your interest.

The purpose of a buy-sell is to make the transition of ownership run smoothly. Now is the time to anticipate any potential conflicts that could upset the functioning of your business when an owner sells their interest.

You should decide ahead of time how to value the partnership, and what events will trigger a buyout. One of the biggest benefits of a buy-sell is limiting who can obtain an ownership interest in the company.

If you’ve been running your company for 20 years, the last thing you may want is for some young whippersnapper to come in and tell you how he’s going to change everything.

Continuity of management and control is priceless and it’s cheaper to invest in this kind of agreement now. If one of you retires, the other person probably won’t want the retiree to become a “backseat driver” with regard to how the business should run.

Are you concerned that if something happens to your partner you might not be able to afford to buy out his wife? It’s common to fund a buy-sell agreement and the resulting buyout with a life insurance policy. In a common scenario, the company would buy a life insurance policy on each partner and the proceeds would be paid to the surviving spouse (or whomever is the named beneficiary) in exchange for the deceased partner’s share.

Things can get more complicated if you have several owners of a business. Instead of buying multiple policies on one another, you can use what’s called an entity purchase buy-sell agreement, in which there’s one policy for each owner.

Of course, as with any life insurance, there are issues of cost, uninsurability and policy lapse. There are also other ways to fund buy-sell agreements besides insurance.

I recommend hiring a professional to help you draft your buy-sell agreement, if you choose to use one. These agreements can be complicated, and as is true with any business decision, things can get messy when emotions are involved.

Mary Luros is a business law attorney with Hudson & Luros, LLP, in Napa, and can be reached at mary@hudsonluros.com or 418-5118. The information provided here is not intended as legal advice, nor does it form an attorney-client relationship with the author. The author makes no representations as to the reliability or accuracy of the above information. In a perfect world we wouldn’t need disclaimers — or attorneys.

Dear Mary, There’s an attorney here in town who I think is a jerk. Last week I told a friend that the attorney is a crook and he breaks the law because he thinks he can get away with it. He’s not actually a crook, but I really don’t like him. The attorney found out about what I said and I’m worried about him suing me for defamation. But it’s a free country, I can say whatever I want and what I said was just small-town gossip, right?

The First Amendment is one of the most misunderstood parts of the Constitution. Let me be very clear: You cannot say whatever you want about whomever you want. Generally speaking, defamation is a false statement that is harmful to someone’s reputation. If you knowingly lie about a person’s reputation, or if you should have known it was a lie, you may be liable. “Libel” refers to written defamation, while “slander” refers to a spoken defamation.

In order to prove that someone is defaming you or your business, you must be able to prove that a false statement of fact was communicated to a third person, who understood that remark to be harmful and about you or your business.

In this case, the attorney could say that you knowingly or recklessly lied that he broke the law, when really you knew otherwise. Furthermore, you knew that your friend would believe your statement. The attorney will also say that what you said is harmful to his reputation, as well as his business. An attorney who has a reputation for breaking the law won’t be getting a lot of clients. If people hear “this guy is a crook,” they will skip him and find another lawyer.

The truth is always a defense to a defamation claim. However, proving that something is true can be difficult and expensive. If you can prove that this attorney is indeed a “crook,” and that he breaks the law, you may be able to defeat a defamation suit.

In addition, statements of opinion are not defamatory. If you had said, “I really don’t like that guy and I wouldn’t hire him,” then you probably would have been fine. Coming right out and falsely saying that he’s a crook is defamatory.

A court will also take the purpose and intent of your statement into consideration. Sometimes, the circumstances are such that the statement could not possibly be taken as the truth.

There’s another interesting thing to mention about your situation: If your friend relies on what you said and tells other people that the attorney is a crook, would he be liable for defamation as well? The answer may be yes. Every repetition of defamation is a separate communication and gives rise to a new and separate cause of action.

The lesson to be learned here is that we shouldn’t “gossip” about people or businesses. If something isn’t true, or you aren’t sure, it’s best not to repeat it.

Mary Hudson is a business law attorney with Hudson & Luros, LLP, in Napa, and can be reached at mary@hudsonluros.com or 418-5118. The information provided here is not intended as legal advice, nor does it form an attorney-client relationship with the author. The author makes no representations as to the reliability or accuracy of the above information. In a perfect world we wouldn’t need disclaimers — or attorneys.

Dear Mary,

I own a local bakery and I need to hire a cake designer. I’m worried that during the interviews, I’ll have to explain my top-secret cake making methods, and candidates could use that information to start their own bakery, or take a job with a competitor. Confidentiality is really important in my work and I need to know that applicants can keep things private. What can I ask during interviews? How do I talk about my company and still protect my confidential information?

The easiest way to protect trade secrets is with nondisclosure agreements (also known as confidentiality agreements).

During the interview process, a company must often disclose confidential information. An employer may protect the company’s information by requiring applicants to agree in writing that any information disclosed during the interview must be kept confidential.

You must give the applicant the opportunity to read the agreement and consult with counsel. You can’t make them sign it without having a chance to review it. You should also review the confidentiality agreement with the applicant to make sure they understand its terms.

A good way to put this into practice is to include the confidentiality agreement with your application. When an application is submitted, explain your confidentiality policy before you schedule an interview.

An employee interview is the perfect time to explain the importance your company places on protecting confidential information. Explain now what your protective policies are and how you protect third party confidential information.

It’s also helpful to pay attention to the applicant’s attitude about their former employer’s confidential information: If they reveal things that they probably shouldn’t, you know that your confidential information will be treated no differently.

Ask the applicant if they had a nondisclosure agreement with their previous employer. The last thing you want to do is misappropriate another company’s protected trade secrets.

You should also instruct the applicant not to reveal any trade secrets during the interview process or anytime thereafter. If an applicant previously worked for a competitor bakery, do not ask them for their fabulous secret carrot cake recipe, or you could be facing a not-so-sweet lawsuit.

If the applicant displays a willingness to disclose the trade secrets of their former employer, then the former employer may obtain an injunction to keep you from hiring them. The mere intent to disclose trade secrets is considered an actionable threat of trade secret misappropriation.

When you’re hiring new employees, you should really look into whether or not the position might require the inevitable disclosure of trade secrets. If it does, you should consider placing the employee in a position not requiring such disclosure (at least temporarily).

Nondisclosure agreements should be specific about what you want to protect. If your agreement would prohibit an employee from ever owning a bakery, it’s not going to hold up. However, if your agreement specifically cites a recipe or method that you have protected (not just an ordinary recipe to which anyone has access), employees may be forced to use reasonable efforts to protect that confidential information.

Mary Hudson is a business law attorney with Hudson & Luros, LLP, in Napa, and can be reached at mary@hudsonluros.com or 418-5118. The information provided here is not intended as legal advice, nor does it form an attorney-client relationship with the author. The author makes no representations as to the reliability or accuracy of the above information. In a perfect world we wouldn’t need disclaimers — or attorneys.