Should your business try to minimize what it spends on lawyers so it can direct its resources towards its business objectives? You bet.
But minimizing your legal spend may not be the same as minimizing what you spend today, consistent with the thoughts of Ben Franklin and, for those of you old enough to remember, the Fram oil filter ads, to name two examples I have referenced in this space.
That thought certainly is not uniquely mine. Note this article, “Nothing is more expensive than a cheap lawyer.” But here, I am talking about not using a lawyer at all. Sure, there are plenty of decisions you can make and documents you can sign without talking to a lawyer, but here are three common examples where it is not uncommon to see a business have regrets after the fact for not getting guidance on the front end.
1. Hiring somebody with a noncompete.
Let’s start here: the commonly heard statement, “Oh, those aren’t enforceable” is almost always wrong. (One big part of “almost” is California – that statement is almost always right in California. In Ohio, no.) Noncompetes and nonsolicits commonly get enforced, at least in part. If you are not an expert on them, you probably should talk to one.
Even if you do not subscribe to the extreme “not enforceable” view, understand a couple of things about noncompetes. One, the rules governing them vary widely state by state, and just because your agreement says “Ohio law” does not always mean that Ohio law will apply. Businesses win and lose noncompete cases regularly based on which state’s law a court determines applies.
Two, noncompete issues are what lawyers call “fact intensive” or “case by case.” In other words, unfortunately for businesses who reasonably want to plan their affairs, it is an area with few black and white answers. There is gray and nuance and close calls, and a business (or an individual) flying solo on any aspect of noncompetes is taking more risk than most businesses want to take.
2. Terminating an employee without assessing the risks.
Many business people think, “I know how to terminate an employee, and this is an employment at will state. I don’t want to pay a lot of legal fees for something I know how to do.” Let’s look at several pieces of that statement.
First, understand that “employment at will” is a contractual status. It means that either party can terminate the relationship at any time and for any lawful reason, and there is no contract saying something else.
Employment at will, however, is irrelevant to most common employment claims. For example, even if an employee is employed at will, the employer cannot discriminate against that employee. Employment at will also gets you nothing vis-à-vis an employee who has some sort of whistleblower / complainant status under any number of employment laws; the law prohibits retaliation against them.
Second, if you are calling an expert on employment law, you should not be paying much in the way of attorney fees, because those lawyers will walk you through the key questions to identify risk factors in a matter of minutes.
The truth is, we see employers terminate employees too soon on a regular basis, without having considered and managed the risks. Many times, the employer could have worked through that situation and put itself in a better situation in a relatively short period of time. As I have posted here before, the most common (though certainly not the only) example of this are employees with health issues, which is a particular tricky area of the law.
3. Signing a contract you can’t get out of.
Not many businesses have a lawyer look at every contract, and it may not be practical to do. However, there are certain hot buttons you should be aware of in negotiating your contracts, hot buttons that tend to be the causes of most of the problems we see “downstream.”
Probably the most common source of regret we see over un-reviewed contracts is the inability to terminate the contract when you have a good reason to do so. I primarily practice employment law and we certainly see this problem with executive contracts, but we also see it in all kinds of business arrangements. If you ask yourself one question about a contract other than the basic terms of price and product, asking yourself about how you get out of it, and following up with counsel where appropriate, would be a good place to start.
Ultimately, there is no substitute for having a lawyer you trust to help you efficiently sort out when you need legal advice and when you don’t. Until you do, these three areas are ones where businesses sometimes regret their short-term “savings.”
This article should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own lawyer on any specific legal questions you may have concerning your situation.
Barnes & Thornburg LLP is a large, full-service law firm that seeks to take a more entrepreneurial and cost-effective approach both to client service and its own business.