Protect Your Shop from Common Legal Problems
The last thing Tina Clark wanted to deal with four years ago was a sexual harassment claim, which was lodged by a female employee against a male coworker who was making unwanted advances toward her. As the human resources manager of Collision Solutions Inc. in Indianapolis, Clark spent several hours investigating the claim, documenting evidence and interviewing witnesses. Meanwhile, employees began to whisper about what was going on and the shop’s production slowed. Though the issue was eventually resolved, Clark, whose shop has five locations in the area and $10 million in annual revenue, wanted to be sure a situation like that didn’t happen again. Thanks to her scheduling yearly anti-harassment training and implementing a strict anti-harassment policy in the company handbook, it hasn’t. “It just goes to show how being proactive pays off,” she says.
Performing a legal check-up on your business is a smart way to prevent issues like sexual harassment from happening in the first place. As part of your check-up, it’s also a good idea to monitor two other important areas of your business: internal controls and employee theft. While these areas can prevent some of the biggest legal problems shops face, they’re also the easiest to safeguard against. Here are some safety measures you can take to protect your business—and keep production and profits up.
STONE AGE HARASSMENT
Though sexual harassment has long been a problem in the workplace, it’s now often less conspicuous than you may think. “Today, there’s subtler sexual harassment,” says Sam Erkonen, an attorney with Chicago law firm Howe & Hutton and legal advisor to the Women’s Industry Network (WIN). “A pat on the butt or breast squeeze is Stone Age harassment.” Today’s harassment is more likely to look like this: “I ask you for drinks and you say, ‘No, I’m married,’ and then a couple of weeks later, I ask you to lunch, and the same thing happens. Then, when I know you’re going on vacation, I put a huge stack of work on your desk the afternoon before you leave. It’s subtle,” Erkonen says, “but it makes you feel [like you’re] on shaky ground because you rejected me.”
At Collision Solutions, Clark ensures every employee signs and acknowledges the company’s anti-harassment policy. During each training class, she hands out pamphlets from her local Chamber of Commerce. Ongoing education—for everyone in the company—is an effective reminder not to participate in any type of sexual harassment. Along with training, Clark also makes sure that employees are aware of the company’s complaint procedure.
Erkonen says these regular meetings and Clark’s procedure for reporting complaints is smart, especially in the scenario when a disgruntled woman levels a sexual harassment accusation as a parting shot. “That reporting and reminder eliminates that [problem,]” Erkonen suggests. “If it does get to court, it’s very powerful to show that she had ample opportunities to report it and multiple people to tell.” Such policies discourage would-be perpetrators, since they know you’ll promptly follow up on any complaints.
THE FRAUD TRIANGLE
Your internal controls are another important area of your business to keep regular tabs on. Managing your internal controls begins with knowing the location of your important documents—tax information, insurance policies, articles of incorporation, software licenses and bank statements—and extends all the way to preventing fraudulent behavior.
Thwarting fraud before it starts may be a lot easier than you may think. Mark Ayers, a certified public accountant who works with collision repair shops, says employees are more likely to commit fraud under the right circumstances, or what is known as the “fraud triangle.” The three pieces of the fraud triangle are motive, rationalization and opportunity. When all three are in place, “you have a ripe opportunity for fraud,” says Ayers, who is the director of Macdonald Page & Co. in South Portland, Maine. And while you can’t control a person’s motive or rationalization, you can eliminate opportunity, he emphasizes.
To prevent most fraud, you just need to know where to look, Erkonen says. He recommends monitoring:
Company credit cards. The accountant or bookkeeper can receive a statement, but you should also be getting a copy, Erkonen says. It’s too easy for an employee to think, “Oh, they’re not looking at these statements, so I think I’ll rack up a $3,000 television.” The employee may even assume that by the time you do check the statements, they’ll be long gone. Erkonen says he once knew a client whose chief financial officer charged $15,000 to the company credit card—and got away with it because the statements came to her. It’s imperative that you have more than one set of eyes check all statements and bills.
Mail. “Every couple of weeks, switch who opens the mail,” Erkonen says. “The potential danger is if someone has ordered something in the name of the company and then the bill comes in, they can just throw those bills away.” Switching things up ensures that you don’t fall victim to the likes of the aforementioned cheating CFO.
Company computers. “Only the owner should have the root password [that trumps any other password], especially to any financial records,” Erkonen says. “If you have an employee who goes away disgruntled, they can screw with your network.” That’ll just result in a huge hassle, at minimum, for you and your employees.
Your website. No matter who is maintaining your website, Erkonen says it’s important to make sure your software agreement states that you own the site. “Down the road, the website author could potentially shut it down or say, ‘Hey, if you don’t give me $2,500 I’m going to shut it down,’” he says. It’s best to avoid that possibility altogether.
Repair orders. Ayers also suggests that you run open repair order reports, since an open job can be an easy place for employees to charge unauthorized expenses that won’t show up on your financial statements.
Vendor payments. Shop operators should get a listing of all the shop’s payments to vendors every month. Look for unusual or unfamiliar vendor names, and verify that each vendor has a clear name and address.
GOOD BUSINESS SENSE
The best defense is a good offense. Be proactive about putting safety measure in place, and perform regular check-ups on your business. “Have a policy,” Erkonen says. “You don’t have to make this complicated. The more complicated it is, the less likely people will be to follow it.”
And simply making folks aware of your intentions is often enough to deter a lot of unwanted activity in the first place. “One of the biggest preventers of fraud,” Ayers says, “[is making sure] people know you’re looking at things. If they know someone is looking, they’re less apt to [misbehave].”