Meet this computer, it's your new HR person

I often think about all of these new HR platforms and software programs being rolled out to small businesses.  These programs tout many amazing things like the fact that employers will be able to handle administration with a click of a button, or that insurance/payroll/hr can be automated to the point where you won't need someone in those roles.  I'm actually surprised that these systems don't say that they'll generate top-line revenue for your company (maybe some day they will).

Aside from administration being a total pain in the ass, I do believe that it serves a useful purpose.  Young folks entering into the HR field these days will gain valuable experience filling out forms and documents.  It's not the act of filling out documents, but understanding other crucial elements of "document completion" which includes:

1.  Why the documents are being filled out;
2.  Who requires the documents to be filled out:
2.  Where can I take shortcuts and where can I definitely not take shortcuts;
3.  What happens if the documents aren't filled out the right way;
4.  What are the consequences of an incorrectly filled out form;
5.  What happens in those weird, one-off instances where the system doesn't know what to do;
6.  When an employee signs something and I sign something, what does that really mean?

Here's an example. I used to handle HR administration back in the days of Third Eye Blind and Crystal Pepsi, and one of the things that I did was complete an I9 and go over it with employees.  I knew I9's inside and out, so well in fact that I went to a training session put on by an HR executive and an immigration attorney and left feeling like I could teach class to other HR folks.  It was incredibly informative, but it was put on by a lawyer, and we all know how I feel about lawyers.  I learned a lot of great information at that session. I learned potential pitfalls, what to do in strange circumstances, and even the intricacies of collecting identification documents. I know. I was a nerd.

Fast forward to today, where many companies are using HRIS platforms, benefit systems, and online document completion.  I was talking to friend of mine who owns a small engineering firm about how they complete I9's and he just replied with "The system does it."  The hair on the back of my neck stood up a little, but I didn't bristle.  I then asked how the system handled remote employees.  The response again was "I just click a box and the system handles the rest."   At this point I didn't argue (although I thought about sending him in the direction of the closest Immigration Attorney) but told him to be careful in case he ever has an I9 audit.

I'm not saying that companies need to hire a person just to handle I9's. And I'm also not saying that they shouldn't use I9 software or automation. What I am saying is that anyone signing an I9 should be aware of the proper way to complete the document. They should also be aware of the consequences for not completing an I9 correctly.  Most of the individuals signing I9's don't even realize that they're signing them under the penalty of perjury.  And if things go badly, and a Notice of Inspection hits your mailbox, you better be sure that "The system handles my I9's" is not going to be looked at with any sympathy.

HR needs to figure out business before boldness

The other day I stumbled onto a post on LinkedIn that seems to be making it's way around various HR circles.  After reading the article I figured I'd weigh in on its main argument that HR needs to be more bold.  It's not that I disagree with being bold or that I think being bold is a bad idea, it's just that being bold is a small piece of what HR practitioners really need to be. Sure, HR needs to be risk takers, gutsy, and all of those other exciting words that make your heart pump faster. But at the end of the day, what HR really needs to be is better businessmen and businesswomen.

HR has relied on scare tactics, fear, and "compliance" to push their agenda for too long.  Yes the DOL, EEOC, and all of those other spooky government agencies are huge pains in the ass, but they're a necessary evil. And to be honest, many business leaders look at HR as a necessary evil too.  So stop approaching the HR function in a vacuum; HR is an important component of a business but at the end of the day it exists for the same two reasons that every job in a company exists:  Increase revenue and decrease expenses. Forget that and you should just pack your shit up, leave the office, and go home for the rest of the month (or year).

My advice for those of you who are currently in HR or who plan on going into HR is to sear the following ideas into your brain:

1.  Embrace Bold Finance:   You have to do this in our current business environment.  The minute that we start caring more about being loud and gutsy than about earnings and revenue is the minute that we'll change this heading to Embrace Bold HR. But don't hold your breath. Instead, get a firm grasp of income and expenses. know how to interpret and unpack financial statements, and understand the critical impact that revenue has on a business.  Use your problem-solving brain to learn a little more about A/P, A/R, forecasting, budgeting, and taxes.  Hell, payroll tax should be near and dear to your heart if you plan on being in HR for the long haul.

2. Salespeople are Weirdos:  Weird like a fox.  You may think of salespeople as being flashy, arrogant, fake, or phony.  It's the department that spends money like water, dresses way too nice, and will waterboard their own mother for an opportunity to bump their commission check up by $50. The bottom line is that these folks bring in the dollars that pay everyone's salary, including yours.  Sales isn't easy, and while these employees have greater earning potential than other non-sales employees, they can also be around one day and gone the next.  HR needs to learn how to embrace the sales culture and figure out how to use it to their company's advantage.

3.  IT is Crucial:  I'm not talking about the IT guy down the hall that sets up your computer and spills coffee on your keyboard while he's deleting Spotify from your machine.  I'm talking about Data and Information professionals who can read, write, and understand code.  Valuable IT employees grasp the notion of how software and hardware interact with one another, and you should too. Data is a critical component of business these days. Gathering data, creating data, storing data, securing data, and disseminating data is the lifeblood of business.  As more IT efforts head to the cloud and SaaS platforms, the people who manage these programs and areas will become essential to business (I'm looking in the direction of DevOps and TechOps).  Once you're able to talk intelligibly with these employees you'll be that much better of an HR professional, and you'll be respected a heck of a lot more.

4.  Lawyers are Assholes:  For the most part this is true. I know this because I work with a lawyer almost everyday.  He also gave me permission to write this sub-topic, but he remembered to remind me that his permission wasn't technically legal advice.   Rather than going too far down this rabbit hole let's just all agree that the good Doctors of "Jurisprudence" protect you and your company, and in turn that protects everyones paychecks.  Also, it's very important to recognize that you, as an HR professional are not a lawyer.  There are positives and negatives to this, but never confuse providing FMLA information to an employee as giving legal advice.

5.  Understand Your Business: I don't care if you work for a startup, a public company, a non-profit, or a government contractor.  You absolutely must know and understand how your company makes money, how they spend money, and what goes on in between these two points.  You can't be a good HR professional, a good co-worker, or a good employee if you don't understand how and what real success and failure looks like.  Real success and failure is defined by leadership, and more often than not it comes in the forms of numbers.  So as they say in rap songs, if you don't know you better ask somebody.

When you want to know how your HR job affects the big picture, here's an idea: go ask your boss about what you can personally do to have an impact on the top line and the bottom line.  Then GO DO IT.  If your boss doesn't have an answer for you, then go ask his or her boss.  Ambition goes a long way in this world. And the next time you're feeling bold, take a deep breath, open your web browser, and download a good book from Amazon.

Surprise: It's an insurance bill!

Today I'm writing about a New York state law that was passed earlier this year which is going into effect next year on April 1, 2015.  The law is known as the Emergency Services and Surprise Bills law and it's intended to protect New York consumers from out-of-network medical services and surprise insurance bills.  As someone who has dealt with many other folks' insurance claims over the years I think that this law is going to be great for individuals initially.

You read about this stuff all the time. People who have health insurance go to the ER and then get hit with massive bills due to the hospital allowing out-of-network doctors to operate out of their facilities.  You might even go to an in-network hospital, see your in-network doctor, and then get services from an out-of-network specialist.  Sometimes you hear of folks going to a doctor they found on their insurance company's website, only to discover at a later date that the doctor was in-network  years ago, and was never removed from the insurance company's list of providers.  And once in a while, you'll hear of folks who need care from doctors so specialized that there aren't any of those specialists in their insurance network.  Whenever someone asks me for advice on how to handle these issues, I always tell them the following:  Before any provider ever touches you, make to confirm that they are in your network. Kind of crazy, asking a doc whether he participates in the MagnaPPO Plus ChoiceCare plan right before he puts on an your anesthesia mask, but hey, consumers need to be vigilant these days.

This new law is intended to protect the insured from those scenarios.  Instead of the onus being on the insured to cut some sort of deal with the doctors and hospitals, it now becomes the responsibility of the insurance companies to work with the medical providers.  This sounds great on the surface, but I wonder what the long term cost implications of this law will be. It probably means that the insurers are going to end up paying for claims that they didn't intend to pay to begin with and/or have to spend extra time arguing and mediating claims with doctors and hospitals who aren't in their network.

All of this amounts to more cost for the insurers, and guess who they pass those costs on to?  Yep, you guessed right.  Their plan participants who this law was designed to protect!

I'm also very interested to see how this law is handled for international health insurance claims.  Oh the amount of money I'd pay to see a claims resolutions specialist in the Midwest argue with a billing rep in Taiwan about negotiating a New Yorker's hospital bill. 

Recruiting like it's 1999

I recently met a great guy who happens to be the CEO of a well-funded startup based in Washington D.C.  This guy was giving me the scoop on his company (a SaaS product that I would guess many in the DC startup scene would know of) and about how innovative they are.  Usually when someone tells me how innovative their company is my eyes glaze over and I slip into a nice daydream.  But as our discussion continued, I started to agree (in my mind) that his product actually is pretty unique.

At some point during our discussion the conversation turned to the topic of recruitment.  I asked this CEO how he was recruiting new employees and he proceeded to list the following websites: SimplyHired, Indeed, Craigslist, and Washington Post.  My jaw almost hit the floor.  In my brain I thought to myself this guy is developing an amazingly innovative piece of software, but he's using recruitment practices that were hot in 1999. These days there are so many ways to be creative and innovative when recruiting new talent.  Using niche job boards, developing referral programs, liaising with Dev programs, sponsoring/attending events, and holding contests are just a few things that come to mind.  The truth is that the best way to find employees who want to help you innovate is by searching for them with innovative recruitment methods.  Sure you can find some good candidates on regular job boards, but that's the exception not the rule.

I encourage startup executives and tacticians to think creatively and find new and exciting ways to tell their story to the right people.  Doing this will connect you with candidates you'd never find on the traditional job boards.  And if you are the individual who is described above, please don't be upset that I shared your story. I'm looking forward to helping you with your recruitment strategy very soon!

OOO Forever: Weighing in on unlimited leave policies

The more startups that we come in contact with, the more we see using an unlimited leave policy to manage employee time off.  Some do it better than others, and the spectrum usually ranges from a loosey goosey scenario where employees can come and go as they please, all the way up to structured unlimited leave policies.

Based on this very unscientific Yahoo Poll, 75% of U.S. internet users think unlimited leave is a "Good idea".  This makes sense since the U.S. has some of the most vacation-deprived workers on the planet.  The chatter surrounding unlimited leave has also been increasing recently as well due to companies like Virgin and Netflix publicly touting the benefits of making unlimited leave available to their employees.  If I were a pilot for Virgin I'd probably take my unlimited leave right when I reached someplace like Bali or Bora Bora, but I digress.  

We decided to take a look at some of the pros and cons of having an unlimited leave policy:

Pros:

• You're sending the message that you trust your employees;
• You convey that you're not like other companies (e.g. you're not stodgy and you don't play by the "corporate" rules);
• Your employees don't have to track their leave, ask for permission, request time off, or fill out any HR forms;
• Your HR person doesn't have to play "bad cop" when employees are taking too much leave;
• You don't have to pay the extra $2500 for your HRIS system's Employee Leave Tracking Module;
• Your company doesn't have to book leave accruals, make leave payouts, or pay out accrued leave balances;
• Your employees don't have to lie to you and pull a Ferris Bueller when they stay home sick.   

Cons:

• Companies may believe that having an unlimited leave policy will magically solve all of their issues related to absenteeism, tardiness, over/under working employees, and work/life balance; 
• The legal ramifications of having an unlimited leave policy is still a relatively grey area still since the notion of unlimited leave has yet to become mainstream (think required payouts in California, the interplay with state and local paid leave laws, discrimination claims, etc.);
• By not tracking leave you won't have a clear picture of who is or is not taking leave, when employees are taking leave, or why they are taking leave.;  
• If you ever want to change your unlimited leave policy, expect this:

We would like to offer a few recommendations if your company decides to implement an unlimited leave policy or if you already have one in place:  1) Make sure that your unlimited leave policy is written down somewhere;  2) Make sure that your unlimited leave policy is communicated to your employees; 3) Make sure that your policy contains processes and procedures in it relating to calendaring, tracking, requesting, and timing - and maybe even some guidelines; and 4) Make sure that you understand how your unlimited leave integrates with statutory leave such as state/local paid sick leave, FMLA, USERRA, and other types of required leave.  

Buyout oDesk, save $, and reduce risk

At first glance, oDesk saves you money. But, you pay for it somewhere. And if it all goes wrong, it might cost you everything. If you like your oDesk contractor, we suggest that you contract without oDesk.

To hire your oDesk worker directly, you have to have been working with the contractor (for the purposes of this post, let's call him "Bob") for 3 years or you have to pay oDesk a fee that is the greatest of:

• (A) 15% of the estimated future yearly salary;
• (B) 52x the average Weekly oDesk fees; or
• (C) $500.

In most situations, Option A is what you'll pay because it is probably the highest, which is the equivalent of a modest recruiting fee to oDesk. Here are 12 reasons why you should pay the fee and contract directly:

1. Simple economics.

If you pay Bob through oDesk $10/hour for 10 days/week for 50 weeks/year, you pay $5,000/year. In turn, oDesk keeps about $750 and gives Bob about $4,250/year. 

Quick math: You can hire Bob directly for $4,250/year. Under the oDesk buyout policy, you'll owe oDesk at most $637.50 to poach Bob, for a grand total of $4,887.50 for the next year. You just saved $112.50 right off the bat!

It gets better: You just reduced your risk by cutting oDesk out of the picture. Keep reading why.

2. You've got a lousy independent contractor agreement through oDesk.

Your primary labor contract is with Bob and not oDesk. You agreed to this in oDesk's User Agreement, which makes clear that "a Service Contract is formed directly between such Client and Freelancer." 

That's legalese for "You are on the hook if Bob gets pissed off and wants to sue you." For lots of reasons below, we would never advise a client to use oDesk's service agreement as a contractor agreement.

3. You agree to pay for oDesk's lawsuits and legal bills.

This is huge. I mean, this could sink your business. Be honest: Did you read and understand the indemnity section in your agreement with oDesk? 

Well, you signed up to pay for "all claims, damages, liabilities, costs, and expenses" that oDesk might suffer if Bob sues oDesk. This includes, "but [is] not limited to, reasonable attorneys' fees and all related costs and expenses" like court fees, translation fees, travel, lodging, and more! 

What if Bob is in Poland and sues oDesk for violating Polish employment law, or damaging Bob's reputation, or not paying up, and Bob wins or settles? That's right, you're on the hook for the winning amounts from the lawsuit or settlement. 

And whether oDesk wins or loses, you're on the hook for all of oDesk's related attorneys fees and costs. Is that worth the extra 2% you're paying by keeping the contractor on oDesk? No fucking way!

4. Anybody can do the work you assign.

Did you notice that Bob can subcontract with third parties? It's right there in the User Agreement. All Bob has to do is set up a "legally recognized entity with the ability to hire and/or contract[.]" In other words, Bob can hand off tasks to whoever he wants.

5. Your IP might not be protected.

You should carefully consider how your IP is protected in your relationship with Bob. In particular, you should avoid any land mines that might exist in foreign law, which is what will govern your employment relationship when Bob is working from outside the United States.

With that in mind, your Service Contract in your oDesk User Agreement likely does NOT protect your IP in all jurisdictions. For example in France, which is a pretty good indicator of how this will go in any civil law country, you must jump through a bunch of legal hoops both in the particular provisions and overall agreement if you want to protect your IP rights as they apply to French contracts for labor. 

Bluntly stated, a French (or Colombian, or Spanish, or Polish) Labor Court would LOVE to throw out your California-based provisions on work product assignment. The best practice here is to have a local advisor provide your agreement under local law, which is an inexpensive move and the kind of foresight that a future investor or acquirer would love. 

6. If foreign laws require you to treat the worker as an employee, you're screwed.

So, we've surprised many well-heeled general counsels about this concept. No matter what your contract says, local employment law almost always governs the relationship you have with a worker who works in another country. The exceptions are so few and specific that you can pretty much accept this as the rule.

So, for example, how much do you know about how to classify, say, a Chinese independent contractor? Did you know that it is illegal to hire an independent contractor in China? Do you realize that you could pay 2 - 10x the Chinese contractor's wages and lose all of your IP when the relationship goes bad?

Well, you better know these kinds of details in any country because you assume "all liability for proper classification of Freelancers as independent contractors or employees based on applicable legal guidelines." I.e., foreign legal guidelines in many oDesk relationships.

In this provision and others, oDesk makes sure to cover its own ass but not your ass. Proper classification is one of the easiest things to get right from a legal perspective, but you've got to make sure you have the right  agreement in place, a basic understanding of local rules, and proper restrictions on Bob's activities. 

If not, you'll have to pay for all tax compliance, withholdings, penalties, and fines. You'll also have employment law risk in that country. And, you might even have corporate tax liability in that country based on your contractor/employee's activities. Your User Agreement with oDesk makes sure that it is your ass for any liability.

7. And if oDesk screws up, you can sue them for $2,500 and what you paid them.

Let's take a little detour away from employment, tax, and IP issues and glance at your civil litigation options if oDesk really screws you. Let's assume that something goes way wrong and you actually have a claim against oDesk. You could get some coverage there, right?

Well you can get something, because in your User Agreement, you agreed (in all caps!) that:

THE LIABILITY OF ODESK TO ANY USER FOR ANY CLAIM ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT SHALL NOT EXCEED THE GREATER OF: (A) U.S. $2,500; AND (B) ANY ODESK FEES RETAINED BY ODESK WITH RESPECT TO CONTRACTS ON WHICH USER WAS INVOLVED AS CLIENT OR FREELANCER DURING THE SIX (6) MONTH PERIOD PRECEDING THE DATE OF THE CLAIM[.]

Ouch! You can get $2,500 and about 15% of your Contractors' wages back. That sucks, but you signed it…

8. Oh and get this, oDesk can sue you.

You remember that last class in Contracts during your first year of law school where they talked about third party beneficiaries, right? I barely remembered it, but I looked it up and now I remember.

Basically, a third party beneficiary (the missing hyphen kills me) is a third party who is not party to the contract but can still sue either party even though it isn't a party. In Section 3.10 of your Service Contract, oDesk hereby names itself as a third party beneficiary, so it can sue you.

9. Weak-ass confidentiality provisions.

Okay, back to the employment and IP stuff. If you're like most startups, you are fiercely protective of your confidential information. After all, this is likely your most valuable asset. So, you can rest easy knowing that oDesk has robust confidentiality provisions, right?

Not so fast. While the Service Contract offers some protection, it's certainly not the confidentiality agreement we would ever use. We will limit this critique to a few of our concerns.

First, the provisions are not in a logical order. Your Service Contract incorporates the confidentiality provisions of your User Agreement by way of reference. Not fatal, but certainly not ideal when dealing with a court, whether in the United States or in another country.

Second, you could drive a truck through the provisions. For example, Bob must protect your "Confidential Information with the same degree of care he uses to protect his own confidential information, but in no event with less than due care." What is the standard for due care? Is it the average Ukrainian freelancer's standard? Google's security team? Not clear!

Third, I won't even comment the line allowing oDesk to disclose your confidential information "to any Client or Freelancer engaged in a Contract" except to say: on its face, that's crazy.

These are just our initial concerns with oDesk's confidentiality provisions.

10. No trade secrets protection.

In a related vein, we cannot help but notice that you do not have contractual trade secrets protection. Without digging too deep into the law here, let's take a simple example of a customer list. 

Let's assume that your oDesk contractor gets ahold of your customer list. You also list all of your customers on your website, which means your customer list is not confidential. However, you would be afforded trade secrets protection under California (and many other states') laws, if you properly contracted with your employee. However, oDesk's agreement does not include provisions that adequately protect your trade secrets, so you've got a much tougher fight.

11. No non-compete.

And notably, you have absolutely no non-compete provisions in your oDesk Service Contract. To the contrary, the Bob "is free at all times to provide Services to persons or businesses other than Client, including any competitor of Client." Did you read that part?

To be fair, this provision can cover your ass in many jurisdictions. And, as you may know, non-compete provisions are prohibited in many jurisdictions, most famously in California. But, shouldn't you have the choice if non-competes are allowed in your jurisdiction?

12. You're giving jurisdiction to California.

Ah, jurisdiction. The stuff we lawyers love to talk about in our lavish conference rooms that you pay for but you'll never see. But seriously, you designated California as your jurisdiction of choice for any disputes arising from your oDesk User Agreement. 

This is fine if you're in Mountain View, but what if you are in Boston, New York, or D.C.? Are you really going to pursue or defend an expensive lawsuit in the Golden State? Not likely!

Where HR and Legal Software Ends and Consulting Begins

Automation affords small businesses great power when addressing HR and legal issues. We know, because we run software for our clients that in turn makes our lives easier.

However, these useful tools have their limits when solving many out-of-the-box problems that small businesses face. We've thus dedicated this post to point out the price that many clients pay when using software solutions for HR and legal issues.

1. Software might not provide the security you need.

With many well designed software solutions, we are often shocked at the lack of security afforded to employee and company information. When walking through software with our tech clients--who are admittedly more knowledgeable on the technical aspects of data security--we often notice gaping holes.

For example, do you know that some of the links that software products create to store your employee and company information are simply not secure? In several instances, we've demonstrated software workarounds where sensitive information--financials, SSNs, salary, immigration compliance, tax filings, and employee identification--is only a click away with an open URL?

Moreover, software does not have the professional responsibilities that professionals, particularly attorneys, follow to protect their clients' confidential data? For example, a software program does not afford attorney-client privilege for compliance issues. An attorney does.

2. Software can leave you high and dry when it does not give you adequate insurance

We are fully supportive of the recent advances in technology that are disrupting the outdated insurance brokerage model. However, it rarely makes sense to leave insurance decisions up to an office manager or overburdened CEO. As cheap as most insurance policies are, we almost always find instances where businesses have spared a dime on insurance when better human guidance would provide them needed protection.

3. Employee agreements are often insufficient when an employer uses boilerplate offer letters

From an attorney and HR manager perspective, we are shocked at the gaping risks that employers leave on the table when they cut and paste an employee's name or contractor's name into an existing offer letter or independent contractor agreement. Yes, you're saving a few hundred dollars on lawyer fees by not drafting a unique agreement for each hire. But, you'd be wise to have an HR manager or attorney spend 20 minutes verifying that the agreement fits the proposed role.

This is just one example of a boilerplate document or process that creates risks for employers. We'll save things like employee handbooks, noncompetes, non-disclosures, compensation policies, and non-discrimination polices for another day. Suffice it to say that there is a middle ground between automated materials and partner-level legal drafting. 

4. A missing human touch leaves employees feeling cold

As much as we all think that we can rely solely on digital contact, the human touch still has a big role in the workplace. For instance, how do you bring your employees into your business? Do you simply have them log into your payroll software, fill out some forms, and start working?

While we don't recommend arduous intake processes, we do advocate for a personal touch in some practices. We find that a human approach up front goes a long way for communicating things like workplace culture, expectations, promotion policies, and an explanation of benefits.

We are constantly evaluating our use of technology with a keen eye on what software does best and what where we need to add a human face.