"Red Flags" For Business Owners

By: Laura C. Hess

Here are some common problems that our clients who are business owners come to see us about:

  1. One of your customers represents most of your sales. For this reason, you let it run up a large account receivable, whereas otherwise you would have cut it off long ago. However, you are starting to worry now as to whether this customer is ever going to pay you.
  2. One of your salespersons recently quit to take a job elsewhere. Since then, your customers are telling you that this salesperson is calling them and trying to get them to move their business over to his new company.
  3. An employee came into your office in tears because of the way her supervisor is treating her. She is complaining to her co-workers and starting to use legal catch phrases, like "hostile work environment."
  4. You want to fire an employee. However, right before you were going to fire him, you received a doctor's note saying that the employee will be out on stress leave for the next two weeks.
  5. Your distributor called you and said that they are getting a lot of customers complaining about and returning your products. The distributor demands that you determine what is causing the problem and implement better quality control. It is going to stop all sales of your products in the meantime.
  6. One of your customers is complaining because it sent you a purchase order a long time ago, but due to circumstances beyond your control, you have not been able to fill the order yet. The customer is getting angrier by the day and says that, if it cannot get the product immediately, it cannot fill its obligations to its own customers and it will lose business.
  7. You hired a vendor to do a job for you. You have paid it a lot of money so far. However, the project has not been completed yet, and there is no end in sight. Every day that the project drags on is causing more harm to your business.
  8. You learned that there is a potential problem with one of your products that, if it happens, could cause the product to fail, or even hurt someone. You do not know yet how likely it is that this failure will happen or how much product is affected. You are wondering whether you may have to do a product recall, but you do not know whether you are required to do so, or how to go about doing it.
  9. You want to fire an employee. His job performance is poor. However, he has a medical condition, and you are worried he will sue you if you let him go.
  10. You classified someone who works for you as an independent contractor. Now you are not sure if this person really qualifies as an independent contractor, or whether he should be a W-2 employee. If you make this change, you are worried that this will make this person realize that you had misclassified him before, and invite a lawsuit.

These are all "red flag" situations where you should speak to a lawyer right away. We have experience consulting our clients in these matters and can point you in the right direction.

Laura C. Hess is a Partner with Kring & Chung, LLP's Irvine, CA office. She can be reached at (949) 261-7700 or lhess@kringandchung.com .

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