Below are some recent articles by Lee Goldberg on changes in the law and how they can apply to your business.
California labor laws are complex and numerous. Lee discusses some of the latest California employment laws and as part of Lee’s General Counsel series featured on Be The Change HR’s website. You can read the article by clicking here.
Lee Goldberg recently wrote an article for Be The Change HR, detailing the importance and benefits of sexual harassment laws for a business. The article can be read here.
By now all should be aware of the new employee classification laws challenging California businesses (employee vs. 1099 contractor) effective January 1, 2020, known as AB-5 (Cal. Labor Code §2750.3). AB-5 codified the April 2018 unanimous ruling of the California Supreme Court in the Dynamex case.1 1 Dynamex Operations West, Inc. v. Superior Court of Los Angeles (2018) 4 Cal.5th 90. Well, AB-5, or more precisely, Labor Code §2750.3, has been repealed. However, it is not quite time to celebrate. In early September 2020, Governor Newsome signed AB-2257 into law, which came into effect immediately as an “urgency statute”. While it is true that AB-2257 repeals former Labor Code §2750.3 (AB-5), the provisions of that code section are reorganized and re-enacted with certain amendments as new Cal. Labor Code §§ 2775-2787. Consequently, AB-2257 should be viewed more as a restructured and clarified amendment to AB-5, rather than a repeal of the challenging requirements of the statute. While some businesses will certainly benefit from the amendments, there will be no change in the requirements for most. The three (3) general questions I have been asked regarding the changes to the law implemented by AB-2257 are: 1 – What if I previously qualified my 1099 contractors Under AB-5? If you satisfied the former AB-5 requirements for your 1099 contractors, you most likely qualify under AB-2257. No additional concerns should be raised under the new laws. 2 – What AB-2257 Does Not Do: There are no changes to the basic test as to whether the hiring party has an employee vs. 1099 contractor. This test, which has come to be known as the “ABC” test, is now codified in new Labor Code §2775. As a reminder, the “ABC” test is a 3-prong test with respect to which all three prongs must be met to have a 1099 contractor classification. The three (3) prongs are as follows: (A) The person is free from the control and direction of the hiring entity in connection with the performance of the work, both under the © 2020 Lee R. Goldberg. All Rights Reserved. contract for the performance of the work and in fact; (B) The person performs work that is outside the usual course of the hiring entity’s business; and (C) The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed. 3 – What changes were made to the AB-5 laws: As under the prior “new” law, there are a number of specific exceptions to the “ABC” test. Most of these exceptions have not changed and are re-stated in the new law. As before, the exceptions are not a free pass. Most have conditions and qualifications. In common to each exception is the continued requirement that the hiring meets the Borello test, one of the requirements of which is a written contract between the hiring party and service provider. 2 2 S. G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341. Some of the changes/additions to the exceptions include, but are not limited to, the following: – Labor Code Section §2778 – This is the revised “professional services” exception. The changes are most helpful in using qualified 1099 contractors in the academics, creative media services (copywriters, editors, etc.), a wide variety of fine arts (including still photography and videography – which was a problem before), marketing and digital content aggregators, certain written media, appraisal and home inspector businesses. – Labor Code Section §2779 – This new provision provides an exception for “single-location events” – This exception may be very useful to event planners, festival organizers and charities for their charitable events. – Labor Code Section §2780 – This addition is very detailed and generally provides exceptions for the recording and musical performance industries. – Labor Code Section §2782 – This addition provides an exception for “data aggregators” – mostly applicable to educational, political and public survey type companies. – Labor Code Section §2783 – This section restates the other professions that are exempt, and adds a few others in the newspaper/publishing industry. CAUTIONARY NOTE: PLEASE DO NOT ALLOW MY SOMEWHAT SARCASTIC, HYPER-TECHNICAL, ARTICLE TITLE MISLEAD YOU. Not much has changed for California businesses in general since the adoption of AB-5 (other than the fact we now have to also work through this seismic employment classification change in a post-COVID era). California’s new employee/1099 contractor classification laws are alive and well and the State of California has made clear it intends to enforce them. The evidence is not just in the statements of Governor Newsome and various State Representatives, and through its very public enforcement actions,3 but also as telegraphed under AB-2257 itself. 3 People of the State of California v. Uber Technologies, Inc., et. al., San Francisco Superior Court, Case No. CGC 20584402; Garcia-Brower v. Mobile Car Wash, Inc., Los Angeles Superior Court, Case No. 20STCV24800. AB-2257 also amends various parts of the California Revenue and Taxation Code to make it clear that these employee definitions apply to the California Tax Code (This is where the pain will be for companies that have adverse determinations on employee misclassification challenges). On a more comical, but no less telling, note is the importance that California’s leadership puts on AB-2257, actually calling it an “urgency statute” – really – like budgetary emergencies, wildfires, disaster relief funding, and COVID? If you use 1099 contractors in your business, I strongly advise, at the very least, you obtain a professional assessment of your compliance, compliance strategies, and financial exposure for non-compliance, with new Labor Code §§ 2775-2787. Your legal counsel and HR Specialists will be familiar with the issues and can offer consultation and options. But at least, know your business exposure.
It’s been a rough year so far for business (and for us all personally). Between the: (a) “shelter” orders, (b) business shut downs, re-openings, and new re-closings, (c) layoffs and high unemployment, (d) businesses feeling the pinch of decreased sales and increased operating costs, at the same time (e) trying to restructure operations in this new COVID world, … the current challenges for business are daunting at best. With all of that in play, it is easy to forget that as of January 1, 2020, the State of California codified a seismic shift with respect to how businesses must classify a 1099 contractor versus employee (Cal. Labor Code §2750.3 – a.k.a. AB-5). Basically, all service providers are now “employees” and not 1099 contractors unless: (1) the engagement satisfies all three prongs of the “ABC Test”; or (2) there is a codified exception for the specific service and how it is rendered. As a reminder, the “ABC” test is a 3-prong test with respect to which all three prongs must be met to have a 1099 contractor classification. The three (3) prongs are as follows: (A) The person is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact; (B) The person performs work that is outside the usual course of the hiring entity’s business; and (C) The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed. Well the California Attorney General, and the City Attorneys for Los Angeles, San Diego and San Francisco did not forget about AB-5. On May 5, 2020, in the midst of the “shelter-in-place” orders from Governor Newsome, at a time when the courts were closed to all but emergency and criminal matters, the State of California filed an AB-5 enforcement action in the San Francisco Superior Court against Uber and Lyft for violation and enforcement of Labor Code §2750.3 (People of the State of California v. Uber Technologies, Inc., et. al., Case No. CGC 20584402). The State is alleging that all of Uber and Lyft’s 1099 contract drivers are intentionally misclassified and must be classified as “employees”. The complaint requests injunction and demands monetary restitution in the form of minimum and overtime wages, meal and rest period premiums, unreimbursed business expenses, unpaid sick leave, along with taxes, penalties and interest to the State. At or about the time of the filing, Governor Newsome held a press conference stating among other things he was asking for more funds in the State budget to bring further enforcement actions. With all the COVID tumult going on at the time, this may have flown under the radar for most. However, I noticed, and I see this as a very clear, unequivocal statement by the State of California to all businesses that the State will enforce the new AB-5 labor laws, and they do not care what your business may be going through – COVID be damned. This is nothing less than a wake-up call from the State. If you need further evidence, just this month, on or about July 1, 2020, the Commissioner of the Division of Labor Standards Enforcement filed an AB-5 enforcement action against a mobile car wash company based in Bellflower (with 100 “employees”) seeking to recover unpaid wages and overtime premium pay, unreimbursed business expenses (including costs associated with uniforms, car washing tools and equipment, insurance, cell phone service, and mileage), rest period premiums, misappropriated gratuities, waiting time penalties, and liquidated damages on behalf of the allegedly misclassified car wash “employees”, as well as unpaid taxes, penalties and interest to the State. (Garcia-Brower v. Mobile Car Wash, Inc., LASC Case No. 20STCV24800.) This lawsuit is also filed against the company’s president personally for willful violation. Does the State of California have your attention yet? It can be very costly to be found to have misclassified and paid your “employees” as 1099 contractors, and definitely costly to defend. And the State is coming to enforce the labor laws. This is a time when businesses are in the midst of evolution. They have to adapt to the new economic realities that, most will agree, has transformed business forever. Companies should be revising and implementing new strategic business plans and reorganizing their operations accordingly. Based upon the clear exposure that this new law poses, AB-5 compliance (or shift of the risks for non-compliance, which is possible in some cases) should be high on the list of business strategies to address now. If you use 1099 contractors in your business, I strongly advise, at the very least, you obtain a professional assessment of your compliance, compliance strategies, and exposure for non-compliance with Labor Code §2750.3. Your legal counsel and HR Specialists will be familiar with the issues and can offer consultation and options. But at least, know your business exposure. Be advised, be well and take care of business.
1. Can You Stay Open: The Governor’s Executive Order N-33-20 identifies16 critical infrastructure sectors that are to remain open and operating in the interest of security, economic security, public health and safety. However, if your company does not operate in, or in support of, the16 critical infrastructure sectors, you may only stay open and operating to the extent that you or your employees may work remotely. Executive Order N-33-20 is a “Stay at Home” order. There are also certain businesses that have specifically been ordered closed (or to operate differently) in various counties/cities in California, mostly those that serve as places of public gathering (restaurants, bars, clubs, gyms, etc.) Please refer to your local emergency ordinances. 2. What Are The 16 Critical Infrastructure Sectors: i. Chemical Sector ii. Commercial Facilities Sector (Office Buildings) iii. Communications Sector iv. Critical Manufacturing Sector v. Dams vi. Defense Industrial Sector vii. Emergency Services Sector viii. Energy Sector ix. Financial Services Sector x. Food & Agriculture Sector xi. Government Facilities Sector xii. Healthcare & Public Health Sector xiii. Information Technology Sector xiv. Nuclear Reactors, Materials & Waste Sector (thank goodness) xv. Transportation Systems Sector xvi. Water & Waste Water Sector It is also clear from additional guidance that businesses in support of critical infrastructure are to remain open. A more detailed guidance can be found at https://a78.asmdc.org/press-releases/guidance-essential-critical-infrastructure-workers-under-governors-executive-order-n 3. Can Your Employees Come To Work If You Operate In A Critical Sector: The Executive Order expressly provides: “I order that Californians working in these 16 critical infrastructure sectors may continue their work because of the importance of these sectors to Californians’ health and well-being.” So yes, if you operate in one of those critical infrastructure sectors, or in support of one of those sectors, your employees may travel to and from work as normal, if in-person services are required. Many companies are having their legal counsel provide letters that their employees can carry with them in the event that they are stopped and questioned. Of course, if your company can operate through employees working remotely, even in a critical infrastructure sector, it is best practices that those employees do so. 4. Can You Force Your Critical Sector Employees to Come to Work Upon Threat of Termination or Other Sanction: That is a tricky question at best and depends upon the circumstances. But in general, it is best practices that you do not threaten sanctions. My best advice is to simply allow the employee to take furlough, sick leave (discussed below) or other available leave after consulting legal counsel or HR specialist. Under certain circumstances, the employee’s concerns may well be appropriate (including a known prior infection within the company, leave to care for a family member, or employee personal risk factors about which an employer really cannot inquire – like someone with risk factors at home). 5. Do You Need Additional Health Practice Policies For Company At- Work Operations: In my opinion – Absolutely!! Businesses should prepare an emergency COVID-19 policy in writing, to be distributed to, and signed by, all employees. This may be added as an Addendum to your employee handbook (as some projections have this issue lasting for some time). Once in place, it should be strictly enforced. 6. What Should COVID-19 Company Policies/Practices Require: The following are, in my opinion, best practices. However, the manner in which each and every business operates is different and companies should have a legal or professional HR review of their specific operations before employing any company policy. i. Practice Social Distancing at Work – Keep 6 feet apart; no conference room meetings (use e-mail, zoom, FaceTime, etc.); no break room gatherings; no unnecessary touching of surfaces, etc. ii. Exercise Good Hygiene – I know that sounds kinda silly, but it should be in the policy. Require the disinfecting of work stations before and after work (supply disinfectant if available). Possibly require hand washing (or sanitizer) before taking their post, both in the morning and upon return from breaks and lunch; Possibly require disinfecting of all common surfaces they touch after they are done (e.g., phones, copy machines, coffee makers, etc.); If close contact is unavoidable, and if available, possibly require N-95 masks and disposable Nitrile gloves be worn (and provide them). And of course, immediate reporting of ANY illness with liberal “send home” policies and immediate notice if any employee is diagnosed with COVID-19. iii. Work Remotely If Possible: All employees that can work remotely, should be required to work remotely. No non-essential business travel – even driving to a client/customer, nor business in-person meetings. If such in-person meetings or services are required, you may want to consider requiring the wearing of protective equipment described above, if available. iv. Screen Before Granting Access To Your Business Premises: This is an interesting one (considering HIPPA) – but reasonably required in this public health and safety crisis and under emergency orders. Not only should you exclude ALL non-business related visitors as a matter of policy (no more mom visiting little Jonny at work), but also limit access to your business premises for everyone (employees and business visitors alike) unless passing some sort of screening (for each and every access – including after breaks and lunch). At minimum the screening should consist of a dated, time noted questionnaire. Three simple questions: (a) Do you have, or in the last 5 days had, any of (list COVID-19 symptoms); (b) Have you sought medical attention for coronavirus symptoms in the last 14 days, and if so, when, and has quarantine been recommended; and (c) in the last 5 days have you come into contact with anyone you know who has been having (list coronavirus) symptoms or diagnosed with COVID-19 (or similar questions). If any answer is yes, then access should be denied. If its a business where people work closely together, circumstances make it otherwise reasonable, and if available, pre-entry temporal temperature taking may well be something to consider before access is granted. 7. What If An Employee Is Diagnosed With
Last month, Governor Gavin Newsome signed AB-5 into law, now codified as new Labor Code §2750.3. Section 2750.3 governs the classification of independent contractor employment status (vs “employee”) in California. The new Labor Code section expressly adopts the California Supreme Court’s heavily employee biased shift in then existing law as expressed in its 80-plus page April 2018 Dynamex decision.1 1 Dynamex Operations West, Inc. v. Superior Court of Los Angeles (2018) 4 Cal.5th 90. 2 Most notably business operating in the “gig” economy like Uber. The Dynamex case involved drivers for an on-line food delivery service. 3 This means any business, in any form, whether sole proprietorship (individual), partnership, corporation, LLC, trust or other organization. Ever since the Dynamex ruling, and now its codification in AB-5 (Labor Code §2750.3), we have been hearing grumblings from the business community in the nature of, “This is the death of small business and independent contracting in California.” Nonsense. While some business in California will be heavily hit and may need to re-structure their operations2, most will adapt to operate in compliance with the new law and survive/thrive, although operating costs may be higher. But what cannot be done is to “stick your head in the sand” and ignore the new rules of the road. There are still independent contractors in California, and they can still be used extensively in business. However, businesses must: (A) Understand the new employee classification laws and how it may apply to their operational structures; and (B) Be proactive in addressing their potential issues and not simply wait for a costly enforcement action. NEW LEGAL CONSTRUCT Everyone is an Employee and not an Independent Contractor. Ok – that’s an exaggeration. However, New Labor Code §2750.3(a)(1) provides, in pertinent part: “… a person providing labor or services for remuneration shall be considered an employee rather than an independent contractor unless the hiring entity demonstrates that all of the following conditions are satisfied …” What does that mean? It means that the starting position and analysis by the EDD and FTB, per statute, is that everyone paid by a company3 for his/her services/labor is an employee and not an independent contractor, with all of the employee rules, regulations, statutes, and code requirements applied, including withholding, wage/hour (including minimum wage), benefits, sick pay, training, safety, and similar applicable “employee” classification requirements. That is, of course, “unless” the hiring company “demonstrates” (meaning that the hiring company has the burden of proof to show) ALL THREE prongs of the following 3-prong test: (A) “The person is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact.” §2750.3(a)(1)(A). This means the hiring company must show that the services are pursuant to a written contract providing for the independence of the contractor, AND that the services were actually performed by the contractor independent of the company’s control or direction. In most cases, this could readily be shown. (B) “The person performs work that is outside the usual course of the hiring entity’s business.” §2750.3(a)(1)(B). Now there’s the rub for many businesses. It will probably be the source of most litigation under Section 2750.3. Are a company’s contract administrative professionals rendering services outside the “usual course” of the company’s business – probably. Does a company’s independent contractor commissioned salesperson satisfy this prong – probably not. If the independent contractor renders the service which the company offers to the public – it will definitely not satisfy this prong. This is a determination that must necessarily be made on a case-by-case basis and should be made with the assistance of qualified HR and legal professionals. (C) “The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.” §2750.3(a)(1)(C). Basically, it’s the company’s burden to prove that the contractor regularly offers his/her business services to other companies. If a company’s “independent contractor” only works for that company (e.g., a “captive” outside salesperson) this prong will most definitely not be satisfied. Finally, there are a number of exceptions to the application of this new construct, with respect to which the pre-Dynamex classification determinations (S. G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341) apply. Some of these exceptions are absolute and others require some showing of proof on the part of the hiring company. Some of these “absolute” exceptions include: licensed attorneys, doctors, accountants, engineers, architects, and real estate salespersons. An example of an exception that requires a showing of proof by the hiring company is a “professional services” contract (a defined term) that requires a showing of 6 separate indicia of an independent contractor. There is also a B2B exception that requires a showing of proof. HOW THE PRUDENT COMPANY PROCEEDS An adverse determination of the classification of a company’s independent contractors as employees can be devastating for the company. It has been known to put more than one company out-of-business. The assessment can include the amounts for unpaid employment tax, unpaid withholdings, interest and a 30% penalty on the unpaid withholding amounts. Multiply this by all of a company’s IC’s, account for an eventual audit by the IRS, throw in the personal liability of the responsible person at the company for the unpaid withholdings, interest and penalties, and this can be the perfect storm to derail a once thriving business. As a result, it is highly recommended that any business that uses independent contractors to any significant extent have their business structure and operations reviewed by qualified HR and/or legal professionals. Even if the determination is made that the company can continue to classify its service providers as independent contractors, it would be prudent for the company to have all of the required documentation to prove such classification. Those documents will require a written agreement with the contractor structured for, and containing, all of the terms necessary under prior law (i.e.,
Most business owners are not aware that it can take up to two (2) years or more to properly position a company for sale. Proper positioning means that at the time your business “goes to market”, your company is structured, organized, documented, protected and operating in a manner that: (i) attracts the right business broker (which can be extremely important); (ii) will attract the right buyer (not just any buyer); and (iii) position your business to maximize your return on sale. The following are 8 general exit strategy planning and execution considerations common to most businesses. Many of these considerations can (and perhaps should) be implemented well before it comes time to sell your company. I. Get Your Financial House In Order. Once a potential buyer understands your business, the first thing they will review and analyze are your financial statements. By the time your company is ready for sale, you should have 3-5 years of consolidated and consolidating financial statements, prepared by professional independent accountants (not internal), including all accountants’ notes. These should either be audited or auditable. This will take some time and will require professionals. Your accountants, financial consultants and CFO (whether in-house or fractional) should be engaged to help with this process. II. Organize Corporate Documents. When was the last time you reviewed your corporate documents? If you are like most, it’s been a while. This is the first category of documents that a potential buyer’s counsel will want to review. Make sure your documents are complete and up-to-date. This will include, but not be limited to, all formation documents, all shareholder/member agreements, all stock purchase/sale agreements, completed stock/shareholder register, all annual minutes, all options, warrants, etc., SS-4, registrations in foreign jurisdictions (other states); and re-sale certificate, among others. III. Maximize Your EBITDA. EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) is the single most important business metric in the vast majority of business sale transactions. Generally speaking, it is an accounting measurement of your business’ “profits” from operations. Most business sale prices are based upon some multiplier (which can be fractional) of EBITDA, as discussed below. Smart potential buyers will not only look to your EBITDA in the year of (prior to) sale, they will also look for year-over-year increases in EBITDA. There are 2 ways to increase EBITDA: (i) increase gross revenues (as long as you are similarly profitable on the increased margin); or (ii) © 2020 Lee R. Goldberg. All Rights Reserved. 2 the preferred, most efficient, and usually easiest method, … decrease business operating costs. The more efficiently that your business operates, the higher the EBITDA will become, and the higher the EBITDA, the higher the sale price. There are a myriad of great business consultants that can help with this effort (they used to be called efficiency experts). IV. Enhance Your Blue-Sky. In modern colloquial usage, “Blue-Sky” is anything that enhances the value of your company beyond EBITDA. It is the multiplier discussed above, also known as “turns” on EBITDA (also, the measure of how long it should take the buyer to earn back the investment, all things being stable and equal). This is generally determined by uncontrolled factors including market condition, industry, local economy, unique buyer need, etc. However, Blue-Sky also includes things you can control, including extraordinary inventory and equipment, real estate, significant market penetration, and in vogue these days, intellectual property, including trade secrets, trade processes and/or unique trade supplier relationships. It always amazes me how many businesses do not even know they own and use protectable (possibly valuable) intellectual property. Find what makes your business unique and successful in the market. Then develop it and protect it as a separate asset. Again, experienced business and legal consultants can help with this process. V. Ensure You Are Operating Legally. I know it sounds silly, but this is what a potential buyer’s legal counsel is conducting due diligence to ensure. Make sure he/she is not disappointed. This does not only relate to business licenses, and building and occupancy permits, it also means that you have any and all specialty permits and licenses required to conduct your particular business, all necessary export-import licenses, all required hazardous waste treatment/disposal permits, etc. This will also mean that your company is operating in compliance with all labor laws and health and safety laws. If required, make sure that you have your HASSP program prepared and written as well as your employee handbook and other similar documentation. Hazardous waste is a big issue. Make sure you are in compliance. VI. Shore-up Your Contracts. If your significant contracts are not in writing, they should be. Review your customer, trade supplier, independent contractor and service provider contracts to ensure they are well written and protective of your business. Buyer’s counsel will review this in due diligence. Take note of all contracts in which you have given indemnities, limited the company right of assignment, or agreed to confidentiality. These types of restricting provisions found at the end of your contracts (sometimes disappointingly called boilerplate) should be assessed and limited in the future as they can have an effect on your business sale down the road. Also, get all of your intercompany contracts, leases and licenses prepared and signed. Finally, make sure you are protecting your business’ intellectual property, not only by registering patents, copyrights or trademarks, but also by documenting your trade secrets, legally protecting them and, above all, keeping them secret. © 2020 Lee R. Goldberg. All Rights Reserved. 3 VII. Review Your Business Structure/Operations. Your current business structure and operations may not be the best option for a proposed sale. The best structure may depend upon a number of factors including, whether you are preparing for a stock or asset transaction, the extent of the business you intend to sell (retain), the target buyer, and/or your particular tax situation. As an example, a business operating as an LLC may need to convert to a C-Corporation to attract a particular class of buyer. Another example is
We are currently going through some very difficult times – no doubt. Business is challenging at best. I have read professional economists’ forecasts that business will not even start to return to “normal” until the end of June or July, some predict well later. At the very least, that is 3-4 months from now. The good news is that the overwhelming opinion (quite nearly unanimous) is that when the economy comes back, it will do so with a vengeance. During this COVID-19 crisis, I have not only been addressing my clients’ pressing and immediate business challenges, I have also been spending considerable time counseling my clients as to how they can be proactive and use this economic slowdown to prepare their businesses for the explosive growth to come. Below are 7 categories of the most common proactive strategic planning considerations recently discussed with my clients. I. Cement Client/Customer Relations. Your clients are going through similar challenges as you. They will remember the companies that supported them during this time – you should be one of them. This protects your current base of business in two ways: (a) It may help them survive to continue to be a client; and (b) the better clients will be grateful now, and loyal after the downturn passes. Some strategies I have counseled include: (i) proactively (before they ask) offering your clients with outstanding accounts receivable discounts for quick payment (it helps the client and your business – during these times, cash is king more than ever); (ii) offering EXISTING clients extended terms on their ongoing – regular orders; (iii) offer clients deferred or reduced fixed monthly payment for a period of time (basically a new payment plan – with short term relief); and (iv) continuous contact with clients with business relevant updates, order/service status letters, operational status letters, and most importantly, with no business agenda, just to see how they are doing. II. Protect Important Assets – Like Your Labor. Most businesses think of employees as an expense and not an asset. But, what happens to your business if you do not have the labor to support it? What happens when your employees feel you have treated them poorly during this downturn? I will tell you from much client experience, when the economy comes back, they will leave your company in need at a time when every business is competing for the best employees. However, it takes very little to protect this asset. If you are still operating as one of the 16 critical sector companies, protect your employees with enhanced COVID safety policies and practices. If you have had to furlough © 2020 Lee R. Goldberg. All Rights Reserved. 2 and/or layoff employees, at the very least help them with access to support services, and keep constant contact with them during the downtime. Your HR should be their one-source “go-to” for referral assistance. Maybe even help in some tangible manner (financially or otherwise). When this passes, you will be glad you did. Your HR professionals can be a great help in this endeavor, with resources, policies and practices to help maintain your very important labor asset. III. Re-Evaluate; Reorganize. Perhaps your business had been good, but no business is perfect. Address the challenges in your operations during this downturn. Maybe you have a challenge in accounting, production, sales, or other department – fix it during this time. It’s also time to evaluate and possibly restructure your debt, or qualify new vendors. You should also evaluate and employ new methods to reduce operating costs; After all, “a penny saved is a penny earned”. (If you don’t understand that expression as it relates to business, I almost guaranty your operating costs are too high.) In addition, specifically identify the matters that you need to change, but cannot adjust today, putting a detailed plan in place of how to address the issue when the time is right (and identify that time). You may even need to entirely restructure your operations for future strategic plans, or changes in the law (e.g., California’s new 1099 contractor laws). Now is the time to get those business structures and/or modified operations in place, or at least moved forward. IV. Marketing Plans. Let’s be clear – I am not talking about marketing during the downturn. In general, people are tired and annoyed with hearing all the great offers they can get, but only so long as we are in quarantine. However, this is the perfect time to re-assess and identify your target market and develop and prepare marketing plans that can immediately be placed into effect when the current business challenges are eased. Traditional marketing consultants, web-marketing professionals, advertising consultants and related services have availability now. Businesses that do this will realize two very important advantages over competitors that do not: (i) They will be ready and visible in the market the instant that the time is right (before unprepared competitors); and (ii) They will not be scrambling to get the attention of the best marketing professionals and consultants when all other businesses are doing so at the same time. V. Invest in Your Business. Notwithstanding the current downturn, there is plenty of business capital available out there right now, including possibly held in your own “retained earnings”. Moreover, everyone is talking about the SBA Emergency Relief Loans (which if you qualify – there is no better current business debt/grant structure out there of which I know), but that is only one source of available debt capital. Both institutional and private lenders are lending. So, maybe you have capital improvements that have been deferred too long. Perhaps you need to acquire equipment or software to increase efficiencies and reduce operating/labor costs. Maybe your business facilities need to grow or even relocate (including potential real estate acquisitions). Maybe, your employees can use better training. All of these things can and should be addressed, assessed and planned at this time, as well as proceeding with the steps to put these capital investments in