Above Board
There are more than 1.3 million lawyers across the country and, according to a recent American Bar Association National Lawyer Population Survey, New Jersey clocks in as one of the top 10 states nationwide with the most lawyers.
That’s good news for small businesses in The Garden State, as local attorneys and professionals alike agree that obtaining legal counsel is not a detail to be overlooked for any company, no matter the size.
“A critical element of any small business prior to opening and regardless of industry, is to build a support team as part of the planning process. The team would include a banker, CPA, insurance rep, payroll service, marketing/social media professional and legal,” Bob Palumbo says. “The business plan, including cash projections, must include a budget line for these resource costs. Existing businesses should follow the same advice and ensure they have secured their business with a team of experts.”
Before his retirement in July, Palumbo worked with thousands of small business owners during his 22 years with the New Jersey Small Business Development Center at Rutgers–Camden. The former regional director reflects on these individuals being passionate, intelligent and creative in their respective fields—but not legal experts.
“Legal support in the planning phase and operating phase of a business helps small businesses prevent problems, operate efficiently and focus on growth and development without the heavy weight of legal issues,” Palumbo explains. “The industry type will dictate common legal exposure facing a business owner.”
There are specific risks for different businesses, whether food service, retail, professional services or manufacturing. There are also many common legal elements, according to Palumbo, including business formation, contracts, employment law, partnership agreements, licensing and permits.
“Business owners should not assume to understand the law and cannot always rely on their own ethical or moral compass,” he says.
Strength with Legal Counsel
From starting a business to instituting new mandates at longtime companies, having a legal advisor either on staff or on retainer is critical to avoiding costly missteps along the way, as they can ensure that business owners stay not only compliant with ever-changing regulations but also ahead of anticipated changes in the law.
“It is often far more costly to be reactive rather than proactive,” Sergio I. Scuteri, Esq., shareholder with Capehart Scatchard, says. “Daily business decisions often require prompt responses, which can be better made with the assistance of counsel.”
According to John C. Miller III, Esq., managing partner at Mattleman, Weinroth & Miller, P.C., there are elements of legality in most every choice a business makes.
“Companies benefit by having a full team on their side. Most business decisions involve some aspect of legal analysis,” Miller says.
A Changing Business Landscape
As Scuteri observes, “In today’s litigious society, one misstep is all it takes to bring down an otherwise successful company. Hiring the right people is a good first step, but it will only get you so far,” and adds that downloading an employee handbook from the internet isn’t enough.
“Establishing and implementing sound workplace policies is a must,” he continues. “Successful and proactive company leaders will retain a good employer-based attorney to custom-develop policies and best practices for your specific company, and will update those policies and practices regularly as needed. … Having documented policies and procedures in place, including regular training sessions, can be a defense should litigation arise. Additionally, your company could benefit from reduced insurance premiums and preferential status since your company risk will be reduced.”
When implementing company mandates, procedures and policies, it’s also important to remember that they must comply with anti-discrimination laws such as the Civil Rights, the Americans with Disabilities and Age Discrimination Employment acts.
“Policies should not disproportionately impact protected groups,” Palumbo says. “A legal review of policies is highly recommended before implementation. Lawyers specialized in emplacement practice can assist to prevent exposure. Many payroll service companies offer employee handbook assistance and assist with employee agreement forms.”
A huge change to businesses—and the world—is the influence of artificial intelligence, or AI, in most every facet of life. According to Forbes Advisor, the AI market will grow to $407 billion in the next three years, as well as contribute a 21% net increase to the country’s gross domestic product by 2030. In other words, if AI is not yet influencing a business, it most likely will be soon. And this isn’t just about the heavy hitters: Small businesses will be impacted, too.
“Business owners must not only understand their responsibilities when utilizing AI, but also protect themselves and the business from outside artificial intelligence. Normal business operations must be reviewed to identify any potential legal issues to be addressed to ensure compliance and mitigate risks such as data privacy, personal data and protecting intellectual property,” Palumbo explains.
Small businesses should use caution before adopting AI and combine the practice with research, fact finding and sound legal advice. In ways AI can lead businesses astray, Palumbo gives an example of a business relying on it to make employment-policy decisions. These may not be compliant with anti-discrimination laws and can result in decisions that unfairly create a disadvantage for certain groups.
“AI systems process information through data collection and learning. It depends on the quality and its interpretation of the data,” Palumbo says. “The liability of decision-making rests with ownership and cannot be deflected to an artificial intelligence tool.”
Building Legal Relationships for Business Success
“Not having a lawyer to weigh in on a decision is like going into a competitive sporting event—think football game—and only having an offensive game plan and no defensive coaches,” Miller notes. “You are only a fraction of a winning team.”
When a small business builds a relationship with a legal advisor, that individual is then able to understand the all-around business: the ownership, workforce and potential pitfalls. With this knowledge, the legal advisor can help small businesses navigate the complexities of employment law and how best to build a successful company.
“A legal retainer can provide benefits for managing and settling employment disputes, including immediate access to legal expertise, cost predictability, proactive compliance, and dispute resolution. … However, a legal retainer may be a financial burden for a small business,” Palumbo says. “An assessment by a legal advisor can provide advice on potential exposure to determine if a retainer would be beneficial. As an example, a manufacturing facility or a building contractor would have more exposure than a retail gift shop.”
He adds there are “no-cost” services paid through taxes from government agencies and resources that are available to assist small businesses in many areas of legal and compliance stipulations, including the New Jersey Business Action Center and the New Jersey Department of Labor. Some state and local bar associations also offer pro bono programs for small businesses, and many law schools offer legal clinics in which supervised law students can provide free legal assistance.
“The bottom line in securing legal advice,” Palumbo says, “is to protect your business, ownership, personal assets, family and employees dependent on the success of the business.”
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Published (and copyrighted) in South Jersey Biz, Volume 14, Issue 9 (September 2024).
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To read the digital edition of South Jersey Biz, click here.
Published (and copyrighted) in South Jersey Biz, Volume 14, Issue 9 (September 2024).
For more info on South Jersey Biz, click here.
To subscribe to South Jersey Biz, click here.
To advertise in South Jersey Biz, click here.
Author: Kristen Dowd
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