In Praise of CYA – Sometimes The Buck Shouldn’t Stop With You

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As an entrepreneur, you are in charge. The ability to know who’s accountable – you – may be the reason you are an entrepreneur rather than trying to work your way up a corporate ladder. And certainly it is good in a business for stakeholders to be accountable. The buck stops here. Within your organizations, with few exceptions personal responsibility is good.

However, one theme I see in various client advice contexts is that there are many scenarios where you can help protect your business by making sure somebody outside your organization is “on the hook” at least to some extent.

Start with an example that is somewhat obvious: legal advice. There are some scenarios where you may be required to have a formal opinion. For example, in the context of various transactions, the party with whom you are doing business, such as an investor, might want a lawyer or law firm to give a formal opinion as to any number of things – that your organization is properly organized in a particular state, or that the transaction is legally allowed are two examples.

Even where it is not required, certainly there are areas where it is strongly advisable to have legal counsel to guide you through a situation. In some (not all) situations you are entitled to represent yourself in a legal proceeding, but in most situations it is probably not advisable. You want somebody who is trained to participate in that process protecting your business and that, frankly, has insurance to protect you if professional standards are not met.

But there are a lot of extensions of that principle that may be less obvious where I tell clients to shift some responsibility to somebody outside the organization to help protect you.

Three common ones:

1. You are not sure whether you should report something to law enforcement or otherwise involve law enforcement. For example, one employee is fearful of contact from another employee outside work. You don’t think the first employee is in danger, but … what if?

I have told clients many times: if you wonder whether you should inform law enforcement, do it. Talk to your own legal counsel about any particular situation you are dealing with, but generally you protect your organization by notifying law enforcement of a situation so it is law enforcement making the situation about matters they are presumptively most qualified to decided. You can be faulted for not reporting if something bad happens and you didn’t, but – assuming you just report factual information and do not encourage any particular response or exaggerate situations – it is hard for a business to be faulted for sharing information in order to let the experts decide.

2. We have written here before about the importance of insurance to businesses. When a client asks, “Hey we are going to <insert activity outside the usual scope of your business activities>, so what should we be thinking about here?” My answer often starts with checking on whether your business’ insurance will cover any mishaps that occur.

Common examples: a holiday party or a weekend fundraiser of some sort. One of my colleagues or I could spend time analyzing your policies, and in some situations we should, but what may protect you the most is getting your insurance committed – in writing – that your business is protected if anything goes wrong. The only way to accomplish that is to put that conclusion on your insurer, broker or agent.

3. In situations where you are seeking to comply with your legal obligations with respect to an ill employee, a tricky area as we have written here before, I tell clients that you need to define the target. That sounds cold-hearted, but it simply means that in order to strike the proper balance between providing the employee the rights and benefits the law requires on the one hand, and being able to run your business on the other hand, you’ve got to know what you are dealing with.

What aspects of the job can the employee currently perform? Which ones not? How often can she be there? How long will it last? You want a medical opinion on those topics so you are not making assumptions, and not relying on the employee. It may take some follow up to get the information you need, but the only way to properly protect your business is put that determination on somebody else.

By the way, with few exceptions there are no costs to you in making any of these contexts. They take time, but you are spending time on the situation one way or the other. So make it an automatic question for yourself when you are dealing with a tricky situation: Is there somebody outside the organization that can bear some the risk and responsibility here?

Barnes & Thornburg LLP is a large full-service law firm that seeks to take a more entrepreneurial and cost-effective approach both to client service and its own business.

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