“Nothing will ever be attempted, if all possible objections must be first overcome.”
— Samuel Johnson
Most business decisions entail risk. Businesspeople are understandably frustrated when lawyers exhaustively identify every possible risk, but do not seem to help the client decide whether the risk is worth it. Business involves risk, legal and otherwise. The question is which ones to take.
I often put potential client decisions about risk into three categories – high risk, low risk and medium risk. The first two categories are easy decisions. The middle one entails the tough judgment calls, with the ultimate decision depending on the particular circumstances, and more than anything, the client’s taste for risk. Let me give an example from the scenario where I have most commonly used this tool – considering whether an employer should terminate an employee.
High-risk terminations are those where the only reasonable business decision is not to terminate the employee in question. An extreme, hypothetical example would be an employee who last week filed a complaint that she is being harassed on the basis of her gender and her race, that complaint is being investigated, and this week her supervisor wants to terminate her because she was 10 minutes late for work, even though her personnel file is spotless.
You do not need to be an experienced employment lawyer to know that this would be a high-risk termination. Put another way, if the company terminated this employee, and the employee filed a retaliation charge, it is difficult to imagine that the company would prevail. This does not mean that the employee can never be terminated, just that under this particular scenario it would not be within the range of reasonable business decisions to do.
Low-risk terminations are those where the only reasonable decision is to go forward with the termination – the risk or cost to the company of retaining the employee is unacceptably high. Again an easy, hypothetical example: an employee with a well-documented record of performance issues in a manufacturing setting has committed a major safety violation resulting in property damage and personal injury to a co-worker. The file is clear that the employee received training on how to properly carry out the task that, when improperly carried out, resulted in the injury. Retaining this worker seems like a clear risk to the company in terms of potential liability if there is another incident, and the company’s ability to have a strong workplace safety program is jeopardized if he is retained.
Before we move to door number three, do not assume from these extreme examples that only a, handful of situations fall into these relatively easy decision categories. Experienced counsel who have seen hundreds if not thousands of potential termination scenarios (or whatever type of scenario we are looking at), and how they unfold after the decision is made, can categorize a significant number of scenarios into one or the other. One intended takeaway of this article is that your lawyer is doing his or her job by identifying the potential risks of a situation, but the question that you should ask in return is, into which of these buckets does the situation fall? Tell me the risk, but do not stop there.
Medium-risk situations are the ones that will occupy ninety percent of your discussion time with your lawyer. These are the closer calls, the mixed bags. In the termination setting, often this means there are strong reasons to end the employment relationship, but the file does not adequately reflect longer-term performance or conduct issues, evidencing the pervasive reluctance of managers to have tough conversations and give meaningful evaluations. You and your lawyer have to roll up your sleeves, weigh the pros and cons, and identify and evaluate the options. It is your lawyer’s job to identify the options and articulate the level of risk of each, then it is your job as the businessperson to make a decision considering that advice.
These three buckets can be a good tool for thinking through potential risk situations. Your time is valuable, do not waste it on the easier decisions. Have trust in a lawyer who has the confidence to put things in these buckets and, outside his or her particular expertise, identify other lawyers who will do the same.
Understand that the high and low risk buckets are not guarantees. Our legal system involves human decisionmakers at every level, so there is always some uncertainty even with what seem like easy decisions. But that level of risk that you cannot reasonably anticipate is a cost of doing business. If you are lucky, you will never lose that lottery, but the possibility that you might does not mean that the up-front decision should be difficult and time-consuming.
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