Category Archives: Running Your Business

Are Job Applicant Criminal Background Checks Legal?

Does your small business conduct criminal background checks on job applicants? If so, a recent settlement agreement between Pepsi Beverages and the U.S. Equal Employment Opportunity Commission (EEOC) illustrates the legal dangers you may run into if you don’t use such background checks carefully.

According to reports of the settlement, Pepsi ran background checks on job applicants and refused to hire individuals with arrest records (but no convictions) and individuals convicted of minor offenses, as well as those convicted of more serious crimes. The EEOC determined that Pepsi’s policy disproportionately affected African Americans and that more than 300 African Americans who might have received job offers from the company were excluded.

To settle the EEOC’s charges against it, Pepsi paid a $3.1 million fine. The company also agreed to revise its criminal background check policy and offer jobs to qualified applicants who were previously excluded under its former policy.

The Pepsi settlement highlights the legal minefield that your small business can inadvertently wander into if it runs criminal background checks on prospective employees. Under federal law, hiring policies that could have a disproportionate impact on minorities or other protected groups may be illegal, even if you do not intend to discriminate against anyone.

According to the EEOC, an arrest record, without a resulting conviction, is not a useful hiring tool because everyone—including a prospective employee—is presumed innocent until proven guilty. Further, excluding applicants convicted of minor crimes, particularly if the incident occurred years ago and is not related to the particular job at issue, may be deemed irrelevant to the hiring process.

There’s nothing wrong with wanting your company to be staffed by honest and trustworthy individuals, and used correctly, criminal background checks can help you weed out individuals who might genuinely present a problem in the workplace. However, if you do run criminal background checks on prospective employees, you should avoid using the background checks to make blanket hiring decisions.

Instead, evaluate each prospective employee’s record on a case-by-case basis, taking into consideration whether the offense is related to the position at issue. In addition, consider giving the applicant the opportunity to explain or dispute any arrest or conviction information you discover. Taking steps like these will help ensure that your criminal background checks continue to be a useful hiring tool, without running afoul of the law.

By: Guest blogger Steven Koprince, an attorney with Petefish, Immel, Heeb & Hird, LLP in Lawrence, KS. Mr. Koprince’s practice emphasizes government contracts and small business law.

Payroll Tax Cut Extended For First Two Months of 2012

The two percent payroll tax cut for employees that was in effect for 2011 has temporarily been extended until the end of February 2012. Under this measure, employees pay a reduced 4.2 percent of Social Security tax withholding on wages instead of the usual 6.2 percent. It has no impact on employees’ future Social Security benefits.

Employers must make the change to the reduced payroll tax rate by January 31, 2012 at the latest. If any employee’s Social Security tax is withheld at the higher rate in January, the employer has until March 31, 2012 to adjust that employee’s withholding so that the total withholding amount is correct for that period.

For more information, see the IRS website at,,id=251650,00.html.

2012 Business Standard Mileage Rates Announced by IRS

The Internal Revenue Service announced the 2012 optional standard mileage rates for calculating the deductible costs of operating an automobile for business purposes. Starting January 1, 2012, the standard mileage rate for the business use of a car, van, pickup, or panel truck will be 55.5 cents per mile for miles driven. This rate is the same as the the rate that went into effect on July 1, 2011. Taxpayers can choose between the standard mileage rate or their actual costs to calculate their deduction for the business use of a vehicle.

Employees and Salary Discussions—Is Your Policy Valid?

There’s nothing many small business owners hate more than employees discussing their salaries with one another.  After all, what your small business pays its employees may vary considerably, based not only on factors like experience and educational level, but things like productivity and how well the employee negotiated his or her salary before starting work.  To curb hurt feelings (and limit requests for raises), some small businesses have adopted policies prohibiting their employees from discussing their salaries with each other.  The problem?  These policies may not be legal.

In a case recently decided by the Court of Appeals for the First Circuit, National Labor Relations Board v. Northeastern Land Services, Inc., 645 F.3d 475 (2011), a company required a new employee to sign a contract stating that “the terms of this employment, including compensation, are confidential” and that disclosure “may constitute grounds for dismissal.”  The company later fired the employee for allegedly violating the confidentiality provision.

The National Labor Relations Board determined that the confidentiality provision was illegal and that, consequently, firing the employee for violating it was also illegal.  The First Circuit agreed.  It upheld a NLRB order requiring the company to reinstate the former employee, pay him back pay, and rescind the confidentiality provision in all of its employment contracts.

As a small business owner, it can be tempting to require that your employees keep their salary information to themselves.  However, at least under the NLRB’s current interpretation of the law, salary confidentiality provisions can be more trouble than they are worth.

By: Guest blogger Steven Koprince, an attorney with Petefish, Immel, Heeb & Hird, LLP in Lawrence, KS. Mr. Koprince’s practice emphasizes government contracts and small business law.

What to do in the Event of a Double-dip Recession

Just when we thought the economy might be on the upswing, fears of a double-dip recession have hit both Wall Street and Main Street. The New York Times recently asked small-business owners what they’re doing differently in this time of economic uncertainty. Some good advice can be gleaned from what the entrepreneurs had to say:

  • “I mortgaged plants and put $11 million in the bank, paying 5 percent interest, as an insurance policy because I don’t know if there is going to be another credit crisis.”
  • “[I]f I see that sales start to drop 10 to 15 percent in a week and see that it’s a trend over the next two or three weeks, I’ll start cutting. The water cooler, and other extras like employee lunches, will be the first to go. After that, I’ll consider asking the staff to take pay cuts, which I prefer to layoffs. Last time, I was the first to take a pay cut. I brought my salary down to what I needed to pay rent and eat bologna.”
  • “As economic news worsens, a small business tends to get paid later and later, if at all. I’ve learned that when the going gets tough, you’ve got to stand up for yourself and show that you’re the least likely person to be bullied….We took two steps. First, we hired an ex-Army Ranger who had served in Iraq to chase down receivables….The second thing we did was let it be known that we’ll fight over a $100 invoice….In this economy, you have to get your teeth out and fight.”
  • “We’re just starting a catering company…but we’re doing it in a very slow-growth mode….In the past, we would have probably purchased an existing building and converted it; you know, we would’ve gone out and borrowed a million or two million dollars.”
Have you changed the way you run your business recently in anticipation of another recession? What do you plan to do if fears of another recession become reality?

QR Codes- A Powerful New Marketing Tool

Are you familiar with QR codes? If you’re a small business owner, you should be. QR codes are on their way to becoming the latest rage in new technology for small businesses– and with good reason. QR codes (aka Quick Response codes) are two dimension bar codes that can be scanned by smartphone cameras to link the user to videos, text, and online resources. A business can use the QR code on printed material to instantly link to information about a product, its business, or anything else.

One advantage is how specific and targeted the information in the link can be. For example, you could put a bar code on specific products you sell that links the reader to product reviews or instructions on how to use the product. Or, you could put a bar code on receipts or flyers or in your store window that links to updated information on upcoming store sales or special deals or new products you want to advertise. The possibilities are endless and consumers and businesses in the US are just starting to take advantage of this incredible tool. QR codes are widely used in Japan (where they were first developed) and in Europe. Check the Internet for information on how to get started with a QR code and other ideas for uses. Kawya is one of the more popular sites for creating a QR code.

Don’t Be a Victim of This Yellow Pages Scam

You receive a fax from what you think is the Yellow Pages. The fax includes the “walking fingers” logo we’re all familiar with. The fax asks you to update your information for your local Yellow Pages listing. What would you do?

If you’re like the thousands of business owners in the U.S., Canada, and Australia who did receive this fax and didn’t read the fine print, you’d probably fill in your contact information and send the form back without a second thought.  Unfortunately, what the fine print revealed is that by returning the form, these business owners agreed to pay $89 a month for a two-year listing on a non-Yellow Pages online business directory.

This scam is alleged to have been perpetrated by a company based in Europe called Yellow Pages Marketing B.V., which collected millions of dollars in fees from U.S. small business owners alone. The company is now the target of a lawsuit filed by the Federal Trade Commission (FTC).

We’ve all heard this before, but it bears repeating: Always read the fine print.

For more on this scam, see The Wall Street Journal’s In Charge blog.

Vacations and Exercise: Keys to Success?

What does it take to build a successful small business? If we knew, we’d all be millionaires, but two things to add to the mix may be surprising to you: time off and exercise.

Taking time off when starting up a business may be counter-intuitive, but according to an article in the Wall Street Journal (“Time Off Is No Option: It’s Required,” by Sarah E. Needleman), time off is essential to avoid burnout and jumpstart creativity. One entrepreneur interviewed for the article describes how, in the day-to-day grind of building his business, he feels like he’s “constantly looking at trees and never seeing the forest.” (Sound familiar?) Vacations offer him a “mile-high perspective” over his business that he can’t get when his head is buried in his laptop.

Can’t afford to take off a week? Go away for a three-day weekend. Or tack on a day or two after a business trip to see sights and visit friends. It might also help to think of vacations as networking opportunities. And remember, with a smartphone or laptop and a wireless connection, you can easily keep tabs on your business while away.

Exercise is the cure-all for many ills: it helps you lose weight, prevents disease, and aids in getting a good night’s sleep. And, according to blogger Derek Flanzraich, it can also help your small business succeed. How? By boosting your energy level, sharpening your focus, and helping you come up with better ideas—all things an entrepreneur needs and could use more of. (Need help on starting up an exercise regimen? Derek’s got you covered. Read the comments for some interesting real-life tips from readers.)


Businesses Must Take Steps to Prevent Workplace Harassment by Non-employees

A business may be found liable for workplace harassment committed by outsiders, according to a recent decision of the U.S. Fourth Circuit Court of Appeals. In that case, EEOC v. Cromer Food Services, Inc., 2011 WL 733814 (2011), the court held that an employee could sue his employer for failing to prevent harassment he encountered on his sales route.

The Cromer case involved a lawsuit by a delivery driver whose job involved restocking snack and beverage machines owned by his employer but located in various businesses and other facilities. The driver’s route included a local hospital, the employer’s biggest client.

The driver alleged that over a period of several months, two hospital employees harassed him whenever he restocked the hospital’s vending machines. The driver asked his employer to change his route or intervene with the hospital to put an end to the situation, but the employer took no action.

After the driver sued, his employer argued that it could not be liable because it was not responsible for preventing harassment by non-employees, such as the two employees of the hospital. In a broad decision consistent with prior decisions in the 7th, 9th, 10th, and 11th Circuits, the court held that employers covered by Title VII of the Civil Rights Act of 1964 can be liable for on-the-job harassment committed by non-employees, if the employer had actual or constructive knowledge of the situation but failed to take action to protect its employee from the harassment. The court allowed the driver’s suit against his employer to proceed.

No small business wants to hear that its employees are being harassed, whether by other employees or outsiders. But Cromer confirms that if your small business learns that an employee is being harassed on the job by a customer or other outsider, taking action to prevent the harassment may not just be the right thing to do from a moral and ethical perspective but a legal requirement.

By: Guest blogger Steven Koprince, an attorney with Petefish, Immel, Heeb & Hird, LLP in Lawrence, KS. Mr. Koprince’s practice emphasizes government contracts and small business law.

Employees, Social Media, and Your Small Business

Can you legally fire one of your employees for a Facebook post critical of your small business? No, according to the National Labor Relations Board (NLRB), which issued a complaint in late May against an Illinois BMW dealership, alleging that the dealership unlawfully terminated an employee for making critical comments about the dealership on Facebook.

The NLRB’s complaint alleges that a car salesman posted complaints about the quality of food and drink served at a dealership event promoting a new car. Other dealership employees had access to the salesman’s Facebook page. The following week, management asked the salesman to remove the posts, and the salesman complied. However, soon after, the dealership fired the salesman.

According to the NLRB, the employee’s Facebook posts were protected “concerted activity” under the National Labor Relations Act (NLRA), because they were part of a discussion among employees about the terms and conditions of their employment. An NLRB administrative law judge was scheduled to hear the case on June 21.

The BMW dealership case comes on the heels of other NLRB complaints against employers for penalizing employees based on critical Facebook comments, blog posts, or other social networking activity. For instance, in February, a Connecticut employer settled a NLRB complaint alleging that the company fired an employee for posting a negative comment about her supervisor on Facebook. And in April, the NLRB filed a complaint alleging that a media company violated federal law by restricting its employees’ ability to use Twitter to discuss working conditions with coworkers.

The NLRB’s actions do not mean that every social media post an employee makes is protected by law. In fact, the NLRB recently held that a Tuscon-area newspaper did not violate the law when it fired an employee for unprofessional and inappropriate tweets that included remarks about how Tuscon was “slacking” because there were no overnight homicides and sexual innuendo to describe the employee’s television viewing habits.

While unprofessional and inappropriate conduct may not be protected, the intersection of social media and the NLRA is an evolving area of the law, and it is not yet clear when a Facebook post or tweet crosses the line from protected concerted activity to punishable offense. If your small business is concerned about the social media activities of one of your employees, proceed with caution, because the employee’s actions may be protected by the NLRA.

By: Guest blogger Steven Koprince, an attorney with Petefish, Immel, Heeb & Hird, LLP in Lawrence, KS. Mr. Koprince’s practice emphasizes government contracts and small business law.