Legal Mistake #8: Are You Protected From the Government?
I have a two-and-a-half-inch thick book of transportation regulations sitting on the window ledge behind my desk. I pull it out about once a week to look up something. As I do, I shake my head and say, “We started with the Ten Commandments and it has come to this?” That book is just the tip of the iceberg.
Government regulation touches nearly every aspect of your business. In many ways, it has been covered in the sections above, but still, it is so pervasive that we treat it like an area of vulnerability in and of itself. In this section, I will run through some examples of how regulations and taxes can trip up businesses.
Do Beware of Regulation Violations
The operations of nearly every business have some body of regulation that outlines how the work needs to be done. In law, it is the state bar and ethics rules and whether you are headed to court. The court rules are like a maze. The Federal Motor Carrier Safety Administration looms large in how transportation operates. Violating the rules of governing bodies like these can get you crosswise with the government. A wrong move can turn into a full-blown, time-consuming and expensive nightmare.
We recently had a client who garnered the attention of a state department. Some domestic problems caught the attention of a regulator and the state moved in to take his license that allowed him to make a living running the business that he built. It was very obvious to us that the state could not do this, but that was lost on the regulator, who of course had no skin in the game and would bear no consequence for persecuting this hapless citizen.
Fortunately, the administrative judge agreed with us. However, the ruling came after a lengthy and expensive legal proceeding. Avoid getting stuck in the quagmire of dealing with a bored bureaucrat who is gunning for you by getting enough legal counsel to head off regulations violations.
Regulation violations can also set the standard for how private parties bring suits against you. There is a doctrine in the law called Negligence Per Se. Under a common law negligence standard, fault is determined based on what a “reasonable person” would do. That variable sets up a lot of grey area to argue about. In contrast, if there is a regulation governing the act and it is designed to protect a given class of people, then the regulation replaces the reasonable person standard. In short, the grey turns to black and white. If you are on the wrong side of that line and you violated the regulation, your chances of prevailing at court just decreased immensely.
Human resources are also a continuous regulatory minefield with wage and hour laws found in the Federal Fair Labor Standards Act and all the underlying state law. This does not take into account the discrimination and retirement regulations. Businesses are so plagued by labor and discrimination suits that the federal courts are plagued by them. The Chief Judge of our Federal District once thanked me for bringing a serious, meritorious lawsuit to her court because she was sick of all the labor claims.
Then there are the safety regulations. For instance, the Occupational Safety and Health Administration (OSHA) intersects with nearly every business, with the possible exception of office jobs. Their requirements set massive changes to industries. In 2010 OSHA mandated that nearly all workers in the oil patch were required to wear fire retardant clothing. This rule set forth an industry-wide change in business and not all companies were able to keep up with it.
Do Beware of Tax Compliance Issues
Likewise as onerous are the tax agencies. Getting on the wrong side of these entities can be deadly for your business. We had a client that almost did. They started with a retail store and branched out into online sales by using Facebook ads. They started shipping goods all over our state and even into surrounding ones.
Just looking at our state, this triggered the need to pay local sales tax based on the location the package was shipped to. This is reported to the state tax commission, so sooner or later they will catch any omission to collect this tax. Fortunately, the implementation of collecting this tax was simple, but had we not started catching up on the back taxes, not to mention the fines and penalties, their books would have been a nightmare.
By including a legal department as part of your management team, you’ll gain a valuable guide through the labyrinth of government regulations and tax agencies. Rather than worrying about a wrong move, you can advance your business into new territory with confidence!
The content on this page has been reviewed and approved by Matthew Davis: CEO of Davis Business Law.