Lawyer Keeps Clients Out of Court

One of the first things attorney Ben Root does when he performs a “legal checkup” for a new small-business client is to ask the receptionist for an employment application.

More often than not, he is handed an outdated form peppered with personal questions about age, marital status and race--all questions that are now against the law to ask job applicants.

Next, he asks for the company’s employee handbook. If they have one, it is usually laden with legally questionable policies or regulations.

Before he goes any further, he walks through the business, chatting with employees, supervisors and anyone else he can find to help him understand how things are done.

“It’s almost an audit process,” said Root, who works in the downtown Los Angeles office of Latham & Watkins. Although his specialty is helping small-business owners cope with their legal problems, Root also represents big business clients, including Peter V. Ueberroth, former president of the Los Angeles Olympic Organizing Committee, whom Root represented when Ueberroth attempted to buy Eastern Airlines.

Root, 43, said he came up with the idea for performing regular legal checkups for his small-business clients because “a startling number of employers don’t know about laws or changes in the law.”

Yet, he said, a lawsuit filed by an employee or competitor can cripple a small business by costing its owners money and time.

Most potential legal problems lurk in the way employers handle disputes with their employees, Root said. Wrongful terminations, problems with pension or medical benefits and improper handling of unemployment insurance claims can leave a small-business owner vulnerable to being sued. Root said he focuses on clarifying these issues, leaving his clients to run their businesses.

“To do the wrong thing is extraordinarily expensive,” said Ed Zolla, president and principal owner of Benhar-Angus Mills, a Los Angeles maker of potholders, kitchen towels and seat cushions. “My calls to Ben have a very big return.”

Zolla met Root about 15 years ago when they were on opposite sides of a labor union negotiation. About eight years ago, Zolla quit the real estate development business and bought Benhar-Angus Mills. Today, the company employs about 225 in Los Angeles and 75 at its mill and warehouse in North Carolina.

Through the years, Zolla said, he has called on Root to help resolve a range of problems. One memorable situation involved a longtime employee who made a serious mistake and probably should have been fired. But, because the employee had a solid history with the company, Root advised Zolla to demote him instead of terminating him.

Root has also helped Zolla set up a profit-sharing plan and counseled him on whether to fight questionable unemployment insurance claims filed by former employees. Zolla said he depends on Root to give him the correct legal advice on employee matters because “we don’t want to be a test case.”

Root, whose usual fee is $185 an hour, said his approach to counseling small businesses differs from most attorneys’ because he becomes deeply involved in a client’s day-to-day operations, including financial matters.

For example, he keeps track of the financial status of some clients by storing their financial data in his laptop computer. He also sits down with business owners to map a strategy and set annual goals. And, he advises them about personnel matters, including the need to hire multilingual employees to better reflect Southern California’s changing ethnic balance.

“In future years, 80% of the new workers hired will be minority or female,” said Root, adding that companies must be prepared to provide more training and education for these workers.

Root also encourages business owners to allow their supervisors to solve as many problems as they can. Scheduling, meeting new production quotas and solving quality-control problems are usually better left to the workers.

“There are usually a lot more resources at the supervisor’s level than the management realizes,” said Root, who got into hands-on business counseling because he didn’t like researching cases in the law library.

“I try to keep the employer out of an argument and let them run their business,” Root said.

Leaders in Growth

California, Oregon, Washington, Alaska and Hawaii led the nation in small-business growth in the last half of 1988, according to the American Express small-business index.

In fact, the Pacific region experienced more than twice the growth of any other region, according to the index.

The American Express index is a composite measurement based on incorporations, employment and sales collected from 7 million U.S. businesses with fewer than 100 employees.

Nationwide, small businesses experienced a 2.7% increase in employment, compared to a 1.3% increase for larger companies, according to David Birch, a professor of urban studies at the Massachusetts Institute of Technology and supervisor of the American Express survey.

Across the country, there was a sharp drop in small-business incorporations and a marginal increase in sales during the second half of 1988, Birch said.

Venture Capital Forum

The Los Angeles Venture Assn. is hosting its annual venture capital forum on Aug. 8. Six panelists are scheduled to participate in the program, which includes a review of new business plans.

Program chairman Franz von Bradsky, president of Green Tree Capital, said panelists include representatives from First Interstate Venture Capital Corp., Security Pacific Capital, Southern California Ventures, Xerox Venture Capital, Peregrine Ventures, El Dorado Ventures and 3i Capital Inc.

The session will be held at the Bel-Air Summit Hotel at 7:30 a.m. The cost is $35. For information and reservations, contact the Venture Assn. office, 1341 Ocean Ave., Suite 129, Santa Monica, Calif. 90401, or call: (213) 450-9544.

LEGAL HELP

Here are some tips for hiring and using a lawyer to give your business a legal checkup:

Try to find an attorney with experience in your industry or who advises similar companies. This may take interviews with four or five different firms to find the one with which you feel most comfortable.

Ask for estimates of what the legal services cost to avoid surprises. Although every legal problem is different, lawyers know the range of costs based on experience.

Request itemized monthly bills so you can keep on top of the expenses.

Ask your lawyer to help you explore the risks of certain business decisions before you take action. Focus on the legal ramifications of actions such as mergers, acquisitions, sales agreements, etc.