The Fort Worth Business Press held a Business for Breakfast panel at the Fort Worth Club on Wednesday, July 18 with a focus on law.
The panelists were:
Philip Vickers of Cantey Hanger,
James T. McBride of Ogletree Deakins,
Andrew Rosell of Winstead and
Thomas R. Hegi of Kelly Hart & Hallman.
Robert Francis, editor of the Fort Worth Business Press, was the moderator.
Co-presenting sponsors were JTaylor and Pinnacle Bank. ImageTek was the gold sponsor.
Here are some lightly edited excerpts from the conversation:
Harassment in the workplace and the MeToo movement
Vickers: Our firm represents and has advised several types of private organizations, churches and/or youth organizations, that deal with children and they have been particularly hit by the “Me Too” movement because, as you know, it’s been very active in the media that folks who … when they were teenagers or children were the victims of some sort of abuse but they didn’t realize that it was abuse until years later when they realized that there was this inequality in position and in abuse of power. So those organizations are struggling to figure out what do we do now years later when maybe this happened when one of our employees was somewhere else or the people who are there now are different.
The critical first step often is figuring out what the facts are before you make any statements. Usually obtaining some independent advice, someone to help provide investigation services. … It also just helps you to realize that there’s an immediate … and this is true in business too … there’s an immediate desire whenever someone makes an accusation, especially if it’s a member of the executive team, to kind of turn inward and say, “How do we protect and deal with this person without paying attention to the victim?” And in this environment social media and hashtag, “Me Too” and all that … that’s deadly or it can be deadly because it all of a sudden appears to the outside world that you don’t care about the victim.
This is less a legal issue as it is almost a PR issue although there are lots of legal issues involved. It’s important to be calm and try and take an approach that says, “We’re not going to make a snap judgment, certainly not in favor of our employee.” You want to be fair, but in that fairness you also need to acknowledge victims and take an approach that says we’re going do this in a methodical way to the world and – to your employees and those inside – you appear to be doing the right thing and not doing something that in the end will be portrayed as a cover-up because that’s the other thing we’ve seen. This symptom of a cover-up that kind of destroys credibility for everyone on the executive team and really can just erode and lead to firings or resignations and really disrupt your business and what’s going on from there.
McBride: At Ogletree Deakins, we are a labor and employment law firm. We only represent companies. So we have a very unique perspective on this area of the law obviously and it’s one that takes up a lot of our time. … Employers are being more pro-active on training and that’s a big area for an employer, especially in light of Philip’s comments that the old reaction may have been to perhaps try to redirect the employee’s behavior in house, maybe not, you know, make sure it doesn’t go outside of that group and from a legal perspective, obviously, significant liability flows from decisions like that, right?
The best thing an employer can do, regardless of whether or not they retain outside counsel to assist, is investigate is conduct a thorough investigation, discover what has occurred, and then take action based on that. Whether it’s action against the accused or perhaps just redirecting that employee somewhere else. But the most important decision an employer can make is right now to train their managers on how to react to those conversations because they’re being had on a daily basis. Regardless of the industry, regardless of the size of the company.
In light of the “Me Too” movement, social media has really, as Philip alluded to, kind of changed that world, right? Twenty years ago it was not easy to broadcast out problems inside your house and it’s a lot easier now for an employee to take to social media and now the fallout is much bigger than perhaps legal liability for sexual harassment.
Rosell: When I get calls about these things it’s more about internal investigations and perhaps there’s been pervasive abuse or pervasive behavior in the workplace that’s been inappropriate. To the extent it gets out in the public, my message is if you’re not communicating and controlling the message, then somebody else will. So it’s very important, what was previously mentioned was get a message out there [that] we’re investigating, we’re gathering facts, and we are going to act on this. Then urge patience and also then finally communicate with stakeholders. That may be your equity owners, that may be your lenders, definitely your customers, and also vendors as well. Let them know we’re taking this seriously, we’re gathering facts, and we’re going to respond appropriately.
By doing so, you begin to control the process and, as a business, I think that’s very important. I think some of the things that we’ve seen with some of the bigger corporations and some of the bigger scandals is … like, Equifax for example. Talk about not controlling the message. It was just a mess. So all the mud gets thrown on them and it’s very, very difficult to clean that up. Don’t be afraid to communicate to the media and to the public and definitely communicate with your stakeholders.
Tax reform
Hegi: To lay the groundwork a little bit; the tax reform on a broad level, from a high level, it reduced the corporate tax rate from 35 percent to 21 percent flat rate and then it provided for a 20 percent deduction for pass through earnings.
A lot of people saw this and all of a sudden thought 21 percent at the corporate rate if I’m a partnership, should I convert? I got a bunch of calls, asking “What should we do? Let’s convert now, let’s get in a hurry, let’s take advantage of this now.” And I think what we heard, or the advice we told most people was just relax and go slow at this because we don’t know what’s going to happen.
They issued a 185 pages of law; very few, if any, [regulations] have been issued. We’re supposed to get regs on how that 20 percent pass through [is handled at the] end of the month, which is supposed to be the beginning of the month and they just came out and said, “No, not yet. Push it back.” So hopefully we’ll have it by the end of the year. So there’s a lot of unknowns out there.
We were at a tax continuing education event at the beginning of the summer and it was for corporate folks but a lot of tax folks were there too, CPAs and attorneys both. They started off the session with, “How many people here, raise your hand, if you’ve had a client ask you ‘Should I convert to a C-Corp?’ ” Pretty much everybody in the audience raised their hand. Follow up question was, “How many in this room have actually converted a partnership to a C-Corp?” and I think two people raised their hand because everyone had the same “We don’t know how this is going to affect you, but we’ll see when the regs come out and decide going forward, because once you convert from a partnership to a C-Corp, it’s very hard to go back without having adverse tax consequences.”
Watch for a more compete transcript on our website: fortworthbusiness.com