ABusiness for salemong the growing number of business owners looking to sell their business, JR and Sue Ellen Pawlenty are in the market to sell their darling Pawlenty Energy. This month, Tilting the Scales highlights a variety of issues is its first installment of a series discussing the potential pitfalls that closely-held business owners should be wary of when selling their business.

Top 6 Potential Pitfalls

  1. Personal Issues & Exit Plan – Exit plan, succession and transition, will you get enough? What is your answer to the question, “Why are you selling your business?”
  2. Business Plan – Do you have one? What makes your business special and worth the premium? Why would someone buy your business?
  3. Accurate Financials and Legal/Regulatory Affairs Current – What do your financials disclose about the quality and sustainability of your earnings?
  4. Value & Timing – What’s your business really worth? When is the right time to sell? What can you realistically expect to be offered?
  5. Deal Points – What are your options? What terms are realistic? What terms are critical? Why should you care about reps and warranties? Should you draft your own documents?
  6. Business Brokers & Other Critical Advisers – What should you be looking for? Can the broker help you avoid selling to the wrong buyer? Your accountant? Your attorney?

Be on the lookout for us to cover these issues in depth with the Pawlenty family over the next several months.

TV interviewJohnny Hotshot, the 11 year-old shortstop on the Dallas Rangers Little League team, suffered a horrific brain injury after a pitching machine at the Hitz-R-Us batting cage malfunctioned. Melanie Scoop, a reporter from one of the local news stations, showed up a couple of days later to cover Johnny’s injury. Melanie spoke to Scotty Van Winkle, the Hitz employee on duty when the accident happened. To Melanie’s surprise, Scotty told her that the pitching machines at Hitz have had similar malfunctions in the past. Should Hitz be concerned about its liability?

Employee’s Statements Can be Used Against You

An employee’s statements about events that occurred in the scope of the employee’s duties are admissible against the employer. That’s not a good thing for employers because employees tend to divulge too much information. For example, a father recently had to hold onto his son after the seatbelt on the roller coaster malfunctioned. After the father reported the issue to the ride operator, the ride operator allegedly told the father he knew the seat belt malfunctioned.

Have a Crisis Plan

Given the risk that an employee could make a “foot in mouth” statement after an accident, companies should develop a crisis communications plan and regularly train their employees on that plan. A crisis communications plan requires more than just “no comment” because, as we discussed in a post several years ago, that response fails to give your customers and employees confidence in your operations. Good crisis communications plans have designated spokespersons, prepared “holding statements” for when a crisis erupts, and notification and monitoring systems for internal and external communications.

Tilting the Scales in Your Favor

Reputation is everything. When a crisis happens it’s imperative that companies do all they can to maintain control over their reputation. Companies that plan ahead place themselves in the best position to do so when accidents happen.

Related Articles

The Benefit of Crisis Communication Plans

Crisis Response and Communications to the Press

The Top 3 Things Tom Brady Can Learn From Blue Bell Creameries: “Nothing is More Important To Us Than Maintaining Your Trust”

busStephen F. Austin is the CEO of Alamo Lines, a bus line servicing Central Texas. One night, a young, promising driver, David Boone, confessed to Stephen that he was suffering from severe depression and suicidal thoughts. Boone did not mention that his depression was due to the breakup of his romantic relationship with co-worker, Samantha Houston. Austin, concerned only that he might have to cancel that night’s San Antonio-to-Schlitterbahn Run, asked Boone if he was “ok” to drive, but took no other action. Boone said he was fine.

Just before leaving on his route, Boone got into an argument with and assaulted Samantha in the Alamo offices. In a desperate attempt to commit suicide, he later drove his bus off of the road and into a ditch, injuring 30 passengers. A subsequent government investigation revealed that Boone had a previous conviction for assault. Is Alamo Lines liable for Samantha’s injuries? For the injuries to the passengers on Boone’s bus?

No and Yes. Alamo Lines is not liable to Samantha because her injuries were unforeseeable. However, Alamo Lines is probably liable to its passengers because the harm caused to them was foreseeable.

What Risks Must Alamo Guard Against? Generally, employers have no duty to guard against unforeseeable risks. However, employers do generally have a duty to hire employees who are competent at their jobs. While a company that employs drivers has a duty to ensure that its drivers are safe and competent drivers – which may include running a background check on their driving record – employers in Texas generally have no duty to conduct criminal background checks on their employees because those employee’s potential criminal acts are, as a matter of law, unforeseeable. Because Texas courts hold that an employee’s criminal acts are not foreseeable. Therefore, because Boone’s assault of Samantha was unforeseeable, Alamo Lines is not responsible.

On the other hand, Alamo Lines not only employed an unsafe, suicidal driver – it actually was aware of Boone’s mental problems and suicidal thoughts before allowing him to drive one of its buses. Even if Alamo Lines did not have a duty to give its drivers psychological tests, a court could conclude that, with actual knowledge of Boone’s severe mental problems, Alamo Lines was obligated to sideline Boone until a psychiatrist cleared him to drive.

Tilting the Scales in Your Favor. Employers are unquestionably required to hire and retain people who are competent at their jobs, and generally do not have a duty to prevent unforeseeable accidents. Employers who do get actual knowledge of an employee’s violence or severe mental illness are put on notice to proactively take steps to ensure the safety of fellow employees, your company and your customers.

Returning from a trip to West Africa with some college buddies, Ben X. Posed, a waiter at Chotchkie’s, showed up for work with a fever, muscle aches, a strong headache, and stomach pains.  Begging his boss Dee Manding for the rest of the day off, Ben complained of his aches and pains and told of his overnight stay where one of the villagers recently died from Ebola.  Dee Manding refused any time off explaining he was short-staffed.  The next day Ben was hospitalized with a confirmed case of Ebola.  Are Dee Manding and Chotchkie’s liable if other employees, or patrons, contract Ebola?

Yes. If Dee and Chotchkie know or suspect that Ben has Ebola or another deadly, communicable disease, Dee owes a duty to protect his other employees and possibly his customers from exposure.

Employer’s Duty to Protect?  An employer must use ordinary care to provide a reasonably safe workplace.  For example, a hospital owes a duty to insure that its health care workers know they are treating a patient with HIV positive once the hospital learns that information. Even if the disease is rare and it is unlikely that someone would contract it, an employer still owes a duty to warn its employees.  Recently a railroad unsuccessfully argued it owed no duty to warn its employees that mosquitoes can carry West Nile virus, losing its argument that was common knowledge.  According to the Centers for Disease Control, Ebola is a “rare” disease and outbreaks have occurred “sporadically” since the disease was discovered in 1976.

Must the Employer Protect the Public? Because Chotchkie’s was aware of Ben’s recent travels and showed symptoms associated with Ebola, but then told Ben he had to work, it is likely that the restaurant owes a duty to protect its patrons from exposure to Ben. Chotchkie’s owes a duty to prevent foreseeable injury because it knew of Ben’s condition and exercised control over Ben – refused to allow him to go home.  Chotchkie’s also owes a duty to customers and visitors to keep its premises, safe from any unreasonable “condition” that it knows or should have known. That includes surfaces that Ben’s bodily fluids might have on them, such as if Ben wiped sweat from his brow and then touched a door handle. Chotchkie’s needs to disinfect the door handle or warn its guests not to touch it.

Tilting the Scales in Your Favor

Sick employees present a double danger: if highly contagious, perhaps liability for infecting other employees and guests; and, even if not highly contagious, presenting the risk of lost company productivity caused by other sick employees in the workplace. Certainly if an employee complains of Ebola-like symptoms or other similarly rare and deadly diseases, send them home to seek medical treatment.  Arguably, even employees who are coming to work to protect their PTO should be instructed to leave immediately and seek medical treatment.  In the worst of cases, an employer should consider closing the office, or the parts the employee(s) accessed that day, and have them cleaned.