Iowa Corporate Lawyer & Attorney : Rush Nigut of Brick Gentry Law Firm : Serving Des Moines, Cedar Rapids, Davenport, & Sioux City

I read a Des Moines Register article this past week on a young man who is starting a business while employed by another company.  According to the SBA deputy director in Iowa this happens frequently.  I must say that I greatly admire anyone who has the courage and desire to start their own business. But my question is whether this is good for employers?

This is not an easy question.  On the one hand it is important for an employee to grow and allowing an employee to create a business on his or her own time may in fact create a more productive and happy employee.  Particularly if the employee is starting a business that is different than the employer and they do it on their own time there may be no harm.

On the other hand, an employer pays an employee to do their job.  The employee's allegiance should be to the employer as long as that employee is receiving wages and other job benefits, right?

I must confess that I am not sure whether there is a right answer and it probably depends on the circumstances.  I am aware of many successful companies that draft policies that prohibit outside business activities while many other successful companies provide an environment that encourages employees to start their own companies.

One important risk in allowing employees to start businesses while on the employer's dime is the potential for the employer to start a similar business and steal clients.  This should be prevented.  One way to do this is with a non-compete agreement.  Other ways employers can protect themselves is through the use of confidentiality and non-solicitation agreements. 

But employers may want to read this article on what to do when an employee betrays you.  Unfortunately, many employees are not as upfront and honest as the young man in the Register article.  Employees have a legal obligation to act in the employer's best interests.  If an employee breaches this duty an employer may have an enforceable right.

Photo on flickr by Burpee Gardens.

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Employee lawsuits are continually on the rise.  So how do you keep your employees happy and stay out of court?

While it is technically not a "legal requirement" I have long suggested that treating employees with respect is the best way to avoid employee lawsuits.  Building on this thought I recently saw a couple of excellent posts from employment lawyers John Phillips and Jon Hyman concerning fairness as the Golden Rule of Employee Relations.

Treating others as you want to be treated is a concept that even young children understand.  But while the concept is easily understandable employers still have a difficult time being fair.  To this end, Phillips offers five areas of fairness where employers should concentrate their efforts:

1. Appearance: does an employment action appear fair to an outside observer?
2. Counseling: except in the most egregious of cases, was the employee told of a deficiency and given a chance to correct it?
3. Consistency: are similar disciplinary problems handled similarly and to the same degree?
4. Documentation: can you point to a performance review, written warning, a note in a personnel file, or some other contemporaneous piece of paper that supports the personnel decision?
5. Rationale: was the employee given a reason for the decision, and was it the real reason?

As Hyman points out, juries are big on fairness.  It is critical to remember that in a jury trial your jurors are likely to be employees rather than employers.  Being fair will not only reduce the employment claims against you but increase your chances of success if you are sued.

So next time you deal with an employee disciplinary situation be sure to remember the Golden Rule of Employee Relations.  It will make a difference.

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