June 2011 Archives

June 20, 2011

How to Fire an Employee

Firing an employee is never a pleasant task. Yet it is a normal part of any business' operations whether a national corporation or a small San Diego business. Learning the best way to fire an employee begins with an understanding of the employment relationship. Most San Diego business owners understand that employment in California is presumed to be "at-will" (employees may be terminated for any reason or for no reason at all, also termed "without cause"). If a business can fire any employee it wants any time for any reason, then why bother writing an article on how to fire employees? It sounds easy enough. Putting aside the moral hesitation associated with depriving someone of their livelihood, many business owners remain reluctant to fire an employee without first consulting with a business attorney for fear of being sued for wrongful termination. Although employers are permitted to fire at-will employees without any stated reason, there are legitimate concerns employers should consider before doing so.

949108_untitled.jpgFirst, laws against discrimination and retaliation subject employers to considerable risk. Even an at-will employee cannot be fired because if his age, gender, race, sexual orientation, physical limitations, marital status or religion. To do so is illegal. It is also illegal to fire an employee, at-will or otherwise, in retaliation for seeking redress. The risks of these types of claims are significant. Employers that follow consistent termination procedures and provide reasons for termination, whether for cause or for other business reasons, reduce their risk that discrimination claims will be successful.

Second, an employer may be wrong about the employee's at-will status. In some cases, the answer is obvious. The employee has a written contract. However, in cases where employee manuals and historical procedures are in place that evidence a good cause requirement for termination, courts may infer that an employee is not at-will (that an implied contract exists). In essence, the employee is permitted to rely on the employer's written policies and historical practices. Offer letters, employment applications and employee manuals that emphasize at-will status reduces uncertainty in this area. Nonetheless, a consistent termination policy is recommended. In addition to reducing the risk of successful wrongful termination claims, a consistent termination policy signifies to other employees that they can expect to be treated fairly.

A termination policy typically includes procedures for progressive discipline and documentation of employee actions. Consistent and progressive disciplinary procedures require open lines of communication and provide employees with an opportunity to correct their ways. The procedures themselves show fairness and document the employer's reasons for termination. With a consistent termination policy and a basic understanding of at-will employment, the employer is better equipped to handle the ultimate task of firing an employee.

So back to the original question: how do you fire an employee? The steps are relatively simple (assuming there have been no violations of labor laws).

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June 10, 2011

Landlord Management of Common Area Maintenance (CAM) Expenses

Triple net leases dominate today's San Diego commercial lease market and virtually every landlord is faced with the annual burden of reconciling common area maintenance expenses (CAM expenses). Challenges to CAM expenses often spiral out of control. Tenants, ever weary of the unseen profit center, want to ensure that they are being billed correctly and are willing to share their frustration with other tenants. The management of CAM expenses begins with the initial lease negotiation which in the ideal results in lease terms that clearly set forth each CAM expense and how each expense will be calculated and apportioned. Experienced commercial managers and lease lawyers understand the need for clarity and comprehensiveness and strive for consistency among tenants while simultaneously negotiating the best possible terms. Unfortunately, the result is most often imperfect. National chains and anchor tenants' demands are given greater weight in negotiation and smaller tenants are finding themselves with increased bargaining power due to the current downturn. Regardless of the economic climate, landlords can and should take care in managing and accounting for CAM expenses. The goal is to reduce tenant frustration and avoid future problems and associated costs.

833931_klcc_2.jpgThe best first step towards improved management of CAM expenses is for property managers to simply pay attention. Supervision of maintenance operations ensures that waste is kept to a minimum. If or when a tenant does question a specific expense, the landlord will be prepared to produce relevant invoices and explain why the expenses were necessary. This is especially important for anchor tenants who typically have the resources to challenge landlords' accountings. Too often property managers ignore potential problems hoping that the tenant will either forget about it or accept an evasive answer for fear of creating conflict. What property managers tend to overlook is that tenants have long memories. If later problems arise or if business starts to decline (for whatever reason), tenants inevitably latch onto the older seemingly innocuous issues and the landlord/tenant relationship can deteriorate rapidly. Regardless of the tenant's size, experienced property managers know the headaches this can create.

In addition to supervising maintenance operations, it's best to know what allowable CAM expenses are for each tenant. That is of course why consistency in tenant leases is so important. Knowing that all of the tenants are billed the same way for all expenses makes for simpler calculations. Because perfect consistency is virtually impossible, it is particularly important that property managers know where the differences lay. Misunderstandings can be costly. It may seem that a parking lot improvement is simple enough. Putting aside that the anchor tenant may not be required to share in the expense (reverting a large share of the cost back to the landlord), it may be that another tenant previously negotiated for the specific use of some of the parking spaces being torn out. 

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