‘Ethics’ can have a variety of meaning in working with small business clients
By Sandy Swartzberg, for SBT
When we hear the term "ethics" today, it typically conjures up images of situations where there’s been a lack of ethics, for example, the fraud that’s brought down a number of large corporations in the past year.
But in working with today’s small business client, "ethics" can have a variety of meanings. And for those professionals who work with small businesses on a regular basis, it’s important to identify just what ethics can mean for small business owners.
There are five main areas to review and consider when working with small businesses: scope of representation, diligence, communication, conflict of interest and expertise.
When working with small businesses, a number of issues need to be addressed, such as: Who really is the client? What is the scope of representation and work? Do the client’s problems and demands exceed the ability to pay for services? Can these "problems and demands" be responded to in a prompt and diligent manner? What’s the most effective way to communicate with this client? Is there any potential for a conflict of interest that precludes working with this client? Do you have the expertise to handle the client’s problem?
Examine each of the following areas when considering working with small businesses:
When working with small businesses and their various service providers, it’s important to keep in mind that owners need to be regularly informed of all methods being used on their behalf as well as to abide by their decisions. It is after all, their business – literally.
The course and scope of the work can change during the working relationship based on the direction a small business takes, so services can change as well during the course of business. And as a result, service providers may wish to limit the scope of representation based on those changes. For example, while you have been retained to counsel a client regarding an employment issue, the client may be sued by another company on an unrelated matter, such as that your client’s name infringes on that company’s trademark. The client delivers the summons and complaint to your office. It is imperative that you define, or redefine, the scope of your representation, so both you and your client know whose responsibility it is to answer the complaint.
While service providers, including attorneys, should not engage in any activity in working with small businesses that is known to be criminal or fraudulent, attorneys can discuss legal consequence of a proposed course of conduct with a client and can counsel to make a good faith effort to determine the validity, scope, meaning or application of the law. Although a client’s communications with an attorney are generally considered confidential, there are exceptions. Additionally, an attorney cannot knowingly allow a client to commit perjury or any other unlawful act.
Diligence can have multiple meanings, such as "careful, thorough, conscientious, attentive." And when working with small businesses, being diligent in all aspects of the working relationship creates a win-win situation for both the small business and the service provider.
Keeping diligence in mind, communication is the foundation to creating and sustaining healthy working relationships. What’s key to communication is acting in a timely manner and that ensures helping the small business owner make informed decisions regarding the direction of their business. Both the client’s expectations of the manner and frequency of communication and the attorney’s expectations must be congruent.
Conflict of interest is one of the greatest challenges facing attorneys, and other service providers in working with small business clients. There are times when conflict of interest is apparent, such as the opportunity to represent an existing client’s competitor.
Conflicts of interest are likely to arise when representing small businesses, especially when there are multiple owners, or when the attorney is also engaged to represent employees in personal matters (such as a divorce).
Some of the issues that do arise with conflicts of interest can involve determining who exactly is the client at hand when there are organizational agreements, operating agreements, shareholder or buy-sell agreements. All parties involved are being represented collectively in the business arrangement, not individually. In addition, if the attorney, or service provider, has previously worked with one of the parties involved, it’s a good idea to get a waiver of the potential conflict in writing.
Typically with small businesses, all the parties involved can’t afford multiple representation and also fail to anticipate any problems that could lie ahead given the new opportunities for a fresh start with a new business arrangement. It’s up to the attorneys and other service providers to anticipate such problems and if nothing else, protect all parties involved.
Sandy Swartzberg is managing partner of the Swartzberg & Duggan law firm in Greenfield.
Jan. 24, 2003 Small Business Times, Milwaukee