Know Who Your Employer Is? – You May Be Wrong.

“During the day, I don’t believe in ghosts.
At night, I’m a little bit more open-minded.”

– Author Unknown

Case History #1: Newly Established Entity: George interviewed for a position with a well-known sales and marketing agency headquartered in Italy. After being told he was their first choice candidate, basic terms were successfully negotiated. George was then presented with an Offer Letter to sign, which he forwarded to us for review. His email said, “Looks fine to me. All terms are what was agreed to. I will be opening a U.S. office. Two year commitment. Please look for any legal issues. I resigned my present position yesterday.”

One “legal issue” really troubled us: the name of the “Employer” in the Offer Letter was very similar to the Italy-based company, but it was slightly different. Our internet research revealed that the “Employer” listed in the Offer Letter was not the same employer George thought he would be employed by. Instead, it was a new company, established in the U.S. just two weeks earlier by the Italian company, with no bank account, no assets and no credit. Sure enough, George’s Offer Letter represented far less of a “commitment,” than George had thought.

As we explained to George, at any time it wished, the Italian parent company could decide that the new U.S. company was not meeting expectations, simply close it down, and “walk away.” Should that happen, George would have nowhere to turn for anything he was owed, and his “two year commitment” was in reality no more secure than a mere handshake.

Case History #2 – “Affiliates” Included: After experiencing sexual harassment at her job in the hospitality industry, Danielle filed a complaint with HR, and when she decided to leave, she was offered a severance package. The severance agreement included a provision that Danielle would not disparage or criticize the “company” to others, and the “company” would not disparage or criticize her to “others.” (That last word was key.)

A careful reading of the first line in the severance agreement revealed that the “Employer” was defined as “Colossal Hotels, it parents and its affiliates.” After leaving, Danielle was shocked to find out that many hotel companies she considering working for had received a letter telling them that Danielle had been “requested to leave, immediately if not sooner.”

When we wrote to her former employer, threatening a lawsuit, they responded by sharing with us that the 12 hotel companies that received that letter were all “affiliates” and, thus were all part of the “Employer,” and that none were “others” to whom they were prohibited from disparaging Danielle. The definition of “Employer” permitted them to say anything they wanted, however disparaging, to those 12 companies.

Case History #3 – “Leased” Employee: Jim, an attorney who had been working for a large Philadelphia law firm for nine months, decided to purchase a home. He put down a significant down payment, and submitted a mortgage application. Just days before the closing was scheduled to take place, Jim quite surprised when he was notified that he was rejected for the mortgage loan because the bank was unable to verify his employment.

It turned out that Jim was recruited for his law firm position by a small recruiting agency headquartered in another state, and that “paperwork” he never saw provided that he was technically an employee of the recruiting agency, and not the law firm. He had been told something along these lines at the time, but he didn’t pay much attention to the “details.” Because the recruiting agency had, itself, several times defaulted on loans, and had once even declared bankruptcy, Jim’s mortgage lender viewed his employment as insecure, and chose not to make the mortgage loan to him. Unable to secure the mortgage loan in time to close the house purchase, Jim lost his entire down payment.

LESSON TO LEARN: Far more employees than you might imagine are not aware of exactly who their true employer is, even when the name of that employer is prominently displayed on the front door to the office. For those who are given an Offer Letter or an Employment Agreement, almost always their eyes look at only one thing: how much they are being paid. They don’t look nearly as carefully at who is their “employer.” For those who are not given Offer Letters or Employment Agreements, they are often satisfied by “the name on the door,” or “the name on the stationery.”

Does it really matter? Well, for most people, and in most circumstances, it probably doesn’t. But, it sure did to George, Danielle and Jim. Depending on your circumstances, it may well matter to you, too. It can’t hurt to keep a sharp eye out for who, exactly, it is you work for, and how “Employer” is defined in any document given to you just in case.”

The implications could be huge, including your job security and rights to benefits, compensation, and stock or stock options. It would be a shame if you worked hard for 10 years under the mistaken belief that doing so made you eligible for a pension, only later to find out that you were not truly employed by the company that offers it, and thus you are truly “pension-less.”

WHAT YOU CAN DO: Take the time to consider who it is – or who it may not be – that is your true employer. For example:

1. Ask yourself: Is the name of your employer “exactly, precisely, letter-for-letter” the same as who you think it is? “IBM Enterprises” may not be the “IBM Corporation” you thought it was. Don’t presume that “Hard Rock Investments” is the same company as “Hard Rock Capital” or Hard Rock Venues. Believe it or not, one additional word, or one missing word, can make all the difference in your and your family’s long term security and happiness.

2. Look particularly for inconsistencies in the commonly used abbreviations “Corp.”, “Inc.” and “LLC” at the end of the company’s name. This is the “clue” I always look for. “Skibiski Lumber, Inc.”, “Skibiski Lumber Corp” and “Skibiski Lumber, LLC” may all (a) be in the same business, (b) use the same lumber trucks, and (b) even occupy the same offices in the same building. But they are definitely NOT the same company.

For any number of reasons – including tax, legal, regulatory and estate-planning – among others – the owners of the original “Skibiski” might have decided to form other companies with similar sounding names, and you can be sure it was not to protect your interests, but instead, their own.

3. The best time to ask yourself this question, and focus on who is your “Employer,” is when you are first presented with a document to sign, of any kind. The most common documents employees are asked to sign are (a) offer letters, (b) acknowledgements of receipt of an employee handbook, (c) confidentiality and non-competition agreements, and (d) severance agreements if and when laid off. In each instance, read carefully, and then read carefully again. Pay particular attention to who, exactly, is your “employer.” You may be very disappointed if you don’t.

Prevent problems early; and preferably before they happen. Consider our Model Letter Confirming Basic Terms of Job Offer. It shows you “What to Say, and How to Say It.™” To obtain a copy, just [click here.] Delivered by Email – Instantly!

4. If you have noticed these or other signs of “employer identity issues,” you might ask Human Resources for an explanation, and what the implications may be for you. An employer may provide generous benefits, pensions and even stock options TO ALL of their employees – but NOT TO SOME of their employees – at the same time. How could that be?

Let’s say Skibiski Lumber CORP. has six employees, all members of the Skibiski family. of whose last names are Skibiski. All of Skibiski Lumber, Corp’s employees – all six of them – are enrolled in the benefit, pension and stock option programs. However, Skibiski Lumber INC’s employees – all 900 of them – may not be enrolled in any of those programs. And, then again, Skibiski Lumber, LLC might own all equipment and have been set up for tax purposes.

Preferably before you take a job, or at other times, you may want to ask your employer’s Human Resources staff to confirm for you that you are entitled to the same benefits, of all kinds, that are all other “company” employees. That information is, in itself, valuable, and may be a key to understanding the identity of your employer, and the implications of that fact.

5. Without your knowledge, your “true employer” might change if your company goes through a merger, restructuring, spin-off, recapitalization, bankruptcy or other “corporate event.” In these events, we often see separate legal entities established for a number of different reasons. There used to be one “Hewlett Packard.” Then the company was split, and there came to be one “Hewlett Packard” and one “Hewlett Packard Enterprises.”

6. If you hear the term “re-badging” or if you are asked to “re-apply for your job,” chances are your true employer is being changed. When, for example, a Private Equity firm makes an investment in an employer, they often “re-engineer” who owns the company, and how it is structured, often to diminish costs and liabilities, without being open, honest or up-front about it. If you hear the term “re-badging,” or are asked to “re-apply for your job,” expect that the employer you think you are working for may very well not be the same employer next week, month or year. Read any agreements closely for this issue.

7. If it turns out your “employer” is a start-up venture of a larger “parent,” you might ask the “parent” to guarantee the obligations of the employer to you. As it was in George’s case history, above, in this situation the most common “remedy” to the situation is to request that the larger, and more secure, “parent” company guarantee to you the obligations of the start-up, just in case the start up cannot fulfill them, if the start-up runs out of money to do so, or if the start-up no longer exists.

Employer a start-up, or on particularly “shaky” ground? Use our “Model Memo Requesting a Guaranty of Your Employer’s Obligations” by a Parent Company or Large Investor. Shows you “What to Say and How to Say It”™ Just [click here.] Delivered Instantly By Email to Your Printer.


In Summary . . .

One important aspect of employment is so simple that it hardly ever attracts any attention: who your employer is. Yet, with increasing frequency we are seeing employers and their lawyers manage to avoid both commitment and compensation by making employees have difficulty determining who, exactly, is their employer. While the issue does not arise too often, when it does arise it pays – and pays big – to pay attention to this seemingly innocuous “detail.” Don’t be fooled; instead, be diligent.

P.S.: For those seeking personal attention, I offer 30-minute, 60-minute, or 120-minute telephone consultations, just [click here.] If needed, evenings and weekends can usually be accommodated.

SkloverWorkingWisdom™ emphasizes smart negotiating – and navigating – for yourself at work. Negotiation and navigation of work and career issues requires that you think “out of the box,” and build value and avoid risks at every point in your career. We strive to help you understand what is commonly before you – traps and pitfalls, included – and to avoid the likely bumps in the road. One of those “bumps” we are seeing more frequently of late, is the substitution of one “employer” for another “employer” without the knowledge, notice to, or understanding of, the employee. This is one precaution wise employees should take, to engage in the wisest job and career “navigation and negotiation.”

Always be proactive. Always be creative. Always be persistent. Always be vigilant. And always do what you can to achieve for yourself, your family, and your career. Take all available steps to increase and secure employment “rewards” and eliminate or reduce employment “risks.” That’s what SkloverWorkingWisdom™ is all about.

*A note about our Actual Case Histories: In order to preserve client confidences, and protect client identities, we alter certain facts, including the name, age, gender, position, date, geographical location, and industry of our clients. The essential facts, the point illustrated and the lesson to be learned, remain actual.

Please Note: This Email Newsletter is not legal advice, but only an effort to provide generalized information about important topics related to employment and the law. Legal advice can only be rendered after formal retention of counsel, and must take into account the facts and circumstances of a particular case. Those in need of legal advice, counsel or representation should retain competent legal counsel licensed to practice law in their locale.

Sklover Working Wisdom™ is a trademarked newsletter publication of Alan L. Sklover, of Sklover & Company, LLC, a law firm dedicated to the counsel and representation of employees in matters of their employment, compensation and severance. Nothing expressed in this material constitutes legal advice. Please note that Mr. Sklover is admitted to practice in the state of New York, only. When assisting clients in other jurisdictions, he retains the assistance of local counsel and/or obtains permission of local Courts to appear. Copying, use and/or reproduction of this material in any form or media without prior written permission is strictly prohibited. All rights reserved. For further information, contact Sklover & Company, LLC, 45 Rockefeller Plaza, Suite 2000, New York, New York 10111 (212) 757-5000.

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