Pay Dispute Boils Down to Credibility

Q: We had an employee on commission who claimed that a miscalculation had been made on his pay for transactions from September 1995 through February 1996. He reported this in February, then in April took a two-month leave of absence, signing an agreement that said if he did not return it would be considered that he quit. He did not return. In July, we found that he was correct in some of his claims and sent him a check. In October, he filed a labor board and unemployment claim for the balance of his contentions, saying that he didn't return because we were not properly paying him. Does he have just grounds for the claim? Should we set new company policies?

--Joe Johnson, Calabasas


A: You believe the employee quit because he did not return from a leave of absence. The employee has decided he was forced out. He can make this labor board claim, but it will boil down to a question of credibility: the employee's word against yours as the employer.

You will have to explain the reason for the miscalculation and the delay in correcting it. You will have to explain your internal process to the board and give a satisfactory explanation as to how and why this occurred.

In terms of policy, I think that the agreement signed by your employees when they take a leave of absence should include a space where the employees are asked to state any unresolved issues.

Let them bring up salary disputes, vacation time, harassment or discrimination. That way you will be put on notice that there's a problem. Often, an employee has an exit interview with the president of the company or the personnel manager but the alleged problem has been with the employee's direct manager, so the president never hears about it.

This way, you'll know there's a dispute and you can address it. This policy is also good for building your files. You know the dispute exists and it won't be sitting in an obscure personnel file left in a drawer somewhere to be discovered years later by an attorney bringing a lawsuit.

--James G. Morris

Business and labor attorney,

Morris & Associates, Sherman Oaks


Q: I design women's clothes and hire seamstresses to make them. Can you tell me how to find a market for them? What kind of insurance should I have for this business?

--Estelita Laureano, Monterey Park


A: The best way to get some idea of what people think of your merchandise, and whether it will sell, is to do a boutique show. That is, pay a fee to enter a merchandise show specifically for small garment manufacturers. If you get a good response there, you might hire an independent sales representative who would take on your clothing line in exchange for a percentage of the sales. There's an independent sales representatives' association called Pacific Coast Travelers ([213] 622-0761) in the California Mart.

Or you could do what most people do when they start: throw some samples in a bag and call on stores. Concentrate on small stores that already carry clothing similar to what you're making. Some will be open to testing your items and others may be willing to place your garments on a consignment basis.

The insurance question is complicated when it comes to the garment industry. By law, if you hire seamstresses as your employees, you are required to get a state garment registration. You are also required to have workers compensation insurance and a health permit for the place where the work is being done. You'll probably also want to get liability insurance and property insurance to protect you in the event of an accident or theft. If you hire the seamstresses as subcontractors, the rules are different. Contact the California Department of Industrial Relations, Division of Labor Standards Enforcement, to determine which regulations apply to you. The state labor commissioner's public information line is (916) 323-4920.

--Bernard Lax

Apparel, textile industry consultant, Bernard Lax & Associates


Q: Please tell me about government loan programs for small businesses. How do I apply? What are the conditions?

--Moe Khaiv, Anaheim


A: The Small Business Administration guarantees loans for small businesses in a program offered in conjunction with traditional lending institutions. Loans of up to $750,000 are available for any legitimate business purpose.

Our low-documentation loan program is designed to minimize paperwork for loans of under $100,000. For a business to be eligible for a low-doc loan, it must be a for-profit entity, have $5 million or less in gross annual revenue and have 100 or fewer employees. The low-doc loan focuses on character and reliability of the applicant. We use four criteria in evaluating a loan: repayment ability (based on historical earnings or projections), collateral, management and personal or business credit record. A negative in any one of these could be made up in another area, except for repayment ability.

The length of time for repayment of the loan depends on the ability to repay and the use of the loan proceeds. The maximum term may not exceed 10 years, except for real property acquisition, which matures in no longer than 25 years.

The terms are negotiated with the lender. Interest rates are tied to the prime rate and cannot exceed 2 1/4% to 2 3/4% over prime.

If you want to apply for an SBA-guaranteed loan, you can request a loan starter kit from the Service Corps of Retired Executives, which acts as an outreach arm for the SBA. SCORE can also provide information about SBA programs and services and a list of Small Business Development Centers, where free or low-cost help is available for businesses that need to prepare a business plan or need financial counseling. SCORE offices can be reached at (818) 552-3206 in Glendale and (714) 550-7420 in Santa Ana. The loan starter kit will include a list of banks active in our loan program. Choose one, then go there and ask about an SBA loan. They will start the process, prepare your loan package and conditionally approve it after the SBA guarantee is received.

--Alberto G. Alvarado

District director, L.A. District

Office, Small Business Administration

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