FOUNDERS & FRIENDS PODCAST

With Scott Orn

A Startup Podcast by Kruze Consulting

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Scott Orn

Scott Orn, CFA

Krista Mitzel, of the Mitzel Group, an integrative law firm that connects businesses all over the world with their strategic legal vision

Posted on: 03/15/2021

Kruze Consulting's Founders and Friends Podcast · Krista Mitzel, of the Mitzel Group, an integrative law firm

Krista Mitzel

Krista Mitzel

Founder and Managing Partner - Mitzel Group


Krista Mitzel of Mitzel Group - Podcast Summary

On this podcast, we welcome Krista Mitzel of the Mitzel Group. The Mitzel Group is an integrative law firm that connects businesses all over the world with their strategic legal vision, ultimately guiding their clients to achieve their goals. They navigate them through the tricky waters of employee immigration, the always evolving human resources regulations, and the tumultuous requirements of not just running a business, but growing a thriving company.

Krista Mitzel of Mitzel Group - Podcast Transcript

Scott: Hey, it’s Scott Orn at Kruze Consulting, and welcome to another episode of Founders and Friends. And before we start the podcast, let’s give a quick shout out to Rippling. Rippling is the new cool payroll tool that we see a lot of startups using. Rippling is great for your traditional HR and payroll. They integrate very nicely, but guess what? They did another thing, they integrate into your IT infrastructure. They make it really easy for when you hire someone to spin up all the web services in their computer. Which sounds kind of like not a huge deal, but actually, we did this study at Kruze, we spend $420 on average just getting a new employee’s computer up and running and their web service up and running. It’s actually a really big deal, it saves a lot of money. And the dogs are eating the dog food. We see a lot of startups coming in to Kruze now using Rippling. So please check out Rippling. Great service. We love it. I think we have a podcast with Parker Conrad, you can hear it from his own words, but we’re seeing them take market share, so shout out to Rippling. And now to another awesome podcast at Kruze Consulting’s Founders and Friends. Thanks.
**Singer: (singing) It’s Kruze Consulting Founders and Friends with your host, Scotty Orn.
Scott: Welcome to Founders and Friends Podcast with Scott Orn at Kruze Consulting. And today, my very special guest is Krista Mitzel of The Mitzel Group. Welcome Krista.
Krista: Hi, thanks so much for having me, Scott.
Scott: Thank you for being here. So, we’ve worked together. You’ve actually advised Kruze a bunch of times and it’s been really helpful, and we really appreciated that-
Krista: Yes, you guys are great to work with.
Scott: … And I thought, “Hey, we should actually have you on the podcast and share the wealth a little bit with the audience.
Krista: Wonderful. Happy to be here.
Scott: First of all, today we’re talking about remote work and the legal implications. And really, the basic idea is, I think a lot of your clients, I know at Kruze, a lot of our clients, have had a lot of employees or contractor, everyone moving around the country or even the world as COVID hit. And so, there’s a lot of questions around like, “Hey, what is my finance policy, what is my task compliance policy, what’s my legal policy need to be for all these folks who are moving around?” And so, we’re going to be super laser focused on that. But I should point out to the audience that you do everything, you do fundraising, you do M&A, you do employment law, you’re a full-service legal firm, right?
Krista: Yes, we are. We’re a full-service law firm. We have 10 attorneys and two staff. So, we help companies on all phases of their growth.
Scott: Amazing. Well, maybe you can start off just by giving your quick background and who you are and how you had the idea to start Mitzel Group.
Krista: Wonderful. Well, I started out as a baby lawyer at the big law firms, and it was all fight all the time, and we were working with a lot of companies after they’d gotten suits. That was really the focus of my career, was, what happens after a company’s already had a problem? And I did that and I worked for wonderful firms where I was trained up with the best of the best, but philosophically for me personally, having grown up in an entrepreneurial family and liking the side of problem solving, hopefully beforehand, I just felt like, most of the time, if something had been handled differently at the beginning, they could have avoided this big old mess. And so, fall of 2009, I left, not really knowing what I wanted to do, but looking around, exploring, having a moment of self-reflection. And one of my clients called and said, “Hey, we have this issue. Can you help?” I remember having a conversation with my then husband, and he said, “What do you need to do to help them?” And I said, “I guess I need a malpractice insurance policy.” And so, I got one and a law firm was born. And it was me and one associate attorney on my kitchen table, helping clients and walking the dog at lunch. And then now, 11 years later, we have 10 attorneys and two staff, and we provide a full-service suite of legal services to our clients with a proactive, preventative, business savvy angle, because we really see ourselves more as entrepreneurs who just happen to be lawyers. So, we use those legal strategies to help our clients make the right decisions and grow their businesses.
Scott: Super smart. And I totally share your perspective on like, let’s keep it clean and in order instead of waiting until something gets messed up to take action. We talk about being due diligence ready day one, and always getting companies cleaned up before we hand them off to account managers, all that stuff. Life both for the clients and for us is so much less stressful when everything’s been done correctly. Vanessa and I say sometimes that we unfortunately, inherit this financial stress or legal, tax stress of our clients, we’re in it too with them. And so, we prefer our life to be smooth sailing and not have to deal with that stuff too. And so, an ounce of prevention really goes a long way.
Krista: It does. And I think sometimes clients worry that, “Oh, it’ll cost too much.” Or, “I don’t have time to focus on that right now. I’m too busy working in the business versus on the business.” But I think making those smart decisions up front can really save money in the long term, I’ve seen it time and time again.
Scott: Yeah. There’s a saying, I know you’ve heard and I say often to our clients, accountants want the clients to have a good lawyer and the lawyers want the clients have a good accountant because it makes everything so much easier for both of us. And the old saying is like, “The most expensive lawyer is a cheap lawyer,” meaning like if you go bare basement, you’re going have a ton of problems, it’s going to be super expensive later on, so do it the right way.
Krista: I don’t disagree. We get a lot of work from those online services and from consultants who gave the wrong advice and we get to clean it up and fix it. I will probably always have a job, as will you.
Scott: I love it. Okay. So, let’s transition to just all the legal implications for remote work. Krista and I, we actually did some homework ahead of time, it’s actually going to be highly structured audience, so hopefully you like this. The first question is, what are the top legal considerations when it comes to working remotely, both for employees, but also… We’re focusing on the employer angle here, but I think it’s nice to talk about some of the things that employees need to think about as well.
Krista: Sure, of course. Well, first and foremost, when you have employees working remotely, you still have to manage and comply with all of the wage an hour, the legal implications that come along with having workers. So just because they’re not in your physical office doesn’t mean you somehow get a free pass to avoid all of the labor laws. So, what we’re finding is as people have moved, and we’ve had clients with employees who have moved out of state from where their initial operations are, we’ve had clients who have moved out of counties, we’ve had clients who have moved internationally, and whether they tell their employer or not has been an issue because sometimes they don’t even know where these people are. Once an employee moves out, you do have to take into consideration, what are the local laws of that place where they have moved? Are you as an employer willing to handle those laws and take that on? Because you may now have gone from everyone working in California, for example, to now you have people in 15 different states, and what does that mean for payroll compliance? So, making sure that you’re compliant with payroll, all of the reimbursements and the different laws around employee expenses has changed because in California, for example, employers have to reimburse for a lot of different expenses, even if an employee’s working from home.
Scott: Oh, I didn’t know that.
Krista: Yeah. So, that’s an important one. And privacy and security. Now, you have people, perhaps did you give them a laptop or not? Because I know that when COVID hit, there were a lot of companies that employees just picked up their laptops and stuff from their desk and they were able to easily go work from home because everything was on the cloud. For a lot of old school businesses or companies that weren’t as technologically savvy, it took months and months and months for them to get the right technology. So, you have employees working from their home computers, they aren’t secure. There’s lots of privacy and security issues that go on there. So that’s another really important thing to think about with the equipment and making sure you’re up to date on technology. So, it’s been a good opportunity for a lot of clients to update their technology. And then also the big issue too with remote work is, how do you still create positive culture and remain connected with employees and manage employees and have that team feel? It really is actually harder to manage remotely because you have that mentality in old school days of like, “Oh, I see your butts in that seat, you’re being efficient.” Well, first of all, that didn’t work in the past anyway, but now, you have to make an effort to connect with people. So, if you had managers that weren’t as strong or more introverted, now they have to make an effort to get on Zooms, to set up meetings, to have connection, to text, to really utilize different forms of technology to stay connected with people. And communication has been more and more important as we’ve gone to remote working.
Scott: All the things you said there, we can actually drill in and probably talk about the whole podcast.
Krista: I know, we probably could. So, I’m happy to.
Scott: Let’s go through them a little bit. So, the use case I’m really thinking of is people who leave the state, because so much labor law and legal stuff is around like a state-based thing. One of the things we’ve been telling people is, “Okay, if people leave the state… “ And it’s going to be a longer term, not just like for a month or something like that, and those employees want to pay lower payroll taxes because they’re working in like Wyoming or Texas or Indiana or Arizona, wherever, then you actually need to register in that state to do business and you need to register in that state to do payroll taxes. And then you have to pop those numbers into your payroll system and make sure the payroll taxes are run correctly. In my world, that’s the big one. Are there other specific things that you see on the legal side when employees move from one state to another?
Krista: So, number one, you’re right, they have to decide how they’re going to handle the payroll, and do they want to maintain that responsibility? Oftentimes, our clients have been using a professional employer organization or they’ve been using services like yours so they don’t have to deal with those differences, because you have to go now file 10 different tax returns and have all of these different applications for different states. But the biggest issue is the labor laws. States are very different when it comes to how they treat workers, not only as employees, but also independent contractor relationships, depending on how you’re engaged with your worker. And so, a lot of our companies who have expanded, whether it’s via this remote COVID situation or in general have had to decide, “Are we going to comply with the local rules and treat everyone differently? Or are we going to take a more universal approach and say, comply to the most employee-friendly states such as California or New York?” And so, I have plans to do both.
Scott: I actually had this conversation with you or one of your team members, Sarah, on this exact same thing. Because we had been predominantly in California, but hiring remotely. California is the most employee friendly state, pretty much, maybe New York, and so we set the high bar, we decided a Kruze internally was just, we’ll treat the California high bar as a standard across all of our employee base because that way we don’t get in trouble and we know that we’re complying everywhere, versus… We probably could save a lot of money and things like PTO time or insurance stuff if we did it on a state by state basis, but for us, the simplicity of doing it just with the California high bar was a little bit easier.
Krista: I think that part of our advice is there’s always multiple angles to an issue. So, there’s the legal angle that states, that you as an employer can follow whatever state, local, federal laws are required for that jurisdiction, and that’s your first layer. However, if you as a company have a lot of employees and it’s going to be an administrative nightmare to go through and have to comply with 15 different state’s laws and have 15 different employee handbooks and 15 different policies and 15 different PTO or vacation accrual policies and sick leave accrual policies, administratively, that might be a nightmare for people. So, the amount you’d pay and having a staff or a differentiated process, it might be cheaper actually to just comply with the more generous state that is offered there. But other companies don’t philosophically believe that. So, some of it’s about, what’s the legal requirement? What’s your business decision around that? And then some of it’s culturally, what kind of company do you want to be? If your employees are constantly interacting and talking about all of their benefits and their pay, and the California people are saying, Oh, we have this day off because of this, and we have this day off. And the people in Kentucky are saying, “We don’t get those days off. I don’t get sick pay. I didn’t get that for maternity or paternity leave or parental leave.” Then it also creates an internal culture shift that some people don’t want to deal with. And so oftentimes, companies will take a more universal approach because culturally, they want to present themselves in a certain light.
Scott: It’s such a great point. I was so focused on the legal and financial implications that you’re so right, that’s actually one of the big reasons we did it, was culturally, we want to be one team. We don’t want to have factions or things like that, or any resentment.
Krista: Yeah, treat people fairly. Treat all the children the same.
Scott: Exactly. Yeah. You’re so right though, because I have heard of some companies that have treated people differently and it gets out, it’s just not worth it, it’s not worth the headache, especially if you’re a startup and you’re trying to grow fast and you’re trying to change the world, it’s not consistent with probably your culture, your core values.
Krista: Well, it depends because if you’re trying to get to the why of why you’re doing the business and you’re trying to be a purpose-driven company and then all of your employees are treated very myopically, it isn’t consistent with having that broader vision of whatever you’re trying to do. So the purpose base of a lot of companies, and I think that what you’re seeing since COVID especially, is everyone’s had a lot of aha moments. And we have to align culturally with the work we want to be doing and how we’re treating clients and customers, what’s the experience with employees? And so all of it plays into that same category of who we are and who we want to be as a company and what impact do we want to have. And so I think that’s how we’re different as lawyers too, because most lawyers are just like, “Oh, you want a document? Here you go.” And we’re like, “No, we’re going to talk about all this stuff and figure it out.”
Scott: Yeah. I love it. So, it’s the state-by-state stuff, focus on your systems, for sure, like malware, VPNs. I would actually recommend, if you’re a startup listening to this, you’ve got us as an outsourced accounting and tax group. And by the way, PEOs have become a lot more popular, professional employee organizations, because they’ll handle a lot of the people crossing state by state with benefit plans and things like that and some of the local tax compliance. And then we will do, folks like us will do all the other registrations and all the other tax things that you need in those states. You’ve got a great lawyer law firm like yourself that a startup can work with. And then I’d recommend also they work with an IT services firm that’s kind of like our businesses, but who will handle a lot of technology infrastructure and those decisions, like, “Hey, what VPN should I use? What malware should I use? How do I have secure single sign-on for everyone? Do I need a remote desktop instead of letting people use a computer that could be their home computer,” or things like that? You surfaced a lot of good ideas there. Are there any other, because you probably help write some of the InfoSec policies and things like that, other things that you see that companies need to be aware of on their info security stuff?
Krista: Well, I think on security, I’m not an IT expert, but what I have found is that part of it also with remote work is making it easier and easy for your employees to work. And a lot of the old school mentality was that, “Oh, we need to go through these different servers to get on to here and do this and do that.” That’s such old school thinking, and especially for service firms like law firms and CPA firms can really be behind the times, tech firms are more modern, but you want to make it as easy as possible for your people to do their work. And so, having everything in the cloud, having easy sign-ons, having the ability to really get your work done without a lot of hoop jumping is really important. It also makes for employees to be happier. The less tech issues employees have, the better work product you’re going to get from them.
Scott: I totally agree. So, you said that very well. And if you make it easier to do it the compliant way versus if an employee feels like they’re fighting the system because they’re fighting their VPN or fighting whatever, they’re going to turn it off or they’re going to find a way around it.
Krista: Or what they’re going to do is download documents to their hard drive, and then they’re sick and suddenly you can’t get anything, then you’re mad at them because that document that you really need is not accessible, yet you had a system that was so onerous and burdensome that they couldn’t do it. So, some of it’s a little bit of shooting yourself in the foot, and you need to modernize. But the other thing about equipment is, when you have someone who’s working on their home computer or their phone and you haven’t created the proper safety, when they leave you, are you getting back all of your proprietary, confidential information? Are you getting back all your client lists? Or are you opening yourself up to some trade secret issues and to some breaches of those agreements. Because even though you might have clients sign non-disclosure agreements. Non-competes are very state specific, so I know one of the questions Scott you had brought up was, how are non-competes working? How are non-solicitation agreements working? It is very jurisdiction specific, and California example has pretty much made non-solicitations and non-competes null and void based on public policy as have many other states. So, you have to be very up on what is the local jurisdiction for those issues. But guess what? It’s much easier if everything’s on the cloud. And once that employee is terminated or quits, you cut off their access and they no longer can have it. And guess what, if they downloaded it, you’ll get an alert from that it system that will tell you that they downloaded 5,000 of your contacts and then I can help you sue them for breach of proprietary information.
Scott: I love it. I love it. You’re so right though, that’s so important. And there are things like remote wipes and limits on download activity. I just encourage people to work with a good IT services firm, even if you’re small, it’s pretty affordable and they’ll help you. You brought up non-competes, which is something I wanted to talk about. We’ve got a bunch of things to go through. This is awesome, by the way, you’re really good at this. In my previous company when I worked in venture capital, we had an office in Massachusetts and I believe non-competes were actually enforceable there, which is one of the things that led the Boston tech and venture capital environment to migrate to New York, because it was like an unfriendly place for startup entrepreneurs and it made leaving companies to start another company difficult. Whereas in like California or in New York, non-competes weren’t really enforceable. And so, people would make some money somewhere and then leave and go start a new business somewhere or a new startup. And so, I’ve been reading that like in Texas and Florida, two of the biggest destinations for employees and companies out of California and New York that we’ve seen, that non-competes are actually enforceable there, which is going to have like a pretty interesting or pretty detrimental long-term impact on new company formation. Because again, those star engineers or star salespeople who want to try something else, they may actually get sued and may actually not be able to start on their company in the category they want. Is that what your understanding of that is? How do you see this playing out?
Krista: It’s a really nuanced issue because, philosophically, the non-compete was meant to prohibit someone who was so integrated into the business from stealing all that information they learned at company A and going out and starting company B and its exact image. And so, there are laws in a lot of states around trade secret misappropriation, around breach of contract. There’re different ways that states have tried to protect this from happening, and one of them is contractual and the other is through case law and through statute. In California, for example, if you signed a non-compete back in the day when it was enforceable, let’s say, or a non-solicitation agreement, you could have a breach of contract claim if you left in addition to filing under the state laws that are common law and that are statutory. So, there’s lots layers that-
Scott: I didn’t realize that. I dint realize there was two layers.
Krista: Yeah, there’s lots of layers. But then what they were finding was that, first and foremost, a lot of the information… Well, it was stopping individuals from being able to have free trade and find another job. So, it was almost like an indentured servitude kind of argument, because if you weren’t letting someone go get another job, you were handcuffing-
Scott: In the field they’re good at, the field they know the most about…
Krista: Exactly. Now, the law still says that even though certain agreements aren’t enforceable in certain states, it doesn’t mean you can compete unfairly, it just means that you can’t use that proprietary information to go out and compete unfairly. So, you can’t steal everyone’s information. But I think the bigger issue here is that if you’re doing a great job at your company and you have a great product and you have a great system, you shouldn’t care what someone else is doing because if your product is so much better, then everyone’s going to stay with you. If you’re so worried about someone leaving and doing something different, you probably should think about your product or your service a little more. But yes, those lawsuits are still out there, they’re happening. Sometimes they do stifle growth, but also, it’s really the practical matter of how much business did that person take or not take when they left, and whether it’s worth suing, because suing someone on a trade secret type breach claim can be very expensive. It’s a lot of money upfront. And so, if it’s just that you thought they downloaded your list, but nothing’s really come of it, it’s an expensive case to bring just to piss someone off. But if they stole your biggest client for $2 million every quarter or something, well, you might want to sue them-
Scott: You’re going to do it. Yeah, yeah.
Krista: … Because you might not get the client back. Because at the end of the day, remember, clients can choose who they work with. So, if the client voluntarily moved their business to someone else, that’s not going to be an issue, but that doesn’t mean you can’t try to sue them for money, but that’s a whole separate podcast we could do.
Scott: That’s super helpful though, because that’s something that people talk about a lot.
Krista: But what I will say about your question about Texas, Massachusetts, all those states, the laws are changing rapidly and they are changing on non-competes, non-solicitation, the independent contractor, AB-5 stuff we heard about in California. All the states are really very robust in changing the employment laws and the laws that are out there affecting your business. So, you really want to not rely on what happened last year just because that’s what happened last year. Between last year and today, there could have been a change in the law, there could have been a case that came out that drastically changes how you should be paying workers or engaging with people or what agreements you can have people sign. So, it’s just really important to stay on top of it with your lawyers and make sure that they’re giving you the latest information about what is and is not enforceable.
Scott: I totally agree. Your firm actually does a great job of sending out an email every January of like all the changes.
Krista: Yeah, we do our yearly legal update and a seminar.
Scott: Yeah. I really liked that. So, I’d encourage people to get on your email list. Because I actually use it as like our little Bible of like, are we compliant? What do we need to do? That usually I’m sure triggers a lot of emails back to you of like, “Hey, oh my God. What do I do?”
Krista: Yeah, we do a lot of handbook updates after that email.
Scott: Okay. So, let’s talk about, speaking of handbook, does a startup need a remote work policy? And if so, what is that? And any special considerations for people doing personal activities during work hours, things like that?
Krista: Sure. So, having written policies is not necessarily a legal requirement, it’s more of a best practice. And it’s really an important tool to create a baseline understanding between the company and its workers. So, if you don’t have a policy, that’s clear that everyone has understood and subscribed to, it’s really then the Jane policy and the Steve policy and the John policy. And there’s no consistency in how you’re treating people. And that’s when you get sued. When employees aren’t treated fairly and consistently, that’s when you have legal issues. And so, we really like written policies because of that clarity. And it also takes the personal side out of managing employees. If you go have a policy that says X, and these are the parameters, it’s much easier to say, “Hey, John, working from home, I see that you didn’t do X. The policy is X, here’s the written policy. You have not done X.” As opposed to saying John, “You’re lazy because you didn’t do that, and you’re not a good worker.” It takes the personal out of managing, which makes it a lot easier for managers, especially ones who have a hard time with that confrontation. So, it’s not an or requirement, but it’s recommended, definitely.
Scott: Your point about making it not personal, I think is a really good one. Like, “Hey, this is just what the company’s decided is the policy, it’s nothing personal between me and you.” That kind of thing. Another point you’re making, which I really like is that it’s probably just easier because you not answering one-off questions constantly, you can just ask people to like refer the handbook or refer to their remote work policy. So, one thing you’ve told us to do is whenever we make changes in the handbook or something like remote work policy is to send it around and have everyone sign it and agree to it, right? That’s the best case.
Krista: Exactly. Because remember, your handbook, your policies, those don’t have to be static, they can be organic and they can be living and they can be updated as things change. And I think that’s the beauty of being a company, you can be nimble, you can change how you’re engaging. And if something isn’t working, try it for six months and then try something else. But you do want to make sure that you communicate change to your staff because the worst thing you could do is change a policy, and they’re like, “Well, I didn’t know about that.” And you’re like, “Well, yeah, you did.” “How did I know?” And you have nothing to say.
Scott: No like signature, no track record, nothing.
Krista: No signature, no email, no meeting. So I really tell clients err on the side of communicating. And it’s so funny, I used to do a seminar with a plaintiff’s lawyer, so I do the defense side and he did the plaintiff’s side. And one thing he said is, “The thing that me off most, Krista, about your clients is they communicate.” Even if it’s crappy communication, communication is better than no communication.
Scott: Meaning the communication protects the company from-
Krista: Exactly. Well, it’s the same way that when we have issues with employees, and I say, “Well, send me their personnel file. If they were such a terrible employee, I want to see all these write-ups.” And there’s no write-up, there’s no performance improvement plan, there’s nothing in there. And I’m like, “Well, according to this, you gave him a raise six months ago and a pretty decent review, so they can’t be that bad.” And so, having all of those, write-ups really also help, even if it’s not something the employee signs every time, but just a log of communication.
Scott: That’s such good advice, and it’s so important. And that’s something we had to learn in the early days of like, documentation is your friend. It also helps the employee know when something’s not going right. If you hire them, they’re probably a pretty good person and they want to do right, and so if you give them actual feedback, it lets them know that this is actually urgent, this is important. And they know exactly what to work on. And so, I think that’s really good advice just in general for employment law. Document it, get them to sign it.
Krista: Yeah, you never want anyone to walk into a termination meeting being surprised. Now, they might act surprise, but you don’t want them to be surprised because you want to be able to say, “Hey, back in June and November and January, I talked to you about this thing and it still isn’t working, so let’s talk about what we can do next or that you need to transition.”
Scott: I love it. I love it. Hey, it’s Scott Orn at Kruze Consulting. And before we get back to the podcast, a quick shout out to ChartHop. ChartHop is one of my favorite new SaaS tools on the market. And basically, what ChartHop does is it puts your org chart in the cloud. And I always like to say, it brings transparency to your organization, and so everyone in your organization can see who they report to, they can see the full org chart of the company and how their group relates to other groups. It also has a lot of information on the individuals in the company. And so, you can click on a ChartHop profile and just get like where people live, their experience, Slack handles, all this stuff. And it’s just a really great tool. The other thing is, ChartHop has started doing some cool stuff around compensation and budgeting planning. And so, you can actually start seeing like what the cost structure of the company will look like during a certain kind of scenarios. So, I’m loving ChartHop. Check it out at ChartHop.com. We use it at Kruze. I really like it, and I can’t recommend it enough. All right. Back to the podcast. Next question, which I think we may have covered, but, what happens legally when employee moves to another state when you hire your first employee in a new state? So, we talked about registering a new business, registering for payroll taxes, any other big things that you think of.
Krista: I would say that you need to audit that state’s practices from a labor and employment standpoint and determine whether you’re going to take the approach of complying in that state. At a minimum, you need to comply with that state or locality’s rules. So, if it’s something that’s very consistent with California and you’re a California based and you’re already doing it, then great, you continue on business as usual. But if it’s a different set of rules and requirements there, then you have to decide, “Am I going to have a state-specific subset of my handbook that deals with employees in that state or locality?” And I’m going to have to then update how I accrue sick leave or vacation, or whether you even offer that at all and all the other benefits that would be specific to that state.
Scott: That’s really smart.
Krista: And then you just have to make sure to be up-to-date on your payroll and how they’re accruing, and that you’re complying with all of the different requirements of what’s on the pay stub and what you’re telling the employees.
Scott: Beautiful. Also, we’ve been talking a lot about… In my head as we’re talking, thinking about salaried people, but there’s a lot of companies that have hourly employees and the rules are different across all the states for salary versus hourly. Do you want to tackle that? And are there any big changes or differences you see in different states?
Krista: Well, there have been changes with regard to certain issues in terms of contractors, etc, because as you know we’ve recently had an administration shift, and so there’s going to be some changes and things that were put forth in the Trump administration that may or may not be rescinded under Biden’s administration. So, keep an eye out over the next six months for changes in what’s coming down from the federal government. But for any company, when you’re looking to do business in another state, you first have to look at the federal guidelines because that’s where you start, and then you look at the state. And does the state have a different set of guidelines? And so, it’s like a layered approach. For instance, in California, we have very specific rules around who can be paid a salary and who is exempt from hourly rules, which is why it’s called exempt because you’re exempt from the overtime rules, you’re exempt from the meal and rest period rules, and who needs to be paid an hourly wage, whereas if you’re in a different state, it might just be the federal standard. So, we have a stricter standard here in California, and so you have to make sure you’ve done an analysis to see if someone fits into an exempt bucket because the default in California for example, is that you’re paid hourly unless you can fit into one of these exemptions.
Scott: I didn’t know that. That’s really interesting. Oh, go ahead.
Krista: No, it’s just it’s gotten slimmer and slimmer over time, because I remember when I was a baby lawyer, my secretary could be paid a salary, and then over time, nope, secretaries no longer fall under the administrative exemption and now they’re paid hourly. Again, it’s one of those places where you can’t make an assumption just because you paid someone a salary at your prior company or in another state or five years ago, doesn’t mean you can still pay them a salary now.
Scott: Interesting. And then we didn’t even cover the difference between employee and contractor, which is something that’s changed dramatically over the last couple of years because like all the Uber litigation and Uber laws, I get asked that question quite a bit because people, especially from companies that are starting in another state and then coming to California as their second or third state, they’re super nervous about the contractor rules here. Can you give the brief overview of that?
Krista: Yeah. Again, we’re back to the default of everyone should be an employee unless you fall into one of the contractor categories. And so, when it comes down to it, California does have some of the most onerous tests, but they’re all balancing tests. So, it’s almost as if every business owner has to assess their own risk tolerance and what are you willing tolerate or not, but it comes down to control, and is that person doing something that is your core business or that’s different? For instance, Kruze Consulting is an accounting firm, we are lawyers, so very easily you can have us be a contractor for you and help you with your legal needs. Vice versa, if you’re helping with us with our accounting needs, but one of the exceptions in like someone is doing your core business, and then someone else is a contractor doing the exact same function and you got audited, you’re likely going to have an issue there. And so, you have to really look, it’s very case and fact-specific to figure out who could be, but it’s about how much control the company has over what the person’s doing, it’s about the type of work they’re doing and whether they fall into an exception or not. And there’s various prongs that you have to look at. So, it’s a fun lawyer analysis you have to do, but again, California wants people to be employees. And so that’s what the whole Uber Prop 22 was about because Uber and Lyft said, “Well, no, we want them to be contractors.” So, they paid a lot of money to overturn the public policy system that was trying to say, “No, we want these people to be into the system and the social safety net.”
Scott: And that’s because the focus on employee is basically, is that because of just the payroll tax revenue that the states miss out on, or is it more workers’ rights thing or what’s driving that?
Krista: I think it’s really layered. I think that it’s probably a mix of a lot of things. I think they number one, want to make sure that workers have that social safety net, like during COVID. If all of those contractors had been employees, they would all be part of the unemployment system. They would all have that safety net of disability benefits if they got sick.
Scott: And the companies would have been paying into the unemployment system, so the money would have been already allocated.
Krista: Of course, would have been there. Exactly. And so both the employee and the company pay into the system. So, it’s not just the company or the employee. However, there’s the freedom that goes into wanting to be able to work where you want and do what want. And so I personally think there could have been a hybrid option where the companies provided some more benefits to the contractors, but still gave them the freedom to be able to work around without having to have all the things, but at the end of the day, I think there’s that altruism of wanting to make sure they aren’t taken advantage of and they’re being paid fairly, because with a contractor you don’t necessarily have to deal with overtime laws and meal and rest breaks, etc. So, a lot of the state, I think, and the lawmakers are looking at, we want to make sure people are treated fairly and not taken advantage of. That’s why the exemption is limited, because they don’t want people working 100-hour week and getting paid like 50 grand a year, and then they’re pretty much being paid nothing. So that’s what-
Scott: Oh, go ahead.
Krista: No, that’s just what they were finding. That’s why they’ve limited who can be paid a salary because they were finding that people were working way too many hours and that when you did the math, they weren’t even being paid minimum wage.
Scott: Oh my gosh, that’s so crazy. Also, on the flip side of that, you hear about contractors who want to be contractors because they want the lifestyle flexibility or want the career flexibility.
Krista: Of course, they want to be contractors until they don’t get paid properly and then they sue and say they should have been employee.
Scott: I love it. I love it. Really good. This is a really point question, but any implications to letting employees use their own devices if they work remotely? I have an opinion on this, but I want to hear your opinion.
Krista: Well, I think that, again, this is a risk tolerance on the half of the company, how much do you trust the person or not? That’s where all the safety breaches happen for clients’ information, for your own employees, for correspondences. If you don’t have your employees on a computer that’s properly protected by your IT company with the right coverages, and they have a security breach or they click that weird email that’s like, “Your Chase Bank account is not fair.” And then all of a sudden there’s spyware on your computer and they’re downloading all your client’s documents and stuff, that’s really, it could be a huge liability for a company. Personally, I think that computers, everyone should have like a laptop that is company sponsored, and if you have to let someone go, you send them a FedEx box to return it.
Scott: I share your belief on that, we can get everyone a computer, we have special software on them to make sure it’s secure and things like that. And it’s just really best practice, it’s like, why take the risk? It’s just not worth it. And a computer these days is like $2,000 or $2,500, is not super expensive. So, I would-
Krista: Well, and remember then what happens is they have issues and your IT company is not on their system, can’t log in and fix them, they don’t know what’s going on. It costs you way more, whereas if you just got them like a nice reasonably priced, easy, mass-produced computer with the right safety protocols, it’s usually much cheaper in the long run.
Scott: I totally agree. People forget about those IT service like hourly-fixing charges, but we’ve actually done the math. It’s actually more expensive than a computer, it’s crazy how a couple of things breaking. So, you’re right, it’s a really good point. Just do that, standardize it. It also helps your onboarding process because you can have a very standard checklist, one of which is like, have Dell send them the computer or have Apple send the computer, or there’s a lot of payroll providers. One of our former clients fleet is bought by Apple that would handle the stuff for you automatically, which reduces the amount of work that your onboarding employee, onboarding team has to do. So, there’s a lot of benefits to just doing it in a very standard-
Krista: And then back to the proprietary information, when they leave you, if it’s your computer, you can go in remotely and delete all of the information, wipe it so they can’t download it, whereas if it’s their computer, you have to schedule a time for a third-party administrator to go in and look it over and not delete their personal stuff. It’s just a bare cost where it could be much streamlined.
Scott: You’re so right. You’re so right. Okay. Next one is, do you need a special information or data security policy if you’re going remote? What do you think of on that one?
Krista: Well, again, I think that we’re back to our conversation about general policies, but you also have to think about like the CCPA and all the other privacy acts that are out there now, what data is your employee working with? What are they passing through their computer? And are you complying with those requirements of those various requirements and those acts? And so, I think that it’s just very recommended to make sure that you have security policies, that you’re giving them the right technology, and that you’re really protecting your company, client, third-party information, so you don’t have to deal with any of those data breach issues.
Scott: I totally agree. And having like… I think your data security policies should be embedded in your info security policy, and probably referenced in your employee handbook. You want people to sign both of those, or they should be embedded in the handbook, but that’s super important stuff. And as you become a bigger company and have bigger customers, they’re going to start asking you for that information. There’s a lot of questionnaires that we fill out around info security and making sure that our clients are comfortable. And the other thing which we didn’t talk about is having insurance around cyber, around theft.
Krista: Yeah. Cybercrime concerns is huge.
Scott: It’s really important.
Krista: We have a lot of clients getting that now. And I think our firm got it last year as well to really protect what happens if there is a data breach and client information is disseminated. And that can be a huge hit to a business, especially in e-commerce business.
Scott: I totally agree. So, get that too, if you haven’t got that already. Just one of the things we might’ve covered, but let’s just talk about it for a second. How do policies need to change when team members go remote or multi-state or even international? I think this is actually a very broad question, so you may not answer it specifically, but what’s your take on that?
Krista: Well, I think first and foremost, you have to make sure complying with the various jurisdictions like we’ve discussed, but I think the bigger issue as teams go remote is that management issue. You have to manage differently when people are working remotely, and utilizing technology, creating team feel and effort, opening people up, getting people to connect, remaining open to feedback and that loop. What we’re seeing a lot during COVID is that people are isolated, they’re depressed, they’re having mental health issues. We’re having abuse issues pop up, there’s a lot of drinking and drug abuse going on. Clients are calling me daily that so-and-so had this issue, how do I handle it? So, companies really need to be cognizant of creating community and remaining connected with people. And so being really a lot more open and vulnerable with your employees and helping them understand. And if say you’re in a billable-type environment and you see someone’s hours suddenly drop, calling them up like, “What’s going on?” People are getting divorced, people are sad, people are hitting that COVID sludge. And it’s really hard to be productive in this environment that we’re in.
Scott: Totally agree. We also pay attention to when people’s hours climb, because we’ve found that there’s almost like a six-month lag when people are working too hard, even if they say they’re enjoying it and they like it and things like that, sometimes there could be something going on in their life that they’re running from to work. And also, despite their best intentions, people don’t tell, just make an announcement that they’re burned out, it’s like a process. And so, if people do get burned out, that’s a moment where you can really have some HR issues around that, which we’ve learned the hard way over the years. There can be times where people just lose it and then they lash out or they do like cyber abuse or things like that.
Krista: Or they just quit and you’re left without someone that was a great and all they needed was the three weeks’ vacation.
Scott: Totally. I actually recommend enforcing… You don’t want to do this in a very strict way, but really encouraging people to take vacations. We talk about all the time, and we actually monitor the vacation logs just to make sure people’s PTO isn’t getting too high. We really encourage them to take vacations. We saw this one when COVID, the first three to six months of COVID, which was a time of a lot of uncertainty in the economy. And so Kruze, we actually grew really fast through COVID because a lot of companies started taking their financial hygiene more seriously. You probably saw this with your client base, they needed a lot more legal advice, but I suspected that some people may not have really understood that and been worried about like, should I take vacation? Am I going to make myself more vulnerable? That’s not consistent with our core values, but it’s something that people could understand. Or they were bored at home constantly and work was, you can get away from your spouse a little bit when you go do some work. And so, we actually saw almost no PTO being taken. Also, the other one was, they couldn’t go anywhere cool, so they didn’t want to take PTO, but we started doing this super proactive messaging around PTO, around avoiding burnout every Monday morning meeting. And as soon as we did that and really reinforced that PTO was cool, we wanted people to take it, we saw the PTO stuff get used again.
Krista: Well, and a lot of companies have been doing mental health days. They’ve been doing just personal awareness days, talking about self-care, talking about balance because you’re right. People are working a lot more than they used to, they don’t have options, they feel stressed around COVID, they feel stressed around connecting with other people. And so, scheduling more social things for your team, scheduling one-on-ones, having opportunities for people to just get together and chat. A lot of our clients have been really putting out their EAP, their Employer Assistance Program plans and options, part of their medical benefits. We’ve had clients get therapists, come talk to groups just about mental wellness and health. Trying to make people realize that what we’ve been going through has been really hard, especially for the parents who have small children at home and really creating flexible work environments. So, the idea that you have to be on from 9:00 to 5:00 when you have two kids at home working or doing school remotely, it’s not realistic. So, we need to also be much more flexible. And as long as people are getting their work done, that should be a win. But that also means that the management team has to have better KPIs and better metrics that they can manage people by. And if they’re not organized enough to do that, then it becomes a frustrating loop for everybody.
Scott: You’re totally right. Also, we also saw was people being, forget 9:00 to 5:00, they were bored or they were connected from like 9:00 to 8:00 even though that’s not what we wanted and that’s not consistent with our core values. And so encouraging people to put work down and just let it go, recharge, be with your family, again, very stressful time there. I think I didn’t really realize early in the Kruze Consulting journey how important like messaging this stuff was like over and over again.
Krista: Well, and modeling.
Scott: And modeling, yeah.
Krista: You can sit here and use words and say, “Take time off.” But if they see the boss never takes a vacation, or if you never share that you had to go pick your kid up from school or that you’re having like, “I’m having a really hard day today, I don’t think I can work this afternoon. I’m taking a mental health day.” So, you’ve seen a lot more out of office messaging around, “Mental health day today, get back to you on Monday.” And people and clients are really responding to that openness and vulnerability and the authenticity.
Scott: I love it. That’s such a great point, modeling the behaviors, because a lot of times in the early days, Vanessa and I would both work on our vacations and it was miserable.
Krista: You can’t do that because they’ll see a 2:00 AM email from you and then they think they have to do a 2:00 AM.
Scott: Exactly. When they’re on vacation, just letting… The other thing that I was coached into which is, when you or someone else on the executive team or a manager takes vacation, it’s really a chance for the team to step up and prove that they know how to do the job, they’re great. It’s like an opportunity in a way.
Krista: Well, and also time off gets people thinking and rejuvenate your new ideas, because think about when you go on vacation, I always come back with a notebook of new ideas and things I want to do.
Scott: I totally agree. All right. That’s really good advice. So, thank you for bringing that up. Interviews and recruiting, if you’re interviewing candidates across different states or people are going to move to another state, what are the don’t do’s and what should you do best practices here?
Krista: Well, I think in general, abide by the EEO best practices around not asking people questions about protected categories and things, that should be a pretty big no-brainer, but I think what you really need to think about when you’re hiring new people is you need to be doing behavioral interviewing consistent with your company’s mission statement and core values. So, if you’ve gone to all this effort to put together core values, mission statements, this is who we are as a company, and yet you’re not interviewing based on that, you’re not holding people accountable based on that, you’re not doing performance reviews based on that, it’s wasted mouth’s lip service. I think that asking people genuine questions about, tell me a time when this happened, or tell me about a time when you experienced this and how did you overcome that? Talking more behaviorally about the behaviors you’re trying to hire for as opposed to falling into that same pattern. And we’re also seeing that with the whole diversity, inclusion and equity conversations, we tend to hire like to like. We hire people that are like us, and those subconscious biases take over. And so really being conscious and training your teams on how to look at individual candidates in a way that is going to be productive for the business and what the business needs, because the research says diversity of opinion, diversity of teams really helps push productivity and profitability.
Scott: I totally agree. If I could just add on to that, which is, when people are considering working at your company, if you’re modeling that you are a diverse company and different ethnicities and different backgrounds and different ages and all that stuff, then it’s actually more welcoming for people who are in those different protected classes, they’re going to be more likely to join your company. It’s just really positive cycle that builds on itself. If you can do that in any way, and having a broad group of people who are doing the interviewing, different experience levels, different backgrounds, that diversity of opinion on just the interview process, and making sure that people who can identify with someone at your company, I think is one of the best recruiting tips I could ever give. It’s really, really powerful.
Krista: It definitely is. And I think that you want to make sure that you are walking the talk.
Scott: We’ve been remote for three years, or more than three years now, so we’ve been super comfortable interviewing over Zoom or some other tools we use, but I’ve heard a lot of entrepreneurs say to me, “Oh my gosh, I’ve never interviewed over video before.” Are there any tips or any legal things you got agree on that?
Krista: I don’t think there are any legal tips, I think that if you’re recording, you have to make sure you disclose, things like that in general. But I would say that I’ve been referring a lot of clients to Zoom trainers who are teaching people how to connect over Zoom because a lot of times they have to give sales presentations or connect and people just aren’t comfortable, it’s a whole new medium. And if you aren’t a natural in front of the camera, that can be a great tool. So, providing additional training to your employees, giving them a heads up on how to feel comfortable, making sure they have good backgrounds, and lighting, and the right external camera. So sometimes it’s just about giving them the tools they need to feel better about that new medium. The tech training’s important is well.
Scott: That’s so smart. You talked about protected classes and questions that you shouldn’t ask, if you could go through that really quickly because I think some people just don’t even know that stuff.
Krista: Sure. It’s a long list, but yeah.
Scott: And also, just any state-to-state types of things too. I’m not even sure if you’re allowed to ask what state you’re in or what city, I don’t even know. I’m embarrassed that I don’t know that question, but are there dos and don’ts?
Krista: Well, geography, isn’t technically a protected category, but you don’t want to ask people about age, race, ethnicity, disability, religion, all of those types of sexual orientation, sexual identity, those types of things. The list is so long, I need to pull it up to read off all of the categories, but in general, what you should be asking them about is their experience. You should be open-minded to figure out how to translate their prior experience to this job. Don’t ask questions, like I had one idiot manager say, “Wow, you’re so attractive. You have such a unique look, what’s your heritage?” Don’t ask things like that. Don’t tell people-
Scott: I love that. You’re right, I shouldn’t laugh because people do that and you’re biasing the hiring process, or you’re making that person feel uncomfortable.
Krista: All of the above. But the idea is that anything that doesn’t seem like a good idea in terms of, “Oh wow, do you think you can really handle this? You seem like you might not be very technologically savvy,” just because they seem to be older or something. So, don’t make assumptions about people, put out there what the job is, ask about the job and whether they can do it or not, and then you follow up on that one.
Scott: One question I get a lot from founders who are interviewing for the first time is, I believe you’re not allowed to ask what someone’s current pay is at their previous job.
Krista: Yeah. In certain jurisdictions, you cannot. You can just ask what their pay expectations are for the current role, and that’s based on the Fair Pay Act because we’re still finding that women and minorities are behind because they haven’t aggressively negotiated over their career. So, you do have to do a pay survey, make sure you’re paying everyone in the same job category and bracket within the same range. And if you’re paying them differently, you have to have justifications for why someone is being paid differently.
Scott: That’s really good advice. This has been… I think I’m going to need to take a nap after this because this has been a very intense conversation.
Krista: I think we have seven other podcasts we’re going to do based on this conversation
Scott: Exactly. We have one more question and then I’m going to let you go, you’ve been very gracious with your time. Thank you so much. How should a company think about hiring internationally and how is that different than just hiring in the United States?
Krista: Well, hiring internationally is a big step for a business, and so you’re going to have the requirements of that country, you’re going to have probably to set up new entities and new forms and comply with that country. So, it really is a big step to be doing business in another country. And so, I would always recommend that you speak to a lawyer based in that country. We have a lot of partner law firms and other areas where our clients work. And then we can strategize about how the different entities in America versus the foreign country would then partner and work together. But it is a big-layered approach and it’s a big consideration, but if it’s one where you have a lot of opportunities, you should always consider it and get the information and you can make a decision then.
Scott: Sure. We’ve seen a ton of companies hiring, dramatically hiring more people internationally now. In the same way that COVID sent team members throughout, leaving California and New York, other states that were high cost, high tax states to other states, we’ve seen this happen a lot internationally. Some of the things I talk, you talked about a PEO or a Professional Employer Organization earlier, there are such things as global PEOs, which have set up entity structures all throughout the world and you can actually have them hire the employee, kind of pseudo on your behalf, or you can create a subsidiary in that country. Governments across the world really like payroll taxes. And so, if you’re going to have a bunch of employees, people who are functioning as employees in those countries, you’re going to want to have a subsidiary where you have payroll and you pay payroll taxes or working through a global PEO.
Krista: Yeah. Or work with the local attorney in that country to determine whether they can be a contractor for them.
Scott: That is really great advice. That’s what I was going to say next, is we get a lot of the same contractor or employee questions in other countries and you’re a US-based accountant or US-based law firm, although we’re knowledgeable, it’s similar, but you should have a lawyer who can do both or who can look at it from that country’s perspective and make sure you’re in compliance. The other thing, we encourage background checks and things… You can get international background checks and things like that. Are there any?
Krista: Background checks are excellent. I have a lot of great resources that we use for that, it just depends on whether you want to pay for it. It’s an added layer to the process. So, it’s something you need to build into your hiring process if you’re deciding to do that. So, it’s a cost, it’s an effort, it’s a time, but it’s a great idea. We’ve had a lot of situations where people wish they had done it
Scott: Yeah. I really recommend that. That’s actually really nice. Thank you so much. You did an amazing job, this is so helpful. Can you tell everyone where to find you, how to reach out? I really encourage people to get on your email list because it’s awesome, and there’s a ton of good tips there. So, how do people reach out and what kind of questions and how should they structure an engagement with you?
Krista: Wonderful. Well, I’m happy to be a resource for any of you. You can reach me at KMitzel, M-I-T-Z-E-L@MitzelGroup.com. Our website is www.MitzelGroup.com, M-I-T-Z-E-L Group. And you can always give me a call at 415-515-5388, and we’d happy to be a resource for any of you.
Scott: Also, we’ve had the pleasure of working with you, it’s been awesome. You’ve helped us a ton, and I can’t recommend you enough. So, please check out Krista at the Mitzel Group. And I’m really happy for you. I didn’t know you guys you were at 10 lawyers now. That’s a lot.
Krista: Yeah. Thanks so much. And it’s all because of clients like you, because our clients are in the 90th percentile retention rates. So, clients come and stick around and we would love to work and help grow with you. So that’s why we love clients like Kruze Consulting.
Scott: Like I said at the beginning, we used you a lot for employment law in some of the state compliance, and things like that, but you do-
Krista: We do corporate transactions, M&A, financing, real estate, business related, immigration, IP, data privacy. We really run the gamut, 95% of what a business might need, we can handle it.
Scott: I love it. All right. Congratulations. Thank you so much. This was recorded on a Friday, so I hope you can have a beer or a glass of wine.
Krista: I know. It’s time for happy hour.
Scott: Bye, Krista. Thank you so much.
Singer: (singing) It’s Kruze Consulting, founders and friends with your host, Scott Orn.

Learn why Kruze Consulting is one of the leading accounting firms in San Francisco and Silicon Valley by serving funded, early-stage companies. Our clients have raised over $4.5 billion in venture capital and seed financing, and our research and development tax credit work has saved clients millions of dollars in burn rate and payroll taxes. Contact Kruze to learn more.

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