chapter 3

S.F.T. Services will be providing services to healthcare providers and will not be interacting directly with patients. However, the consultants will be conducting audits of facilities and will need have an awareness of laws and regulations relating to any incidental patient interactions.

The primary regulation that consultants will need to be mindful of is the Health Insurance Portability and Accountability Act (HIPAA). HIPAA was enacted in 1996 and was intended to standardize the interchange of electronic data for some administrative and financial transactions. It also guaranteed an individual could continue health insurance coverage in the event of a job loss (Gasper, 2009). A Federal Privacy Rule was included to protect patients’ information. While S.F.T. Services will not be accessing patient records, consultants will respect the intent of the law and avoid areas where patients are receiving treatment. Consultants will not access areas where patient records are stored unless a representative from the organization is present at all times.

Human Resources and Employee Laws

Employees are S.F.T. Services’ most valuable resource and it will be the priority of the company to provide a fair, respectful work environment. Koys found that progressive Human Resource strategies encourage good firm performance (2001). His study also demonstrates that employee satisfaction impacts customer satisfaction. By creating a company that partners with its employees rather than treating them as resources to be exploited, S.F.T. Services will be more competitive and will more effectively recruit and retain employees (Guest, 2002). S.F.T. Services will focus on involving the employees in business operations, showing appreciation for employee’s contributions, and providing opportunities for personal and professional growth.

As a small employer with less than 14 employees, S.F.T. Services will be exempt from several Federal and State regulations; however, the human resource practices will be in compliance with these laws as doing so will ensure employees are treated fairly and reasonable accommodations are provided for employees’ needs (Mayhew, 2018). For example, small employers are not required to adhere to some equal employment laws such as Title VII of the Civil Rights Act of 1964, the Age Discrimination Act of 1967, and the Americans with Disabilities Act of 1990. Nevertheless, S.F.T. Services will not tolerate or practice discrimination in its employment practices.

Before hiring employees, S.F.T. Services will obtain Employer Identification Numbers (EIN) from the Internal Revenue Services (IRS) and from the California Employment Development Department (EDD). The Federal Insurance Contribution’s Act (FICA) (1935) requires employers and employees to contribute to Social Security and Medicare taxes. Employee paycheck withholdings include federal and state income taxes and California’s State Disability Insurance. Employers must also pay California Unemployment Insurance which provides benefits to employees who have lost their job. California Labor Code (§ 3700) requires employers to obtain workers’ compensation insurance.

The Fair Labor Standards Act (FLSA) (1938) establishes minimum wage, overtime pay, recordkeeping, and child labor standards for full-time and par-time workers. California’s General Minimum Wage Order establishes a minimum wage of $10.50/hour for employers with 25 or fewer employees and $11.00 for those with 26 or more employees. Overtime of one and one-half times the regular rate of pay is required when an employee works more than eight hours in a day. After an employee has worked twelve hours in a single day or more than eight hours on their seventh consecutive day, they are entitled to pay that is double their regular hourly rate.

The Equal Pay Act (EPA) (1963) mandates that men and women who perform substantially equal jobs receive equal pay. California also has a Fair Pay Act (SB 358) which, among other things, makes it illegal for employers to prohibit their employees from discussing their wages. California’s SB 1063 prohibits wage discrimination on the basis of race and ethnicity and California’s AB 1676 prevents employers from using prior salary as a justification for gender-, race-, or ethnicity-based wage differences.

S.F.T. Services will also comply with laws regulating the terms and conditions of employment such as the Uniform Guidelines of Employee Selection Procedures (1978). This regulation prohibits selection policies and procedures which discriminate based on race, sex, or ethnic group. The California Fair Employment and Housing Act is the state version of anti-discrimination laws. California prohibits discrimination based on the additional protected classifications of religion, national origin, disability, medical condition, genetic information, age, gender and sexual orientation, marital status, and military and veteran status.

California requires employers to provide paid sick leave in the Healthy Workplace Healthy Family Act of 2014 (AB 1522). Under this regulation, any employee who works more than thirty days is entitled to paid sick leave. Sick leave begins accruing on the first day of employment, the minimum accrual rate is one hour for every thirty hours worked. Alternatively, employers may choose to provide at least 24 hours for each 12-month period. California also requires employers to provide leave for pregnancy disability, school activities, organ and bone marrow donations, voting, jury duty, military duties, and provision of care to family members (XpertHR.com, 2018).

The National Labor Relations Act (NLRA) (1935) protects the right of employees to join unions without interference from employers. California Labor Code Section 1102.8(a) protects employees who notify authorities about violative or non-compliant conditions within the workplace.

The California Occupational Safety and Health Act (Cal-OSHA) of 1973 was enacted in response to the Occupation Safety and Health Act (OSHA) of 1970. OSHA mandates employers comply with workplace safety standards. Federal OSHA authorized states to develop their own plans to regulate employee safety. In California, CCR Title 8 contains the safety orders that employers must comply with.

There are a number of regulations and legal requirements for employers; however, employers are in a position of power that provides opportunities for exploitation of workers. In keeping with its commitment to providing an exceptional place to work, S.F.T. Services will comply with all employment regulations.

S.F.T. Services will strive to create a work environment that employees find satisfying and fulfilling; however, employers inevitably experience some turnover. In order to prevent confidential business information from leaving when employees leave, non-competition covenants (NCC) will be required. The NCC will prevent employees from working in the same or similar business activities, either for themselves or another employer, within the Southern California region for at least six months after ending employment (Azevado, Pereira, & Rodrigues, 2018). To make these NCCs more palatable for employees, a reasonable and fair severance payment will be provided when the employment is terminated by S.F.T. Services based on business needs.

S.F.T. Services will also include a no-hire/non-solicitation agreement in contracts with clients. The no-hire/non-solicitation agreement will prohibit clients from hiring or soliciting S.F.T. Services’ consultants to work directly for them. This agreement will protect S.F.T. Services’ investment in its employees. To ensure enforceability, the agreement will be narrow and specific in term and scope (Singh).

Organizational Incorporation and Legal Framework

S.F.T. Services, LLC will not be subject to federal income taxes. There is an annual minimum franchise tax of $800 and an annual LLC fee if income is equal to or greater than $250,000. As a single member LLC, S.F.T. Services will file Franchise Tax Board Form 568 with the state and is not required to file forms with the IRS. There is a $20 filing fee when submitting the statement of information.

S.F.T. Services, LLC will be a for-profit entity. The purpose of the business will be to maximize profit but only through ethical operations and with the goal of providing benefit to the healthcare organizations served. Members will be responsible for paying income taxes on earnings distributed from the business.

The articles of organization will identify the business name as S.F.T. Services, LLC. Since the business will operate under the name on record with the Secretary of State, it will not be necessary to file a fictitious business name statement with the San Bernardino County Clerk (Dutton, 2016).

Miscellaneous Laws and Regulations

A major consideration for S.F.T. Services, LLC is compliance with contract laws established in California’s Code of Civil Procedure. Contracts are necessary to protect both S.F.T. Services and clients. The contract will clearly define the scope of the project, the timeline for the services, and the payment structure. There are four elements required for a contract to be valid (Showalter, 2015, pp. 104-105). The first is that both parties entering the contract be legally competent to enter the contract. Second is an offer and an acceptance. The third element is consideration, there must be something of value given in exchange for something of value received. The final element is a legal purpose – the contract cannot be for illegal services and it cannot absolve liability in advance.

To ensure that contracts entered are valid and enforceable, the services of an attorney will be secured. A standard contract will be developed. Any alterations or addendums to the standard contract will be reviewed by an attorney before they are signed.

Another important consideration will be copyrighting any intellectual property developed as training materials or auditing tools. Any software developed will also be copyrighted. The Copyright Act allows protection of tangible expressions of ideas. The copyright must be formally registered with the Copyright Office of the Library of Congress. Copyrighted work is protected for the life of the author plus 70 years (Kuratko, 2014, pp. 279-281).

In addition to copyrighting software, an End User License Agreement (EULA) will need to be developed. EULAs govern the relationship between the owner of a copyrighted work and the user (Boortz, 2011). Recent court decisions have clarified that if a user purchases a copyrighted work, the user may sell it at any time for any price. However, if the work is licensed, the user’s rights to resale the work may be prohibited or restricted. S.F.T. Services will seek legal counsel when drafting a EULA to ensure that S.F.T. Services maintains ownership of any software developed and that the limits of use are clearly communicated.

Formation as an LLC will shield the members from personal liability associated with the business. General liability insurance will be acquired to protect the business from liability associated with bodily injury and property damage or advertising injury. In addition, an errors and omissions insurance policy will be purchased to protect the business from claims of bad advice or financial loss.