Liability Coverages For Counselors
Phillip Crum: Let’s get started, shall we?
Kathleen Mills: Hi, Phillip. I think so.
PC: You’re back from Michigan?
KM: I am back from the great state of Michigan, and it was cold.
PC: Your pilgrimage?
KM: Yes, my pilgrimage.
PC: Did you bring me a refrigerator magnet?
KM: Yes, I did.
PC: We’ll get to that later. Good, good, good. So we have a couple of attorneys in the office and there’s nothing wrong. They don’t know what to do.
KM: There is absolutely nothing wrong this time.
PC: Good, good, good. Glad you had a good vacation. Let’s jump in because this is going to be interesting stuff today. Who do we have here, and let’s go.
KM: We have corporate securities attorney John Pierce. Hello, John.
John Pearce: Hello, how are you?
KM: I’m fine. And we have the litigator–
KM: I know. John Mongogna, how are you, sir?
John Mongogna: I’m doing well. Thank you for having me.
KM: You are very welcome. And we are fortunate to have two attorneys in one podcast, and we’re going to talk about the importance of service agreements in your business.
JP: I don’t think there’s anything more important than what service agreement you have, except that you actually have an entity that you’re doing your business through. You’ve got to form your entity and then your SAT, but the next thing is how are you going to deal with the people that work for you. And especially when we’re talking counselors, how are you going to deal with them? What is going to be their responsibilities? What’s going to be the company’s responsibilities? So if all that is not in agreement, it’s sort of like, I don’t know, Russian Roulette. Something’s going to go wrong at some point.
KM: So let’s define the people or types of counselors that need a services agreement. And independent contractor renting space…
JP: I think everyone has it, but you can deal with them differently so that you can choose are we going to have employees? In that instance, then the company will just, will see a corporation, will just hire people as employees and you have one agreement for those people. If what they really want to be is an independent contractor and run their own business and work out an arrangement where you collect money but they’re separate, that’s a whole different agreement. And then sometimes you have people who have special things. They want to rent your conference room twice a month and you have something with them. Or other people just want to rent an office on a go forward basis so they can control that more. Or they want you to do a mixture of that and do their billing. But those actually are three separate agreements, and we would look at them differently because the parties are in different relationships with one another.
KM: Why is this so important? I don’t get it. I just want to see people, have a couple of other counselors in my business. I mean, does it really matter? I mean, the malpractice liability should certainly be enough.
JP: Well, the key reason for it is that how you deal… this is your business life and especially if you’re an independent contractor, it’s your business. And if you’re not taking care of that, what will happen is that there are pinch points that come along and the question is is what happens. So if you’re an independent contractor and you have to take a giant medical leave, or you decide to have a child, or you want to take off time so you can travel for three months for your child – as an independent contractor you have all those rights if you write a proper agreement and you get to choose. If you don’t have the proper agreement, you’re much more like an employee. Or if you’re an employee, you can’t just decide to take three months off, or you can’t decide that you’re going to pay yourself more money, and you can’t decide that you’re going to expand your office. There’s all sorts of different things. So all of this comes into… really comes to the forefront when you have a situation when there’s changes or you want to do something special. And a lot of the changes are simply, “Hey, my husband has changed jobs. We’re going to this house over here. Gosh, it’s now going to be a 20-mile commute. I think I want to go ahead and just move maybe six or eight miles over here,” and it depends what relationship you have because, for one thing, the clients that you’ve been seeing – are they the business’ clients? Are they your clients? Is the thing that you’ve been getting, have you been building your business or have you been building the person that you work for’s business.
PC: This is like a pre-nup.
JP: It is somewhat. And what happens is the movings in and out of companies, and it is deciding. Especially today in our world where everything is so fluid and people get moved around and they take different jobs and they want to do special things. It’s more important for the person who’s running the business to actually know what’s going to happen and when it’s going to happen and how it’s going to happen, because the last thing that you need – especially if you’re moving or that you’re changing jobs or you just want to move five miles away – is to not be able to do it because you didn’t take care of your business on the front side. It’s equally bad for the business because if the business has believed that you’ve signed up to be with them for the next four or five years and they’re investing in you and they’re paying you for things and they’ve moved you into positions, and then you just say, “Oh, I’m going to move and that’s it.” Then sorry, that’s it. And that’s the time when everyone gets to spend lots of money because they basically are going to call John Mongogna and go, “These people are talking mean to me and they said they might sue me, and we’re just getting a new house because Billy got a new job. And it’s a great job for Billy and I need to move. Do they not want me to live with my husband?”
PC: Did I hear you say earlier that there are several different types of service agreements as it applies to counselors?
JP: There are, and the fact is that you can have an agreement which is basically an independent contractor agreement and it has different terms in the agreement which clearly indicates that it’s really your business and you’re running it and you have an association with the group that you’re “working with.” Generally a counseling office. There’s something totally different when you’re an employee, because as an employee, the company has more obligations to you. They have obligations to look after you. The government and the other rules say that there’s certain things they must do. But the fact is that you truly work for them. It’s not your own business and it’s not portable and it’s not your clients. It’s someone else’s. And so that’s the situation. Those are the two main situations, although we’re seeing more and more where people just want to have access to this space or this set of conference rooms, or something. And what happens is that you end up in this sort of – it’s actually an independent contractor relationship, but it’s even kind of less in there because half of it’s about leasing the space that you have or someone doing your billing or that sort of thing.
John Mongogna: Well, let me expand on that just a little. One of the things that I would add is: From a litigation standpoint, what we’re looking for is what rights, duties and obligations do we have? So the purpose of the contract, or the services agreement, is so that we get something that tells us what the agreement between the parties was. One of the things that gives us the most concern is when you come into my office and tell me, “Here’s the situation. And this is what I believe our rights, duties and obligations were.” One of the first things I say is, “What is the other side going to say? What are they going to say the rights, duties and obligations are?” The thing about having the services agreement – and John has talked generally about having an employee relationship, independent contract relationship and those things – I would almost say that every agreement could be completely tailored differently. It just depends on what that agreement with that individual or that group really is. And the entire point is that when you’re friendly, when you’re coming together for an agreement, that’s the best time for everybody to sit down and write and put down what you each expect of one another. And that’s what we’re really getting to is those expectations. You see, the problem is is when somebody gets to a point that they’re frustrated with a particular situation, it’s because they have a disappointed expectation. But if you have it in writing, it’s unique because people will sit back and say, “I can’t really have a different expectation than what it says in writing.” And it kind of holds everybody to remember and understand exactly what was agreed upon in the very beginning. Because when you have a world of agreements, things change over time. And what you want out of that relationship changes. And people start remembering things differently, and I can assure you when there is a circumstance or situation that arises, they will remember it differently, and you will get different stories. And things get handled much easier when everybody can go back to the document and say, “This is what you get. This is what I get.” It’s that simple. Move on. And so the entire idea is really to reduce what your rights, duties, obligations are so that you could have an expectation of only that and nothing more.
PC: John– we’ve got two Johns. This is like being at a Texas football game: “Hey, bubba!” and everybody turns around. So there’s different situations, different documents. Is there one document, you know, one service agreement to rule them all?
JP: Absolutely not. It just doesn’t work that way. There are different things that are covered. It’s a different relationship, and you can have relationships– we see it in life, but you don’t… you see it in life but you don’t apply it to business. And so that people have a different relationship with their spouse, that they do with their friends, that they do with their kind of general acquaintances, that they do with their pastor, or something that they do with their cousin. And you actually to different things so that no cousin, or at least no cousins of mine feel like oh I can just come up and borrow money from you any time, or get money from you– although my wife might feel that way, that she can do that. The kids are different and stuff. Think how strange it would be if everyone– I always have thought it strange for someone to go, “Oh, we treat everyone like family.” Does that mean somebody has to support the other and give them money and put them in the house? The whole thing is that we live in a country where we have tremendous freedoms, but part of that is is how we’re going to meet together and how we’re going to work together and that sort of thing, and you really need to decide that on the front side, not on the back side.
PC: Alright, so somebody’s listening thinking– and I’m going to say this because you can’t reach me from there– “Yeah, more than one document. That just sounds like an attorney trying to sell me more stuff.”
JP: And I would tell you that we’re–
PC: Put the stick down.
JP: I would hope– (laughs)
JM: Let me tell you, because from the litigation side this is actually a simple question to answer. You can pay a small amount for John Pearce to create a contract that you can utilize and work under with those relationships, or when something goes bad, you can pay me ungodly sums of money to try to fix your problem. And that’s really the thing. John and I don’t–
PC: Pay me now or pay me later.
JM: Right. John and I don’t necessarily complement each other in our work. What he does is prevent things from ever getting to me. And my problem is is when you come to me, everything’s gone really bad and you’re not paying me $500 or $1,000 or $1,500 to create things and prevent things. You’re looking at tens of thousands of dollars and I can assure you when litigation is ongoing and you’re moving to trials, just to be quite frank: It well gets into the $50,000-$100,000 mark. It just happens. So it’s not about, “Hey, let me get another $100 from you.” It truly is preventing it.
PC: Don’t be cheap on the front end.
JP: But it’s interesting because what really happens is is that people do want to save money and they want to pinch pennies and the net result is is that when something changes it’s truly a disaster. If they don’t have an agreement– if they do have an agreement, it becomes very easy and they just depart and you can see what it is and they do. Otherwise, they start fighting, and when they start fighting the cost just goes through the roof and I just remember talking to another litigation attorney and I said, “You know, I haven’t had any litigation over in” and I named several of the documents that I drafted. None! Because we just look to see what the document says and we go by the document and he laughed, and he said, “John, I’m not worried because so many people don’t use you and I have all the work in the world because they don’t use you.” And the documents aren’t clear and they’re muddled, or people draft their own – and that’s the thing I do want to definitely address: Drafting your own agreement. You hear this and you go, “Oh, I’ll just draft my own agreement.” Let me tell you exactly what happens: What happens is is that these people are bright, they’re educated, and they have a certain amount of savvy. And what they do is they go and they find on the internet or somewhere three or four examples of documents and then they start pulling clauses from the various documents. And I saw a document recently, and John had to deal with it as well, but she had pulled… so one of the things there was there was a clause that made it absolutely clear that this person was an independent contractor with regard to her relationship with the business. Great! I thought, “Great!” But four numbers down, there’s another one which makes it absolutely clear that she’s not an independent contractor, she’s an employee. And I actually went down and saw John. He goes, “I’m not sure where we end up when we make it absolutely clear – crystal clear – two different statuses.”
KM: So there was one clause that said employee and then there was another clause that said independent contractor in the same document that was signed?
JP: Same document signed, and it’s absolutely clear. And it was trying to explain to someone how they were both married and not married at the same time.
PC: So which one applies? The one that got there first, or whoever touched it last?
JP: (Laughs) Who knows, because it was a woman who actually did this particular agreement and she had several others where she made it absolutely clear it was this way or absolutely clear it was this way and they were contradictory.
PC: Can’t we get an attorney to clarify things?
JM: Yeah, absolutely. What’s going to happen is their attorney is going to say the side that they want. And we’re going to say the side that we want. And that’s exactly the problem.
PC: But I didn’t mean the expensive guy. I mean the cheap guy over here.
KM: You have to look at the intent and depending on what side you’re on–
JM: Well, and that’s what happens. That’s exactly the scenario. Let’s say you have a good contractor and you come and talk to me and you’re frustrated with this particular employee or this contractor that you’re working with, and you say, “Gosh, I just can’t work with this person anymore. What do we need to do?” The very first thing I’m going to do is go to the agreement. I want to analyze the agreement. And if it is a good agreement, you would be shocked what really happens. I get on the phone with the other side or the other side’s counsel, and we say, “This is what is spelled out,” and we look at it. If it’s a good agreement, it really solves it very, very quickly. There’s not litigation on it. The reason there becomes litigation is usually a combination of heightened emotions or some true wrong that was done and the complications with the agreement between the parties. So in the particular case that he’s talking about, one side has a reason for claiming that they’re an independent contractor. The other side has an absolute reason for claiming that they’re an employee, and you can bet if the both of them are in the agreement, we’re in for a long fight.
PC: Which will only end when we run out of money.
KM: Well, both counselors are already out of money, and most counselors think that the malpractice liability – the $1 million three or the $1 million five – is going to help them.
PC: Well, won’t it?
KM: John Mongogna knows about that.
JM: See, in the situations that you’re dealing with your other counselors and your contractors or employees that you’re working with, quite frankly I’m not sure the malpractice policy comes into effect at all. I just simply don’t think it covers you for those things. And I don’t want to make a malpractice policy over simplistic by comparing it to an automobile policy, but think of it from this standpoint: You’re covered for certain items. Well, one of the items you’re not covered for in a malpractice policy has to do with your relationships with your employees and contractors. Now, there is a circumstance that if an employee does something and commits malpractice that your policy may cover you for some portion of that, but think of your policy not as a true umbrella (which is another type of policy that is covering you for everything), think of it very different than that. Think of it as you’re being covered for this little pinpoint item and that little pinpoint item, and not at all an umbrella.
PC: So it’s like an umbrella with holes in it?
JM: An umbrella with a whole bunch of holes.
PC: Alright. Mr. Pearce, if I’m wanting to, ok– I’m convinced. I need these service agreements, or singular. That’s my question: Do they come in packages? Do I need to get the one for the employees, get one for independent contractors, one for people who are not sure? How does it come?
JP: We don’t think it’s best to do it that way. We think it’s best for you to choose whether the main relationship that you’re going to have with the people who you work with, and some people really feel strongly – and there’s arguments that you can make – that you should make each one an independent contractor. And other people clearly want them to be employees. But we really ask you to choose to be one or the other because you have different rights, there are different laws that apply to you, there are different terms and agreements that you would do depending on whether you’re one or the other. So you have to at that point make your first choice: Do you want to have employees? Do you truly want to have employees? Or do you want to have independent contractors where you can more let them go? And part of it is is how much, how committed you are and how long you think you’re going to do this and is this sort of something that you know that you’re going to be doing for the next 10 years, and therefore you want to go a certain way? Or this is just something you’re trying out for a year or two, or who knows what. And if that’s the case, then we may choose differently. But you’ve got to choose am I going to have employees and look at them as employees, and they really work for me? Or are these just people that we will help and work with and they will help us and we will work with them, and you deal with them back and forth? Understand you have a whole bunch of independent contractor relationships – everyone does – because the guy who brings (if you have a coffee machine) coffee is really just- he’s outside, he doesn’t work for you. It’s really an independent contractor. He sells to you. You sell to him, that sort of thing. It’s that kind of thing that you have. There’s all sorts of people who effectively live with what are employee relationships because they have family or they have close friends or they have anything, and the fact is no they don’t deserve that or they shouldn’t get that, but we’re going to do that because they’re family. Or we treat them like family and that sort of thing. So you deal with people differently. You don’t remember the birthday of the guy who brings you coffee most of the time, or supplies your coffee machine. But you do remember of your assistant who’s been your assistant for three or four or five years. You’re effectively treating them as much more of an employee whether you officially have an employee relationship. So a lot of times there are reasons that you want someone to be an employee, and other reasons what you don’t. But it’s a mixture between what you want as a business owner, and what they want as a partner.
PC: That’s a good point that you’re getting real close to. The difference between an independent contractor and an employee, there are things that you can have an employee do that you can’t expect of an independent contractor. You can’t tell them what time to come to work and what time to go home. Can you kind of compare those two? Put you on the spot and ask you for…
JP: Yes. The whole point is that, as an employee, the employer should control the day and decide when they’re going to come in, what kind of work they’re going to do, that sort of thing. Independent contractors more can decide, for one reason or another, what they want to do. I’ll tell you how it most affects me is I have clients who call me, and effectively to them I’m an independent contractor. They’re hiring me to do a thing. I’m not employed by them. I’m actually an independent contractor and they say, “I need you to write this contract,” and I will. “I need you to form this entity,” and I will. “I need you to represent me in front of the SEC.” You do, but I’ve had a guy show up who said, “Hey, I need you to write a bond for me,” and I said, “I really don’t do bonds.” And he said, “Oh, John, you’re a bright guy. You can work it out. You do securities.” And I said, “Okay, let me then rephrase it: ‘I won’t do bonds because I don’t do bonds.’” It’s different. I understand the difference. But if I actually worked for someone and he said, “I want you to go draft this bond,” even though I don’t have the skills and I don’t have the experience in that, I would be obligated to try to do it. And that’s the difference. And at the same time though, if you’re an employee, the person is promising to – or it used to be very much, “We will work with you. We want you to be here a long time. We’ll take care of you. If you get sick, we’ll have insurance so you’ll be taken care of. We’ll find you a nice place that you can sit and work,” and that sort of thing. So employees are generally, at some level, better taken care of, where independent contractors are more taking care of themselves while working with a particular person a lot.
PC: What is there that negates a contract? If I have an independent contractor agreement with a counselor, what kind of actions on either part would negate that and… uh oh, he’s rolling his sleeves up… would negate that contract and there you go.
JP: Well, if you have an independent contractor and along the lines of what you were just talking about – you start telling them when they need to be there, what projects they need to work on, when they can take a break, how they need to function, what they need to do. And you begin what you might commonly refer to as “managing” them, they’re no longer an independent contractor. And quite frankly, even if you have an independent contractor agreement with them, you may completely negate that by the actions that you’ve chosen to do. So you’ve got to remember if you really want that person to be an independent contractor, you’ve got to treat them as such and let them act in that independent manner. And our world is changing, right? We have younger people, millennials, that treat each other and treat how they work very differently. And so you might find individuals that if you give them the freedom to work on a project at their own pace on their own, that you might get a better result. And handling them as an independent contractor is completely different than handling somebody else that needs that instruction.
PC: So is there an agreement for millennials? Should there be?
JP: (Laughs) That’s another podcast.
JM: Under our law, we’re going to have these versions. This is what’s going to be allowed and those are the things that we’re going to be able to do. But I would say, you asked John a few moments ago about, “What package can I get for the services agreement?” And what I would say is it’s a great way to talk about how you find an attorney. It’s a great way to figure out what attorney to be able to use. I would say – and this is a little bit general – but if you are looking for an attorney and he says, “I could sell you the bronze, silver, gold, or platinum package,” just hang up. Just hang up the phone and go find somebody else because what John is trying to tell you is it’s about trying to figure out what works for that particular individual, that contractor, or that employee. And what works for you. In other words, if you’re the type of employer, if you’re the type of manager, that cannot handle somebody coming in under which you perceive as late, or can’t handle someone leaving early, or can’t handle somebody taking a two-hour lunch, do not make them an independent contractor. You’re setting yourself up for failure. So the real issue is while you may call up and have an idea of what you want, what really needs to happen is a communication between the attorney and the company, and decide what fits. What fits for that person. Who is it that we’re talking about? And what fits for you? What’s going to be the most successful thing? So when you are getting referred an attorney – because that’s how you’re going to find and attorney, right? You’re going to ask around for your friends and somebody’s going to say, “Hey, I know this divorce attorney. Why don’t you talk to him or her?” And you’re going to sit there and say, “Okay, well let me call them.” And this divorce attorney, whose typically handling the dissolution of marriages, is going to be expected to put together a relationship for a business. It really doesn’t make a tremendous amount of sense, does it? You want to be able to find somebody that’s in that corporate, in that transactional, in that administrative area of law such as John that you can actually look at them and he’ll sit down, talk with you, and ask you about the situation so you can determine what best fits you. So that’s kind of what you’re looking to do, and it could be hit or miss if you’re just basing off referrals. But that’s how you’re going to find somebody. It’s not easy.
PC: It will be hit and miss because the other guy doesn’t know what he’s talking about either.
JM: Right. Absolutely. But it’s still a good start. Finding another attorney that you know, and when that attorney says, “This is what I do. Let me tell you the attorneys that I know,” that’s how I would start. I do this area of law. Let me tell you about the attorneys I know that do these other things. Like, take for instance; if someone called me up about an immigration problem, I’ve got several immigration attorneys I could send them to. If they call me with a problem related to real estate, I’ve got several attorneys that I would send them to. Because it’s not my area. And so I know that automatically. If somebody calls me up for a service agreement, I’m probably going to send you to John Pearce. That’s who I know that does a great job in this area. So that’s really kind of what you’re looking for when you’re talking to attorneys.
PC: So you want a specialist.
JM: You want somebody that has experience in the education, in the practical education in that area.
KM: This is no different than counselors specializing in certain areas. None. I mean, there’s specialists in the attorney world and I think sometimes we don’t think that attorneys– well, we assume that attorneys know all things and do all things, and they really don’t.
PC: We hope they do.
JM: Well, and let me give you a broad spectrum. If you get a speeding ticket and you call me, I’m not going to handle it. I’m not going to do it for you.
PC: You laughed at me when I called.
JM: I might actually– if you forced me to do it and I have to do it, I suppose I could figure a way, but do you know what I’d probably do? I’d probably call a ticket attorney, tell him to do it for us and it would still get taken care of.
JP: Right. And you need to understand that when I was becoming an attorney and I worked for a larger downtown law firm, one of the things they did is they made you rotate through certain sections so that they could decide what you were going to do ultimately, and you could decide what you’re going to do. So I did roll through the litigation section and I got to have three trials. I actually did three trials.
PC: Those people get out next month, don’t they?
JP: (Laughs) And they will forgive me someday. But the point it that somehow I won all three. One was only for $500. One was for like I think it was, one was for $1,750 and there was the big one which was for $8,000-$9,000, maybe $10,000. It’s pittance. But I could tell that I am undefeated in court. I’m undefeated in court and I haven’t lost since the last time I went to court. But what I would mention–
JM: We only keep stats if you have five or more.
JP: (Laughs) Okay. But the point is is I haven’t tried a case in 30+ years. Don’t hire me to try your case.
KM: I think that’s a great point because when I was going through my stuff, one of the reasons why I had to use four attorneys was because of the specialty involved, and this situation that caused John Pearce to make the referral to John Mongogna and then John Mongogna had to make another referral to someone else, and then all that. So it felt like they were trying to get rid of me, but I don’t think it was. It was about the specialty involved and the matter, and pairing it to the provider, to the attorney that can get the job done.
PC: Were either one of these guys crying when they referred you to someone else?
KM: They were probably jumping up for joy because they didn’t have to deal with that for that one thing.
JM: That’s not true.
JP: Not true. And the key is that hopefully whatever attorney you use understands his limitations. And I really do think I do a good job in the areas that I practice. I also am very– the interesting thing that a lot of people don’t realize is they go, “In my last agreement, it had this stuff and it talked about litigation. It talked about this. It talked about this.” What they don’t understand is is that while I’m writing the agreement, I don’t just jump in my office and write it. I go down and I talk to John about things. How’s this going to be perceived? What has changed? If we wanted to be in court, where do we want to be? We talk about all sorts of things on an ongoing basis because I’d rather know ahead of time rather than afterwards: Is it possible that we could win this? And I brought something recently to John and he read it and he laughed. “We’re going to lose,” on that one. And the fact is we hadn’t finished drafting that agreement, and once I know that he can’t defend it, we’re going to find a way to change those clauses because I’m not doing a good job if I don’t fight those. But I don’t know everything and therefore I talk to various other attorneys so that I can get the best agreement for you and we somewhat know how certain things will come out, and if you negotiate them on the front side it’s amazing what people will give you and allow you to do and allow you to write an agreement. When you get three, four, five, six years down the road nobody’s going to change any agreement and it’s about, “I’m going to enforce this right here.”
PC: So specialization matters. You don’t want your proctologist doing your brain surgery for you, right?
JM: Well, let’s talk about that. Even not just the subspecialties within the area of the law, what often times frustrates me is you’re not going to go onto YouTube and figure out how to do your knee surgery. You’re just not going to do that. That doesn’t make any sense. As a matter of fact, even if you take it down to a completely different area– I’m Italian. I like mowing my own lawn, okay? But you know what? My lawn looks much worse than the other people in the neighborhood. It’s because I do it my way, which is the way of doing it once a week and it’s completely different than people who do it on a regular basis and understand how to cultivate the grass, what to do, how to fertilize it, when those things can be taken care of. And you can make choices to do something on your own. You can make a choice to do a service agreement on your own and try to put something together. What frustrates me is when you bring in that junk, okay, and then you expect it to have been perfect. You put it together – it’s terrible! Okay? And now you’ve got to expect me to win something that you didn’t care about in the very beginning. And so let’s be frank: I don’t really care about my lawn. That’s why I do it myself. And that’s the frustration that I have is when we’re talking about specialties – sure, when you’re contacting the lawyer, one lawyer whose handling immigration things should not be handling your divorce. That’s clear to you. But then it goes beyond that. It’s also something you shouldn’t be doing. We kind of start from the standpoint of: Make the decision that you’re not going to put it together yourself. Or if you do, understand it’s most likely junk.
PC: What if somebody– I’m looking at putting a counselor on and they walk in with their own agreement template that they want to use. What are your thoughts on that?
JM: Absolutely no problem. Take it, send it to your attorney, let him rip it up. Or take a look at it and say it’s great. I know John has had situations to where somebody else has put together an agreement, given it to John, John’s looked at it and said, “This is just fine. I don’t have a problem with this. Maybe we change this over here or I don’t like the venue clause because it says you want jurisdiction or venue in Fort Worth or Tarrant County instead of Dallas County,” or something like that. And maybe you try to change one of those things if it fits the need, because I can assure you: In Texas, there are certain counties you want to be in if there’s a fight. And there are ones you don’t want to be in if there’s a fight. And it’s something that oftentimes gets ignored. But I know there are particular circumstances where John has got something in and said, “This isn’t bad. This is pretty good. This lawyer put this together very well. I might change this, might change that,” and you go on. There’s no pride in authorship.
PC: But there is cost in authorship. So if I already have an agreement that I want to use and somebody walks in. I’ve already paid for it. It’s perfect. It’s fine. It’s a Pearce production. And Betty Lou walks in with her own version of something and she wants to use it, well if I want to use– Okay, let’s take a look at yours and I send it to John Pearce, it’s going to cost me money obviously to have him take a look at it. I already spent money on mine so I’m going to tell Betty Sue, “No, I have one that I’ve used and I’ve paid for and I know it works.”
JM: Well, in that particular situation– I think John will add to this a little bit. As a counselor whose running a shop that has those employees or independent contractors, whatever you’ve chosen to do, you probably do want to keep consistency with who you’re working with. In other words, you wouldn’t want to have a multitude of different contracts with people you are theoretically treating the same because then those different ones may say, “Wait a second, why does so and so get treated this way, and why does so and so get treated this way?” Especially if it’s in an employment context.
JP Right. That’s why I think it starts with the business, and I will tell you a story from my life. I of course went to law school and I go to law school, and then I had met this blonde girl who was wonderful and we got married and all of a sudden we need to move into an apartment and she’s still my wife after… since ’81. I won’t work out the years.
JP: The whole point is that I go in and I’m sharp, law student, and they give me a lease and I marked the 16 sections that need to be fixed and the manager said, “I don’t know what this is,” and she has me call the attorney, and I speak to the attorney and he listens and he says, “You’ve got some very good points, but you know what? We’ve decided to lease everyone who’s in this particular apartment building with the same lease. And so if you don’t want it, let me suggest near you are these four apartments that you and your wife can move into.” And so, and I said, “You’re not going to change anything?” And he said, “No, I’m not.” And so we signed the lease and we lived there. The interesting thing is five years later, I was the attorney getting the calls from the young law students, and I had the same reply that they do, “Sometimes you just have to live with this agreement that we’ve made for the company because that really works for the company. And if you find our agreement so reprehensible that you just can’t work here then maybe we’re not the right place because this is the relationship we’re going to have and we’re going to take care of our employees this way and we’re going to pay for these things and we think all of that’s appropriate. And some other places may do something else, but for our company we need to do what’s best for our company and live the way that we’d like to live and take care of you the way we’d like to take care of you, and if that really, really, really doesn’t fit with you then maybe the company doesn’t fit with you.”
KM: I think the person who owns the business has to have continued focus on, “It’s my business. This is how I want to run it. I’m not going to be told how I need to change my services agreement unless there’s a valid point.” But you end up with sabotage at some point, which I’m going to be probably going down the hallway to see John Mongogna at that point because then you’re going to have anarchy in your business because, “How come I had to sign this contract? I didn’t know I could make my own,” and then you just got a big, fat mess. And that’s just me though.
PC: I’ve been in their offices before. The carpet in the hallway to John Mongogna’s office is green. You figure it out. The green mile. Alright you two, so I need a services agreement written, or two, and I know how to Google stuff. That’s not what I mean when I say, “How do I find,” or, “How do I vet an attorney properly so that I know I’m using the right one?”
KM: Yeah, how do I know?
PC: What are the questions I need to be asking?
JP: I think if I were trying something and I certainly do it, when we run into something that’s new and different– or I run into something, I talk to other attorneys and then I eventually talk to other business people and that sort of thing to suggest attorneys. I get calls on a regular basis where someone says, “Someone recommended you that you might know this kind of thing. Can we come visit?” And I have said, “Sure. Why don’t we come, talk,” and we’ll plan to talk for 30 minutes or 40 minutes or whatever. I’ve had two people come recently and we talked probably for 45 minutes to an hour. The whole point is that they 1) had seen four or five other people and they decided, “Hey, after talking to you” – and I said after 45 minutes, “Do you want us to represent you?” And she said, “Oh I decided that 35 minutes ago. I just wanted to keep talking to you about this and this and this and that kind of thing.” But she saw the differences that were in us, and therefore chose us. The other person talked and said, “I think I want to use you, but I actually have a partner and the partner couldn’t come. Could they come and talk with you another day?” And after we talked to the two partners, they chose to use me. There are… I don’t recall any right now, but I’m sure there have been times when we’ve talked to people– I’ve certainly talked to people on the phone and they talked to three people and eventually they decide to go somewhere else for that particular thing. But at least one or two of those came back and asked me to do something else. And so the whole idea is that you need to actually go talk to people, get some references if you can, and then go talk to the attorney. And either he knows his stuff and he’s trying to help you, or he’s not. And if he shows up going, “Yep, this is the agreement. This is for you,” and he hasn’t talked to you, that’s sort of like… how do I relate something? You go into get a haircut. A woman goes in to get her hair re-styled and goes, “Just do it so it’s beautiful.” No understanding of if you want it long or short or this color or curly or anything, just make it beautiful.
PC: You’re in trouble before the first lock gets snipped there, buddy.
JP: Yeah. And the chance of the stylist making it all be perfect is like none. And you’ve got to go find out, see what they do, see somehow something else that they’ve done. Be a… learn something about the person. See if you can work with the person. Can you talk with them? Do they annoy you? If the attorney annoys you or have ignores you or takes three phone calls during your meeting, then that’s probably how the relationship’s going to go. I purposely, I don’t bring my phone to the vast majority of meetings that we have. The fact is it’s turned off or it’s left in the office. I’m with you. I listen to what you’re doing. I see if we can help you. Every once and awhile, you listen to them and you go, “You need somebody else.” And sometimes it’s like you don’t need just me, you need me and Mongogna because I don’t do that other stuff and I didn’t know that you were trying to get out of your prior agreement because you’re going to start a new business. I can help you form a new company and I can get you good agreements, but until you get out of that old agreement, which you’re currently part of and now you’ve told me that you haven’t told the company you’re working for that you’re leaving, we’ve got to see your old agreement and maybe Mr. Mongogna’s the one you need to be talking to about that.
KM: And if I can just add a little bit of experience here with finding attorneys. You’re in a business startup and you are an entrepreneur and you want to get your counseling practice set up and you’re family is in on the deal. They’re silent partners. They have no power. And I think you have to remember that reality that your family is affected by your services contract and your services agreement. Your family wants you to be successful and they’re assuming you’re choosing the right one so as you’re listing those questions to ask an attorney I really am encouraging you to think about your family, your kids, and their future as it pertains to your business set up, which is one of the things that we’re talking about is your services agreements that you have with your employee, your independent contractor, or somebody who’s renting that conference room one time. Just be thinking about it’s not just you. It’s other things.
JM: I want to echo what both of you are saying just with a quick little story. Recently in this area we had a tremendous amount of hailstorms, and the hail storms caused significant amount of roof damage for most of the people in North Dallas. And same thing happened at our house. And so we called the insurance company. Insurance company comes in and they do what insurance company does which is, “We’ll cover this. We won’t cover that. We’ll cover this. We won’t cover that.” And I’m looking at it going, “Why aren’t you covering that? I thought it was covered.” Either way, they decide what they’re going to do and what they’re not going to do. And then I’m charged with the obligation of going and finding a roofer to fix this thing. Now, I really don’t know much about fixing a roof, okay? It’s not in my wheelhouse. That’s not what I do. So how do I find a roofer? I start calling. I talked to my friends, talk to my neighbors. “Hey, who are you using? Who’d you like?” Well let me tell you. I called some. I get one on the phone and he says to me, “Hey, send me the itemization that you got from your insurance company and I’ll let you know how much I’m going to charge you.” Well, how are you going to do that? You haven’t even looked at my roof. You don’t know anything about it. Well, I promptly hung up on that guy. I call another one, another one, another one. And you would be shocked– I received that response a lot of the time. Well, one of the guys I call, he says, “Hey, send me the itemization so I can start the work up, but do me a favor and cross out all the numbers. Let me get to the house, let me take a look at your house. Let me do the inspection. Let me make sure that the numbers that the insurance company put down as far as the sizing and the lengths and the widths and how much stuff is needed is accurate. And then let’s look if we need to go back to the insurance company or if it’s correct, and then I’ll give you a quote as to what I could do it for.” Who do you think I hired? I’m hiring that guy! He comes over to the house, he gets up on the roof, he starts taking a look at it, he’s taking a whole bunch of measurements. 45 minutes later he says, “Okay, you know I’ve compared some things. The insurance company put down this but it really should be less. They had it as more here and this that and the other.” And he tells me those issues. Well, you’ve got to do the same thing when you’re looking for your attorney. John really said it a few minutes ago: Yeah, you could Google somebody and you’re going to find out something, and you could talk to a friend and you’re going to find out something. And those are great starts. But what you really need to do is just get in and talk with the person. Sit face-to-face. Forget about new age let’s get on the phone or start texting each other and actually sit face to face. This is a person that you need to at least have a relationship with. You know, and Kathleen was talking about the same exact thing. Be able to talk to them. This is an important situation. Your service agreement, while it may be a quick, simple thing that can be put together, it could have far-reaching ramifications for your family, for your business later on. So invest a little bit of time in yourself and your business to get this done right at the beginning.
PC: Here’s what I heard so far. Point number one is ask a friend, a neighbor, an attorney you know or respect for a referral. A starting point. A place which I gather means getting a phone number off a TV commercial from some guy on top of a burning semi is probably not a good idea.
JM: The Yellow Pages and the people that are on the back of a bus on a wrap are probably not the people that you should start with. I’m not saying that those particular attorneys do anything wrong, but they’re in a completely different field. The reason why they’re on a bus or on a commercial is they’re trying to find injured people that have personal injuries. These are people that are literally getting on the bus or driving around and they’re looking for people that have these personal injuries. It doesn’t have anything to do with counselors, it doesn’t have anything to do with employment agreements, and sure as heck doesn’t have anything to do with service agreements.
PC: And point number two would be to expect at least a consultation with people.
JP: Yes, and if an attorney won’t meet with you and talk with you without– and we don’t charge anyone for coming in and talking to us– if they won’t meet with you at all unless there’s money on the line, I would seriously think about that because do you really want to hire that guy because he seems more focused on the money he’s putting in his pocket rather than serving you.
JM: I just had recently, along the exact same lines, a gentleman’s leaving employment for one business. He calls up this one attorney. The attorney tells him, “Give me a $5,000 retainer, I’ll look at your agreement that you’ve got for leaving your old business.” The guy, none the wiser, says, “Okay, I’ll send it over to you. But listen, it’s a 13 page agreement. I may not think everything’s right. These are the things I’m agreeing on. Let’s go and talk about it.” The next time he talks to the attorney, the attorney tells him, “You need to give me another $5,000. We’re going to sue this company.” The guy looks at him and says, “What are you talking about? We’re not suing the company. I’m leaving them and they’re paying me money and I like it.” You know? And so it got twisted around real quickly. I asked the gentleman, I said, “Did you ever even meet with the attorney?” No! So he wants $10,000 from you before he’s even met with you and he’s already spent $5,000 for reading an agreement? What did you do? And he said, “I told the gentleman, ‘Give me the final bill and don’t do any more and I’ll take it to somebody else.’” And that’s the thing. So you’ve got to be wise. The attorney that you’re picking, you’ve got to have that relationship with.
PC: He must be a slow reader. Alright, point number three is that you need to make a list of things that are important to you and make sure that the attorney you’re interviewing makes them important to him. And if they’re not, you’re probably… in other words, the family obligations that you at least discuss and come to some understanding how that’s impacted.
JP: Right. Yes. It’s interesting: There’s no agreements for millennials but I do represent some of these people and they’re wonderful. But the whole point is that– and I don’t want to generalize anyone, but at least a group of people, they just like to travel more and they really wanted the situation where they could have about three weeks’ vacation and there were certain places that they wanted to go on a regular basis on certain dates which tied to certain things. And I said, “Great, and if you’re going to move jobs, mention all this up front.” And several of these people were really good at what they did, and they’re still in their twenties and should be praised. But I said, “People will want you, but you’ve got to clue people in on the front side.” And so clue in your attorney, clue in the business, and if you do that, several of them have worked out situations which they think is wonderful because they took the time to understand and the attorney could put it in the agreement and the attorney had them talk to the people up front and because they did, they got what they wanted ultimately.
PC: I want to figure out how they get three weeks off for their birthday. Hmm. Alright. So.
JM: You know what?
PC: Let’s hear it.
JM: They asked up front.
JM: No. And it is strange. I find humor in it as well. But I never thought about doing that when I was younger. We were just about working, working, working. But it really does get to a point that from the very beginning it’s the same thing we’ve talked about from the beginning: Any relationship that you’re going to have, let’s set down what your expectations are because if you expect you’re going to have three weeks’, four weeks’ of vacation, and I’m expecting you’re going to have two, first thing we’re going to do is we’re going to go to that agreement. And if the agreement has it in it, you’re going to get three. If it doesn’t, you’re going to get two and that might make you upset and leave. And that doesn’t solve anything for anybody. Maybe I like you. Maybe I want you here. But now all of a sudden we’re fighting over a week of vacation? Get it set down in the beginning.
PC: Alright. I called my– I keep a divorce attorney on retainer. So I called him up knowing that he can’t do a services agreement but he might know somebody. And so he referred me to somebody who referred me to somebody else, and now I have an appointment, a consult with this attorney. What are the specific questions that I should ask? The handful of questions that right up front are going to tell me, “Get up and get out,” or I may have a winner here?
JM: I don’t think you can. I don’t think it’s that cookie cutter. That’s like saying, “Let me ask these 10 questions for this individual to see if I’m going to hire this individual.” It’s not going to get you there.
PC: What about… Have you ever written a services agreement before? Is that a fair question?
JM: Absolutely. Absolutely. Certainly if they know what a services agreement is, there’s no doubt about it. But what I would talk about is, I guess it wouldn’t be structured questions, but I would first ask what that attorney does. What kind of philosophies that they have in this area of the law. What their experience is in that particular area of the law. Then I would expect the attorney to turn the tables and start asking me about my business. So while I do think it’s important for you to ask those questions that concern you, you should also stop and listen and make sure that attorney is finding out about your business so they can structure it to fit specially for what you’re doing.
JP: Right. And you really want someone and something that I try to do on an ongoing basis is I try to work for people who are on both sides of any particular agreement. And so I represented employees a certain amount of the time, and I’m representing the businesses a certain amount of the time. More businesses than employees, but I make sure that it’s the same. In the same way we represent people who are leasing land or office building space, and people who own it and are leasing to people. If you do that, you understand issues on both sides on an ongoing, updated basis, and what is pushing their buttons and the net result is that you can understand where the party’s more likely are to be and start, and what you might get. And the net result of that is that we’re able to find something that both parties can get an agreement that they feel very comfortable with.
PC: I can tell you from my experience as far as being a sales person, sales manager, sales trainer, that sort of thing, that you want to have one, two, or three questions / conversation starters, but they need to be short because you want the other guy – in this case the attorney – to do the talking.
KM: I think may of us don’t really know what to ask, but we do need to listen and see if it’s a good fit. It’s based on feeling but thinking, too. Allowing somebody to share their expertise.
PC: John Pearce, have you ever written a services agreement?
JP: Yes, I actually write them on an ongoing basis – very regularly.
PC: Okay. Excellent. What’s your philosophy, your thinking on–
JM: Wait. Wait. Ask me the same question.
PC: Uh oh! Okay. Equal time. It’s political season here isn’t it? Alright. Have you ever written one?
JM: No, of course not. That doesn’t make any sense.
PC: John Mongogna has never written one. No. Okay.
JM: (Laughs) Oh I’m sorry. Go ahead.
PC: That’s alright. Have you ever lined a birdcage with service agreements that came in your door?
JM: (Laughs) Right! Maybe.
PC: Okay, I get it. I see where we’re going here. Okay, good. What are your thoughts on services agreements as far as writing them up to make them fit my business? I’m just asking you to repeat the entire conversation we just had, right?
JP: Yes. What we’re going to do is that I need to know what you want to do and how you want to run your business and how long you want to run your business, and that sort of thing because we’re– and do you currently have people? And what are they working under? But we often times talk about employees versus independent contractors, and what do you want to do? And what do you want to do longer term? Because if this is something that you’re going to do or this is something that you’re trying out, we’re going to handle it differently other than you know you’re going to do this, and I’ve known several people who you could hear in what they were saying, “Well, this. Okay, I’ll do this. And then if I don’t like this then I’ll just move to something else.” And that tells me something else about them. The attorney should be trying to learn who you are and what you want and where you’re going longer term and what– and it helps so much– I had a recent conversation and a younger woman came in and she had, she was fully accredited now and everything, and what became clear in talking to her is that she was going to get married but they had talked about it and she wanted to keep working and she said, “Someday I’ll have kids, but I’ll have to cut down for awhile but then I’d like to go back to full time.” And it became very clear the path she had for her life and what she was going to do and what she wanted to build and it just told me so much more about her and where we should go and we went there. Another therapist came in and she very much not only said, “This is what we’re going to do, but my husband knows my plans and if you’d like him to be here I’ll get him here, too.” And I thought, Wow. This is great. They’re together, they’re moving together. They know what they want to do, how they want to get certain things. He was going to have an office. They wanted to get a space where he could literally be next door and they would have a back door maybe there to get in. But they had a plan.
PC: That is unusual. Do you charge extra for that?
JP: (Laughs) No, of course not. But the whole point was that it was just wonderful for people to have a plan. And then we tailored things to fit what they wanted to do because you should not– and I really need to say this: The attorney should inform you as to things that would be helpful and good for your business, but you ultimately make the choice or you can make choice and you should be listening to your attorney but you make the choices. And if you really have a plan, tell people your plan because the fact is then we can tailor things to that and look at it longer term.
PC: At the end of the consult, if I’ve got the warm fuzzies and I can afford you, we can proceed. If I have some doubt, is it appropriate for me to ask you at this point– I might say, “Mr. Pearce, do you feel like you’re a good fit for what I’m doing? Or do you think that there’s someone else that you know in your industry that’s a better fit for me?”
JP: I actually haven’t been asked that question. I do know that– and this was more than a year ago that– a couple people came in and they talked to me and I thought was everything went wonderfully and I’m sure I was going to be hired and at the end of the conversation they go, “Well, wow this has been great. Love to talk with you. But we’ve got two other people we’re seeing in the next two days and we’ll call you back.” And I thought, well okay I wish you had told me that on the front side. And I had spent longer than I normally would and that’s okay, and so I went back to my office. Well, that was Tuesday, but I got a call Friday going, “We went and met with the other two people, and we really want to hire you,” which was interesting because I had– again, I think be up front with the people if what you’re doing is interviewing a bunch of people then say you’re interviewing a bunch of people. That’s okay. But I had put things out of my mind, I had actually accepted two other projects. The net result is then at that point I had to say, “Okay. Happy to do it.” They go, “Can you jump on it right away?” And the answer was, “No, I can’t because I’ve gone and taken these other things. I didn’t know that you were–“ and they said, “Oh okay,” and I said, “If you haven’t found someone I can recommend someone else.” However you want to look at it, they said, “No, we’ll just wait,” and effectively we got to their project about three weeks later.
KM: There’s a lot of value– there is worth in waiting when you find the right match.
PC: You know what I think? The one thing that you two obviously have going for you is that you work together and you… Mr. Pearce, I come to see you and you write agreement, but you don’t have to wonder and hope about what might happen. You walk up the hall and ask Mr. Mongogna what does happen and what’s the best way.
JP: I do talk to him periodically, but never more than 14, 18 times a day.
PC: You sort of pace yourself?
JP: I absolutely put a limit on the number of times I will walk down to his office, but there does seem to be days that it’s like that. Because what we’re trying to do is I’m trying to figure out what’s likely to happen. How much is this going to cost? If you’ve got to fight this. Do you have time to fight this? What is it? And the fact is that we’re looking so much about the future and where we could get that we end up putting clauses in, documents, so that we can have a good outcome.
PC: Do all services agreements attorneys like your partner here work this way that they have somebody that they talk to?
JM: I will say this. Certainly that is the plan in some larger firms. You know, you have the different divisions and the idea would be that you could collaborate with each other. But I will tell you, lawyers are a prideful group and many lawyers are unable to ask their partners, their other attorneys, or sound like they don’t know something. And I will tell you, I don’t want this to sound like a one-way street, I do the exact same thing on the backside. Somebody comes in, I’m suing over an agreement. The very first thing I do is take it over to John and say, “Hey, read this agreement for me. Tell me what you think the rights, duties, and obligations of the parties are. Tell me where you think they messed up in drafting this. How would you have changed this agreement? And I use that as leverage as a part of the litigation side of it. And so the collaboration is absolutely needed. You’ve talked about interviewing an attorney and trying to determine how you could find somebody that’s a good fit for you. The attorney needs to have those resources. It doesn’t have to be– the attorney could be a solo but they’ve got to have the relationships with other attorneys that they can pick up the phone and say, “Hey, let me talk to you about this. Hey, let me take you to lunch and let’s talk about this.” John and I go to lunch on a regular basis and the entirety of our lunch is spent talking about these exact things and trying to put them together and trying to see how they fit and what’s best for that particular client or what’s best to guide through the litigation.
PC: Alright. We’re out of time, folks. Last thoughts, John?
JM: The biggest thing that I would say is you’ve got to start with getting the relationship down in writing. It’s got to be there. I would encourage people not to try to put it together themselves. Find a lawyer to be able to do that but you’ve got to have the relationship down in writing.
PC: Don’t go cheap on the front end.
JM: You’ve got to know what the expectations are from all sides.
PC: Kathleen, Mr. Pearce has been looking at his watch for the last 15 minutes. We’re either on the clock or he’s late.
KM: I think we’re on the clock.
PC: Mr. Pearce, any last thoughts, sir?
JP: (Laughs) Except for being incorporated or forming an LLC or something, I think your services agreement is the most important thing. I can’t tell you how many times that people have called me just bothered because something has gone horribly awry. And they say, “What are we going to do?” And I said, “Let me call you back in 40 minutes,” and I called them back and I said, “Well, these are the rights and such and such and actually they can’t do what they’re doing and what you need to do is you need to give them a copy of your agreement and you can highlight the thing” and you can’t imagine the reactions from the people of like, “You mean this is all covered?” And I’m like, “Yeah, it’s all covered.”
PC: So if somebody wants to find John Pearce, how would they go about doing it?
JP: I’m at my office. The name of the firm is Coats Rose. John works at the same thing. And you just call and ask for me.
JM: You can find us both at www.coatsrose.com. The number is 972-788-1600.
PC: There you go. Thank you both, gentlemen. I appreciate you both paying attention in legal school. Kathleen?
PC: This is the last amount of talking we’ve done in a long time.
KM: I know.
PC: I like that.
KM: I listened a lot.
PC: Ask short questions, let the experts speak, and on we go.
PC: So Kathleen Mills, that’s her right over there. The owner and proprietor of PracticeMentors.us. And you can be found, aside from the website, where else? How would people find you?
KM: You can call me 972-234-6634 ext. 101. Or email me at [email protected].
PC: And I’m still Phillip Crum, the Content Marketing Coach. You can call me at BR549 or [email protected] is preferable. Or 214-264-6297. Appreciate it, gentlemen. It’s been fun.
KM: Thank you sirs. Dear ones.
PC: It’s been very informative. You’re a couple of rays of sunshine, you are.
JP: Happy to be.
PC: We’ll see you next time. Queue the theme song, and we’ll see you next time. Bye bye.