HR Consultants Can Cut Chances of Client Legal Disputes

By Lin Grensing-Pophal, SPHR Jul 23, 2008

One of the things that HR consultants leave behind when they strike out on their own is a security net. The organizations they leave behind generally have in-house legal staff or work with firms to provide the counsel they need to minimize risk and avoid lawsuits. That leaves an independent HR consultant alone when it comes to legal advice. While it might not be necessary to have a lawyer on retainer, it is important for a consultant to know where vulnerabilities are and what to do if a situation arises requiring the advice of a legal expert.

David Kolbe, CEO of Kolbe Corp. in Phoenix, trains HR professionals and independent management consultants regularly on liability issues. Most HR and business consultants tend to worry about legal issues that are unlikely to occur, when it is actually the mundane issues that tend to become legal problems, he says. Those issues tend to be contractual and financial and most often are disputes over the terms of a contract—or agreement—and the work to be done, he says. Most legal “worries” that consultants have are generally driven by the types of cases and settlements that make the news, Kolbe says. Contract issues tend to not fall into that category, yet contract disputes are the most prevalent and most likely to impact independent HR consultants, he says.

However, money issues are generally not that problematic. Issues related to amounts in a contract are usually obvious and are spelled out as simply as, “I do my work, you owe me $5,000.” In an agreement like that, all parties agree that the client will pay the consultant $5,000 for services rendered. But a dispute can arise when the parties do not agree on what the consultant has to do to earn the $5,000, he adds. Most often, a disagreement centers on what was to be delivered—not just by the consultant, but by the client as well. For example, if a consultant expected certain information from a client by a specific date in order to complete the project as agreed, and that information is not forthcoming, there is an obvious impact on the project’s outcome, he says.

Avoiding Problems

Assumptions about the work by the client or the consultant are a common problem, Kolbe says. The more assumptions made by a client or consultant, the more chances of a disagreement. To avoid assumption-related disputes, the parties need to put their “assumptions in writing, too, even if they seem obvious,” he says. Consultants who are reasonably good at having a discussion with a client should then write a draft of the “talking points” from the discussions for a letter of understanding. “That may be enough.”

Avoiding client-consultant conflicts requires “being very clear in discussions” and documenting the agreement to ensure that nothing is ambiguous, Kolbe says. Documentation is critical and basic. Without documentation, “so many legal problems come up because people of good will just have a different understanding of what was said,” he adds.

However, while Kolbe does recommend documenting—or clarifying—what a client and consultant mean, he does not endorse formal contracts. Rather, he suggests that a written follow up—such as an e-mail—can help avoid misunderstanding between the consultant and client, he says. “Sending an e-mail that says, ‘hey, it was great to talk with you, here’s what we discussed, I’m looking forward to working on this with you’ is all you need,” he adds. Such an e-mail does not have to be examined by a lawyer, and documenting the understanding allows the client to confirm or correct any assumptions that the consultant may have made.

A starting point for consultants would be a “form agreement,” Kolbe says. Such a form would not be a form obtained “off the Internet” but should be something tailored for a consultancy, he says. The form agreement can provide a good starting point for letters of understanding, which Kolbe prefers over formal contracts. “I use letters of understanding, which essentially have the force of a contract but don’t put people off as much. It’s really all a matter of presentation,” he adds.

When HR Consultants Need a Lawyer

Kolbe does not suggest that every HR consultant obtain legal advice in every situation. “I’m a big believer in settling disagreements without involving lawyers,” he says. There are, though, certain times when legal counsel does become necessary, and the signs can be obvious, starting with when the other side has a lawyer. He points out that consultants working for large organizations should expect that the client has a lawyer, either in-house or through outside contracts.

Also, a consultant should watch for any correspondence from the client that might suddenly contain language that seems very legalistic. When that occurs, it is likely the client has probably run the document past the company’s internal legal department, and it is an indicator that there might be problems, he says.

However, the business decision about when to hire a lawyer, or when to back down from a potential legal battle, should be weighed in terms of an assessment of risk. Nonetheless, there are some issues that Kolbe will not back down on, such as protecting intellectual property rights. But in other cases, an issue may not be worth a battle, he says. For example, in a dispute with a client over whether Kolbe did a complete job, he might just defer to the client. “If they’re not happy, I’m going to want to solve the problem from their point of view, in general,” he says. If there is a lot of money involved, or there is a potential for significant impact to the HR consultant’s reputation, Kolbe recommends hiring a lawyer. If not, the time and expense might not be worth it.

Lin Grensing-Pophal, SPHR, is a Wisconsin-based business journalist with HR consulting experience in employee communication, training and management issues. She is the author of Human Resource Essentials: Your Guide to Starting and Running the HR Function (SHRM, 2002).

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