The budget planning process is the time for the CFO and general counsel to map out legal spending not based on where the company is but where it’s going, a legal strategist says.
If your company is planning an acquisition in a new or adjacent market sector, for example, it’s helpful to make budget resources available for the in-house counsel team to prepare for the kinds of legal exposure the acquisition could bring with it.
The new market sector could mean legal risks the company hasn’t had to deal with before.
“You can have some game theory around it because of where the business is,” Lenore Horton of Horton Legal Strategies told CFO Dive. “We know that if the business is here and they anticipate going there, these are the types of things that usually come up, so we should have a strategy around that.”
Legal unknowns
Companies that make resources available to in-house counsel to anticipate legal unknowns can manage the issues better when they arise and also prevent them from happening in the first place.
The war for talent provides a good example. Many conflicts that companies treat as employment law matters can be avoided if they’re addressed upfront as a management issue in the company’s policy manual. But doing so takes resources that, at least early on in a company’s growth cycle, might not seem like a productive use of funds.
“I was talking one time to a business executive who, after the third [legal issue] in two years from a departing employee, said, ‘We have the worst luck with employees,’” said Horton.
The real problem is the absence of policy, she said.
“Not every issue with an employee is appropriate to be handled through employment law matters and through an employment lawyer,” she said. “If they [make a plan encompassing] recruiting, incentives, retention and training, they see better results and they can head off the need to use an employment lawyer.”
A plan would also anticipate the kinds of intellectual property, trademark and other types of identity disputes that companies can expect to defend against.
Given the importance of online branding and the rise of ecommerce, companies can anticipate mounting disputes over identity-critical assets like domains. For that reason, by ensuring the in-house counsel team has the resources to anticipate and plan for those disputes, the company can better head them off and fight more effectively when they arise.
“I think we’re going to see more around that as technology keeps pace with the web and the metaverse,” she said. “More domain names are in dispute, even top level domain names.”
For those making the investment, companies can use software that crawls the web in search of unauthorized uses of a company’s intellectual property, including trademarks, copyrighted images and other web content, so they can be dealt with before they damage the company’s business.
“These aren’t humans going through and clicking on pages,” she said of the crawl technology.
From a legal standpoint, showing infringement can be relatively straight-forward. If your software finds an unauthorized use of an image, for example, depending on how it’s been modified, it doesn’t have to be hard to prove your claim.
“In many cases, people won’t even change the file name,” she said. “It’s a very easy way to find out if somebody ripped that image from your website. If you’ve got a file name match, an image match, you’re well on your way to showing that someone used that image potentially in violation of the copyright laws.”
Avoiding ad hoc responses
A legal strategic plan might encompass issues having to do with employment, intellectual property and new business sectors, among other things.
What’s key is having the plan in place rather than leaving the legal team to cobble together responses as issues arise.
When the pandemic hit, for example, companies saw a jump in employees trying to use the Americans with Disabilities Act (ADA) as a right to work remotely on a permanent basis. Although those efforts were generally unsuccessful, the lesson for companies is to have a plan ahead of time so that unexpected changes, like the move to remote work, can proceed smoothly.
“The biggest issue is for those employers who are not used to having so many employees remote and when they start to see performance issues,” she said. “For example, having a company-issued device is going to be the best bet to feel confident that their employees are working during their scheduled time, having software available on those devices that can help capture the screen and ensure that people are not, for example, saying they’re working but are watching movies.”
As a legal matter, employees can assume limits to their rights to privacy if they’re working on company-issued devices or even if they’re using their own devices for work.
“There’s a general rule that an employee has no expectation of privacy when using company-issued devices,” she said.
“A lot of it has to do with how well those policies around work issues are set up, how well they’re memorialized and how well they’re enforced,” she said.
Getting those policies in place starts with the budget process and the CFO and general counsel having a meeting of the minds.
“Companies are moving away from this ad hoc approach to legal services,” she said. “Businesses that would normally say, ‘I’ll just wait until something comes up and handle it with the money available’ are now saying, ‘I can actually get to where I want to go better if we have a strategy on how we’re going to handle these things and play out the game on this ahead of time.’”
