Chapter 8
Legal Issues and Solutions for Coaches
Objectives
This chapter introduces the legal issues that affect your coaching practice. A comprehensive “Law of Coaching” could be a multivolume work, so please think of this chapter as an introduction to the breadth and variety of legal issues you face in starting and operating your coaching practice. These issues include, but are certainly not limited to:
- The choice of structure for your business entity and relevant tax considerations
- Naming your business legally and ethically
- Contracting with your clients legally and ethically
- Regulatory issues that affect coaching (and boundary issues with related fields such as psychotherapy, career counseling, marriage and family therapy, etc.)
- Intellectual property issues, such as copyright and trademark laws
- Insurance requirements for your coaching practice
- Emerging legal issues in the field of coaching
Pre-Chapter Self-Assessment Test
1. Under current U.S. copyright law, copyright attaches the moment an original work is created; a notice of copyright is helpful but not mandatory to protect one’s creative work.
a. True
b. False
2. A coach can almost always insulate herself from being sued for negligence by a well-crafted engagement letter.
a. True
b. False
3. It is fully legal to reproduce a New Yorker cartoon or a Gary Larson Far Side cartoon in a presentation as long as I identify and attribute the cartoon to its source.
a. True
b. False
4. Because the coaching process can be therapeutic and cathartic to clients, it is generally advisable to frame my engagement letter in terms of the psychological benefits that can be derived from the coaching process.
a. True
b. False
5. Because there is really no harm that can come from casting my credentials in the most positive light, it is acceptable and common practice to slightly exaggerate my experience in a particular area of coaching, especially when I have taken a three-day seminar.
a. True
b. False
6. With the client’s permission, it is acceptable for me to publicly disclose the content of a coach–client conversation.
a. True
b. False
7. Because the content of a coaching conversation can cover very private and intimate subject matter, most state and federal courts have adopted a coach–client privilege that protects the content of coaching conversations from the discovery process in litigation.
a. True
b. False
8. When one is selecting the form of a business, a partnership is desirable because it offers limited liability for the partners.
a. True
b. False
9. The Anglo-American legal system uses a principle based on the notion that precedents should generally be followed.
a. True
b. False
10. The laws that most directly affect coaching are generally federal laws, and agencies such as the Federal Trade Commission typically issue business licenses to coaches.
a. True
b. False
11. States generally recognize credentials of coaches who graduate from coaching schools accredited by the International Coach Federation as a basic equivalent of licensure.
a. True
b. False
Introduction
“In civilized life, law floats on a sea of ethics. Each is indispensable to civilization. Without law, we should be at the mercy of the least scrupulous; without ethics, law could not exist.”
—Earl Warren
As Earl Warren noted, the relationship between law and ethics is inextricable. The specific requirements of laws and regulations frequently serve to implement the more general concepts and ethical principles that underlie legal rules. Because of the limitations of language, even the most carefully conceived legal rule is susceptible to unavoidable ambiguity.
In essence, “Law is the intersection of language and power. Lawyers use words to persuade, to justify, and to govern” (Shapiro, 1993). Coaching, in contrast, dwells in the domain of personal growth, eliciting clarity and generating action. In coaching, client interactions frequently involve language and intense emotion, but the manner in which these interactions occur varies dramatically. Abraham Lincoln noted that a lawyer’s time and advice are his stock in trade. Lawyers give advice based on their understanding of a given set of facts, and based on the knowledge of laws that a judge would apply if the matter was reviewed in court. That approach is anathema to coaching.
Coaching is not giving advice. It is not about fixing things or solving problems. Coaching is establishing a vital relationship over a period of time with clients who are searching for the clarity and skills needed for making changes in their lives and human systems (couples, family, work, communities) in the near future. The product of coaching comes from the bond between coach and client. . . . Coaching works to connect two dimensions of a client: the inner being or self and some outer action(s) or performance. (Hudson, 1999)
The law is an ancient profession, but coaching, as we know it today, is a newly emergent field. For this reason, the intersection of law and coaching is still evolving and taking shape. Lawyers dwell in the domain of rules, regulations, and precedent. The Anglo-American common law is founded on a principle known as stare decisis et non quieta movere, which means “to stand by things decided, and not to disturb settled points.” It is useful to remember this maxim because coaching, as a field, is still in its infancy. Therefore, very few direct legal precedents are available for lawyers who provide guidance to coaches. Through analogy, statutes, and court cases that affect closely related fields, the contours and boundaries of coaching are beginning to emerge with more clarity. As coaching evolves, as the number of coaches proliferates, and as the economic impact of coaching grows, heightened attention will be given to the legal aspects of coaching because boundary questions with other fields will intensify.
The answer to each legal question depends on the local, state, and national laws in effect where you coach; therefore, the matters covered in this chapter provide only general guidance. You will need specific legal advice from an attorney near you, some of it general in nature, and some of it highly specialized. The law, much like modern medicine, is divided into specialty disciplines. For example, a good small-business lawyer can advise you in start-up and general matters, just as your family practitioner can advise you on your basic health needs. However, when you run into situations that call for specialized legal counsel, your small-business generalist (like your family doctor) can help you select a specialized attorney (see “At What Point Should I Hire an Attorney for My Coaching Practice?” later in the chapter).
Coaching is still a relatively new field, but specialized niches have emerged (Hudson, 1999; Williams, 2002, pp. 9–22). The range of practice spans from working in the executive suite of a company’s CEO to providing personal coaching to individuals on issues of lifestyle balance and family matters. Nevertheless, some legal aspects in the field of coaching tend to apply to many types of coaching practice.
As a practitioner, you may be tempted to view the red tape of coaching practice as administrivia and set legal formalities aside until they scream for attention. To do so is at your peril! We encourage you to carefully consider the issues this chapter raises and be sure to pay attention to them either personally or through a team of advisors. We will provide general guidance and practical tools, such as checklists, forms, and resources for further guidance in technical areas. Please note:Use this chapter as background and not as a substitute for local legal advice.
The goal of this chapter is to focus on general legal issues that will arise in virtually every coaching practice. We also provide practical solutions that allow you to step over the initial hurdles as a professional coach in establishing your enterprise. A list of the issues addressed include:
- Professional liability
- Steps to selecting a legal name for the coaching practice
- Licensure and coaching
- Formal contracts with clients
- Hiring an attorney
- Intellectual property
- Insurance
- Best practices
Do I Need to Incorporate My Coaching Practice?
“They (corporations) cannot commit treason, nor be outlawed, nor excommunicate, for they have no souls.”
—Sir Edward Coke, English Jurist Case of Sutton’s Hospital
In American, as well as English, jurisprudence, corporations enjoy perpetual existence. If only we coaches, individually, were so lucky! Most coaching practices need not incorporate. There are several cheaper alternatives to incorporating, and each of them imposes fewer restrictions than corporations do. Most individual coaches operate by default as a sole proprietorship, or they choose to register as a limited liability company. In this section, we help you probe the specific nature of your coaching practice through a series of simple questions. This process will help you identify the best business structure for your situation. You can change from one business structure to another as your practice evolves, but you will incur costs and headaches doing so. Therefore, choose a business entity at the outset that will serve your immediate needs as well as your foreseeable needs for the next one to three years.
Business Structures and Other Means of Limiting Coaching Liability
You can operate a professional coaching practice using any business structure that your state’s law recognizes. Most states recognize four basic business structures, or entities: sole proprietorship, partnership, limited liability company, and corporation.
If you choose to operate as a corporation under state law, you have a further choice to make: whether to have the corporation pay its federal taxes as an entity (a Subchapter C Corporation), or to avoid double taxation by having individual owners of the corporation pay their pro rata share of the corporation’s taxes via their individual tax returns (a so-called Subchapter S Corporation).
For several reasons, states sanction several different legal structures for operating a profit-making enterprise. The primary reason is to separate business obligations from personal ones. Another reason is to give business customers recourse against the business, while protecting the pocketbooks of the individuals who operate the business. Not all businesses are alike, so different legal structures have emerged to fit the nature of the enterprise.
Consider this: If limited liability business structures did not exist, wronged customers would have their lawyers file suit against every conceivable individual who may have contributed to a bad business practice or decision. That practice would result in extraordinary costs of doing business, and it would stifle entrepreneurship. Those who operate businesses for profit need limitations on personal liability in order to continue providing goods and services to the public without the specter of personal financial disaster. A coach, like other service providers, should feel secure in offering valuable services to high-income individuals without the fear that a disgruntled client’s lawsuit will wipe out all the equity in the coach’s home.
Limiting Liability through Insurance
Insurance is a second means by which coaches may limit their potential liability. With two means of limiting your liability, it is safer and wiser to use both options, rather than relying on one to the exclusion of the other. Errors and omissions insurance policies, which cover errors in connection with a professional practice, are the preferred method of protecting professionals such as lawyers, doctors, architects, and realtors. You may also wish to look into obtaining comprehensive general liability (CGL) insurance for your coaching practice as a means of limiting personal liability.
Self-Assessment Questionnaire
The type of business structure that makes most sense for your coaching practice emerges naturally from your answers to the following questions. Think in terms of how you see your practice growing during the next one to three years. Circle the answers that apply to your practice as a coach:
1. Do I operate a solo coaching practice, or have I combined forces with one or more other coaches?
YES (I work solo.)
NO (I’ve combined forces.)
2a. Does my coaching practice include any part- or full-time non-coach employees?
YES (I have a non-coach part- or full-time office assistant or marketer.)
NO (I answer my own phones, do my own typing, etc.)
2b. Can I get the occasional office assistance I need from a spouse or independent contractor instead of hiring an outsider?
YES (I can get by with occasional help from my spouse or temporary agency.)
NO (I really need, or will need, day-in, day-out help.)
3. If my coaching business incurs debts, such as a long-term lease, do I have personal assets that must be separated and protected from my business liabilities?
YES (Let’s see, there’s equity in my house, my auto is paid off, etc.)
NO (I’m flat broke, so I’m not worried about it.)
4. If I get sued in connection with my coaching practice, and my practice is exposed to catastrophic liability, do I have personal assets to safeguard from that liability?
YES (Let’s see, there’s equity in my house, my auto is paid off, etc.)
NO (I’m flat broke, so I’m not worried about it.)
5. Can I tolerate operating my practice out of my home, or do I really need an office outside the home?
YES (I work from home.)
NO (I have, or I really need, an office arrangement outside my home.)
6. Realistically, how much net income from coaching will I average for each of the next two years?
1K to 30K (I’m just getting started or coaching part-time.)
30K to 50K (I have an established coaching business, but I haven’t hit the jackpot.)
50K to 100K (I’m humming along quite well now.)
100K+ (I’m really rockin’ and rollin’.)
7. Does federal tax law provide me compelling reasons to set up my coaching practice as a corporation, so that I may take advantage of favorable tax treatment available only to corporations (favorable benefits include greater deductions for health-care premiums and out-of-pocket costs, etc.)?
YES (I have more than $100K in total income.)
NO (I have under $100K in total income.)
Sole Proprietorship
The sole proprietorship is the simplest and least costly business structure for low-risk enterprises. If you have no partners in your business (others who provide capital input, and who are entitled to a share of the profit), you’re already a sole proprietorship by default until you take affirmative steps to register as a limited liability company or corporation. A sole proprietorship is probably right for you if you gave the following answers to the self-assessment questionnaire in the preceding section:
1-YES, 2a-NO, 2b-YES, 3-NO, 4-NO, 5-YES, 6–1K to 30K, and 7-NO
The primary downside of the sole proprietorship is that it exposes your personal assets to debts of the business and to potential lawsuits arising from business activities. If you have significant personal assets that could be exposed to business debt and lawsuits, you should operate your coaching practice as a limited liability company or corporation.
Partnership
If you share a percentage of your coaching profit with another coach or business partner, your state partnership law will probably label you as a partnership by default, even if you have operated on a handshake, and you have no formal, written partnership agreement. You can change from a partnership structure to a limited liability company or corporation by making the appropriate state filing with your Secretary of State. Alternatively, if you are simply sharing office space with another coach and not combining your separate coaching fees, you are operating as separate sole proprietorships.
Most states have adopted one or more variants of the Uniform Partnership Act. Partners can agree among themselves to be governed pretty much as they please. But if you do not reduce your partnership agreement to writing, your state’s Partnership Act will govern your rights and responsibilities as partners, as well as your partnership’s potential liability to others.
A partnership is probably the right structure if you gave the following answers to the self-assessment questionnaire in the preceding section:
1-NO, 2a-NO, 2b-YES, 3-NO, 4-NO, 5-YES, 6–1K to 30K, and 7-NO
The primary downside of the partnership business structure is that it exposes your personal assets to debts of the business (even if your partner incurred them without your explicit blessing), and to potential lawsuits arising from business activities (even those of your partner). If you have significant personal assets that could be exposed to business debt and lawsuits, you should operate your coaching practice as a limited liability company or corporation, and not as a partnership.
Corporation
Very rarely will a coaching practice need or want to operate as a corporation, unless there is a pressing need to insulate oneself and one’s assets from liability. Operating as a corporation is a costly proposition. Corporations are designed so that capital can be raised from many sources, with each of those capital contributions being represented as shares of ownership.
Beyond the initial costs involved in setting up the corporation, you must consider the costs of ongoing compliance with various regulations that are designed to protect shareholders of large enterprises. When there is only one or, at most, a few shareholders, the corporate structure is overkill. Coaching practices do not require much in the way of start-up or operating capital, so there are generally no shareholders to protect, and no reason for going through the hassles of regulatory compliance.
Coaches may be tempted to form a so-called S corporation, one that pays its taxes through its individual owner or owners. However, regulatory burdens that apply to all corporations, large or small, are ordinarily too much for a small coaching practice to bear.
You should consider a corporation only if the answers to your self-assessment questionnaire are as follows:
1-NO, 2a-YES, 2b-NO, 3-YES, 4-YES, 5-NO, 6–100K+, and 7-YES
Limited Liability Company (LLC)
In recent years, the limited liability company (LLC) has become a popular hybrid structure for operating small businesses and professional practices. The LLC enables a coaching practice to adopt certain useful attributes of partnerships (without the personal liability), certain beneficial traits of corporations (without the regulatory red tape and double taxation), and certain unique attributes of its own that fit the needs of small businesses.
An LLC will probably meet your coaching practice needs if you answered the self-assessment questionnaire as follows:
1-YES or NO, 2a-YES or NO, 2b-YES or NO, 3-YES or NO, 4-YES or NO, 5-YES or NO, 6-Any Answer, 7-NO
Summary
Your coaching practice can be started on a shoestring as a sole proprietorship, so long as you’re not overly concerned about exposing personal assets to business liabilities. As your coaching practice grows, you should seek legal advice and draft detailed understandings before you take on another coach as a partner or employee. Create an appropriate partnership agreement (if, with legal advice, you choose to operate as a partnership) or set of Articles of Organization (if, with legal advice, you choose to operate as an LLC). For a select series of articles dealing with business structures, check out http://www.entrepreneur.com/Your_Business/YB_Node/0,4507,143,00.html.
What Steps Should I Take to Select the Legal Name of My Coaching Practice?
“What’s in a name? That which we call a rose/By any other name would smell as sweet.”
—William Shakespeare, Romeo and Juliet
Shakespeare’s Juliet showed little concern for names because, to Juliet, substance (true love) ought to prevail over form (family surnames, and the rivalries they represent). After all, a rose is still a rose, whatever it’s called. But in twenty-first-century American commerce, a cavalier choice of name for your coaching practice can become a painful thorn;the rose might smell as sweet, but who wants a thorn in the side?
Overview of Legal Concerns in Naming Your Coaching Practice
Selecting a legal name for your coaching practice can be as simple or as complex as you choose to make it. The simplest name, from the legal standpoint, is the name your parents gave to you. I, personally, made the choice to name my coaching practice the Ash Grove Group, Inc. Admittedly, I might have saved considerable time, effort, and expense by simply naming my coaching practice William H. Lindberg, Professional Coach or Lindberg’s Professional Coach Services. The name I chose was more fitting with the image I wished to create for my coaching practice.
Freedom to define the image and character of your professional practice is a significant part of the satisfaction you receive in operating a professional coaching practice. To exercise that freedom in a way that is fair to existing enterprises takes time, effort, and expense. To invent a distinctive name, and to verify that the chosen name does not infringe name-ownership rights of an established enterprise, can cost from hundreds to thousands of dollars. To many professional coaches, exercising the freedom to create a coaching practice name is worth it. Criteria to consider for name selection are those of availability, marketability, and durability.
Laws that affect business names have two primary objectives:
The safest way to comply with laws that affect business and trade names is to use your family surname as the name of your coaching practice. But if you choose to use a name that you’ve invented for its unique marketing appeal or self-satisfying artistic license, please read on.
Sole Proprietors and Partnerships—Duty to Disclose “Fictitious Names” Used in Business
If the name of an enterprise does not match the name of the enterprise owner, the made-up enterprise name is known as a fictitious name, assumed name, or DBA (e.g., William H. Lindberg DBA “Ash Grove Group”). DBA stands for “doing business as.” Owners of enterprises sporting fictitious, assumed, or DBA names must register the made-up name with either state or county officials, and they must publish notice of intent to use the made-up name locally. In most states, the names of corporations, LLCs, and limited partnerships must be filed with, and approved by, the state’s Secretary of State at the time of incorporation or formation of the entity. Fictitious-name registration requirements apply primarily to sole proprietorships and partnerships since neither requires formal registration at the state level (you need a brief legal consultation with knowledgeable local counsel to be certain that this is the case in your state).
In most states, fictitious business names are registered and searched at the county, rather than state, level. For example, if you live in Los Angeles County, the search engine for locating fictitious names used in business within the county is found on the county’s website at http://www.lavote.net/fbn/fbn.cfm. To find your county’s website, go to www.naco.org, select About Counties, and then select Find a County. Also, check for the name you intend to use in your local phone book, both White and Yellow Pages.
Also look for fictitious-name search engines on the website of your home state’s Secretary of State. For example, Florida has a statewide fictitious-name search engine at http://www.sunbiz.org/corpweb/inquiry/ficmenu.html. A link to your state’s Secretary of State website is available at http://www.nass.org/busreg/corpreg.html. You may find it easier to run your fictitious name through a commercial search engine. Experian offers such a search engine at http://www.experian.com/business/fictitious_business_name.html. The cost of the Experian name search, at this writing, is a very reasonable $10. A generic form for filing a fictitious business name is available at http://www.ilrg.com/forms/vfictname.html. Or go to your county courthouse and ask for the office where fictitious business names should be filed.
The legal penalty for failing to properly register your fictitious name can be steep. For example, in Pennsylvania, failure to register a fictitious name can result in loss of your right to enforce a contract in the Pennsylvania courts, and at least $500 in additional fines. Further ramifications of failure to file a fictitious name are provided at http://www.e-magnify.com/articleview.asp?ID=541.
Equally important is the practical consequence of having to abandon a business name that was chosen too casually. Consider the cost of changing your listing in the Yellow Pages; reprinting your letterhead, business cards, office signs, brochures, and leaflets; and the cost, time, and embarrassment of notifying all your customers of your unfortunate initial choice of name. So what’s in a name, Shakespeare? Plenty.
Trademarks, Trade Names, and Domain Names
A complex group of federal and state laws combine to protect business owners’ exclusive rights to the use of their trademarks, trade names, and domain names. The names you choose to use in your practice cannot infringe others, just as others cannot infringe yours. Each form of so-called intellectual property provides, in essence, legal protection for the industriousness, marketing expense, and quality-control measures that you’ve built into your coaching practice. In accounting terms, trademarks, trade names, and domain names reflect and protect the goodwill of your professional practice. Trademarks, trade names, and domain names grant holders not just the right, but also the obligation, to prevent Johnny-come-latelies from using names or logos that customers might easily confuse with yours.
How much should you fret over infringing someone else’s trademark or trade name? For most coaches, an expensive trademark search and legal opinion really are not necessary, unless you are tempting fate by using part of a well-known trademark (such as Kentucky Fried Coaching). Consider the consequences if you are forced to change your business name after making an ill-fated choice. If the name change would cost very little, and would have virtually no impact on your existing clients, you don’t need to have a legal education in trademark, trade name, or domain name law. If you coach solo, it is highly improbable that a name change would have a serious impact on your practice. (For further guidance, see Elias, 2003.)
Do I Need a Business License to Practice as a Fee-Based Coach?
One or more types of licensing may apply to your coaching practice. In virtually all locations, you’ll need a local business license; and in some states, you may also need to obtain a competency license at the state level. The purpose of competency licensing has less to do with taxes and more to do with protecting the unsuspecting public from charlatans and quacks in professional fields that require specialized knowledge, training, and skill, such as practicing law, medicine, or accounting, or with protecting the public from shoddy work by tradesmen, such as plumbers and electricians. Details concerning each form of licensing are provided in the next section.
Local Licensing Requirements That Apply to All Businesses
Counties and/or cities (especially larger cities) require businesses that operate within their boundaries to obtain a license to conduct business, and they do so primarily to collect a tax based on the projected or actual income of your coaching practice.
Compliance with local business licensing is a minor nuisance, but it also carries benefits. One benefit is to establish credibility with potential clients. Your local business license is one more plaque on your waiting room’s wall, in case you’re a coach who has fewer than three university degrees. Another practical benefit of the business license is to establish credit if you are self-employed (which some lenders define as deriving more than 50 percent of your income from a business of which you are a 25 percent or greater owner). Credit applications must often be accompanied by proof that you have practiced as a coach for two or more years. Business licenses and renewal certificates are often accepted as proof of two years’ worth of self-employment.
To comply with local business-licensing requirements, first go to your local city hall (or town hall), and ask if you must obtain a license to conduct business at the city or town level. If not, city hall will direct you to the county office responsible for issuing business licenses.
Do I Need a State-Issued Professional License to Practice Coaching?
The International Coach Federation (ICF) Regulatory Committee has been carefully monitoring a possible trend for state legislators and regulators to define coaching as part of the regulated mental-health or professional-counseling fields. Approximately 40 states have statutory licensing boards for professional counselors. It is incumbent on coaches to personally examine state laws that define licensing requirements for those who are either mental-health professionals or professional counselors and consider whether their work falls within the ambit of such regulations. At the time of this writing, these developments are still unfolding, and it will be wise to keep abreast of future developments.
The ICF Regulatory Committee has also identified Washington and California as states in which it may be necessary to register with a state regulatory agency as unlicensed therapists or counselors. Also, New York passed a law in 2002 that defines mental-health practitioners broadly, making it possible that coaches will be treated as counselors, and thus require a state mental-health license, effective January 2005. If you live and practice in the states of Arizona, California, Florida, Minnesota, New York, or Washington, you should closely monitor legislation and rule making that affects mental-health practitioners. At the present time in Colorado, an explicit exemption has been granted placing these professionals outside of the mental-health regulatory framework: “The provisions of this article shall not apply to professional coaches who have had coach-specific training and who serve clients in the capacity of coaches” [CRS 12-43-215 (10)].
Do I Need a Formal Contract with Clients Who Retain Me?
“The faintest ink is more legible than the best memory.”
—Anonymous
In short, yes, you should enter into a written contract with each of your clients. At a very fundamental level, the process of reaching an agreement with a contract is to come to a meeting of the minds. When used in the context of professional services, this agreement is sometimes called an engagement letter. Professional coaches, like lawyers, architects, engineers, software programmers, and other professionals, need a somewhat detailed, written agreement for professional services. Once you have drafted this agreement and presented it to your client, it is wise to provide your client time to read the agreement, amend it if necessary, and sign it. Why have the client amend the agreement? If a dispute should arise with a client under the agreement, you will be able to show that you provided a fair opportunity for your client to read the contract and make changes. The amended agreement further shows that your client exercised the opportunity. The amendment your client suggests also shows equal bargaining power between you and your client. Courts tend to disfavor take-it-or-leave-it contracts, technically known as contracts of adhesion.
In addition to the formal, legal elements of a contract, such as offer, acceptance, and consideration (a formal legal term relating to exchange of mutual value in the contracting process), there are a number of considerations to address about how the coaching process will work. Some coaches refer to this process as designing the alliance with the client, and this phrase aptly communicates the goal of the contracting process. Even though his description of contracting comes from a consulting perspective, Block (2000) offers an eloquent description of the formal and informal contracting process.
Written agreements for coaching services, in and of themselves, dramatically reduce the chance of a dispute when your client receives the bill. Therefore, you increase the likelihood you will be paid. If your dispute should end up in small claims or an even higher court, your written agreement will give you legal legs to stand on.
Figure 8.1 provides two samples of professional coaching agreements, based on the contract I have used for several years in my practice and a coaching agreement from the International Coach Federation website. These agreements are merely illustrative, and an agreement suitable for your type of coaching practice is important to craft in the context of the type of work you do.
Figure 8.1 Sample of Coaching Agreement
Another best practice among coaches is to incorporate a code of ethics addendum to your coaching agreement and discuss the reasons you have chosen to include these ethical guidelines in your work. Provisions in such a code of ethics frequently include discussions of confidentiality, qualifications, referral options, boundary issues, and so on. The ICF code of ethics offers guidance in many of these basic ethical principles in the coaching arena.
At What Point Should I Hire an Attorney for My Coaching Practice?
In spite of all the lawyer jokes you may have heard, sooner or later every businessperson needs competent legal advice, and so do you in connection with your coaching practice. Even people trained as lawyers sometimes need a lawyer, lest they suffer the fate wherein lawyers who represent themselves have a fool for a client, as the common saying goes. One of the most important functions of seeking legal advice is to obtain competent, objective, disinterested counsel.
Among the most important services a lawyer can provide is preventative law. By consulting with a lawyer early in your business development, you may be able to avoid much more serious problems later. Consider the expenditure of funds to receive capable legal advice early as a combination of a good investment and an insurance policy. A lawyer should be viewed as a key member of your board of advisors. Along with your accountant and marketing advisor, your lawyer is a critical part of your resource team. Essentially, you, as the client, are the quarterback of this team, but you can function in a much more informed and knowledgeable way when you know your legal options and can make a conscious choice about those options.
When Do I Really Need a Lawyer?
In a society and business environment as complex as ours is today, functioning as a business many times requires sound legal advice. Among the common business situations in which legal counsel is well advised for coaching practices are the following:
- When finalizing the business structure for your coaching practice
- Before you finalize the form contract you will use for client assignments
- Before you sign a major contract or a lease (for office space, large assignments, etc.)
- When you hire employees or anyone you expect to pay more than $600 (to review employment agreement, to understand your tax and other reporting obligations as an employer)
- Before you undertake a joint venture or partnership
- When you need to protect intellectual property you have developed in the course of your practice (trademarks and copyrights)
How Do I Find a Good Lawyer?
Finding a trusted advisor to help you navigate legal terrain can be a daunting task; it is also a highly personal decision. Although different people will approach this task using different methods, the following guidelines will help to demystify the process and make it less intimidating.
Step 1: Gathering Candidate Names
Referrals from friends or colleagues are often a sound method of developing a list of potential lawyers to handle your routine business matters. Lawyers, like doctors, have become highly specialized, so you will need to match your immediate need with the correct field of legal specialization. For general advice relating to your coaching practice, retain a lawyer with at least five years of experience who has many small businesses as clients.
By calling the attorney referral service of your state or county bar association, you can obtain names of attorneys who serve as small-business counselors. You can also consult Yellow Pages advertising; but remember, you are still at the name-gathering stage. Finally, you can gather names of candidate attorneys from the following online sources:
West’s Legal Directory (www.findlaw.com)
Martindale-Hubbell (www.martindale-hubbell.com)
Public libraries also carry a printed directory of lawyers called the Martindale-Hubbell Law Directory. This publication, like its online counterpart, offers peer ratings of attorneys, information about their educational backgrounds, articles they have written, and representative clients. Look for attorneys who have AV ratings. The AV rating reflects the opinion of fellow attorneys that the listed attorney is competent and ethical.
Some states have specialization certification, wherein lawyers have demonstrated to a certification board that they have deeper knowledge and experience in a particular specialized area of law. Depending on your legal needs, such as trademark advice, for example, certification as a specialist can help you decide on a lawyer.
Step 2: Interviewing Your Candidate Lawyers
Meeting with your prospective lawyer candidates can be an intimidating experience. Remember, in the attorney–client relationship, you, the client, are the boss. You are seeking the advice of a lawyer and expertise in legal matters, but you are the decision maker. You should set aside time to interview no fewer than two candidates, but three is better.
Here is a checklist of questions you should ask during your interviews:
- Does the lawyer have at least five years’ experience representing clients with needs like yours?
- Can the lawyer refer you to several clients with legal needs similar to yours who can vouch they were satisfied with services provided?
- What fee arrangements does the lawyer propose?
- Does the lawyer have a written engagement agreement that describes how services are provided and what fees and incidental costs will be charged?
- Is the lawyer amenable to working with your other advisors, such as your CPA?
- Can the lawyer give you an estimate of the total cost of your project or legal matter?
Step 3: Making Your Choice
After meeting your prospective lawyer, reflect on how the meeting went:
- Do you feel comfortable with this lawyer as an individual?
- Are you comfortable with the lawyer’s experience in the area in which you need counsel?
- Does the lawyer give you the opportunity to ask probing questions?
- Can you afford this lawyer or law firm?
Remember, you are not bound for life to continue working with the attorney you initially select. But the more time, effort, and care you spend making an initial selection of legal counsel, the easier it will be to focus on your coaching practice, and you will sleep better knowing that you have another ally in business with you.
Why Should I Worry about Intellectual Property?
Coaches deal not only in the domain of emotional issues, but also in the domain of behavior and cognitive issues. In the course of coaching an individual, a team, or a group, a coach frequently will develop, and certainly use, copyrighted material.
Included in the ICF code of ethics are the following provisions:
Professional Conduct at Large
In addition to these provisions in the code of ethics, there are quite specific and detailed legal requirements regarding the protection of intellectual property, including copyrighted works, trademarks, and the like. A detailed discussion of these matters is beyond the scope of this chapter, but several excellent resources are noted in the Additional Resources list at the end of the chapter.
What Type(s) of Insurance Should I Have?
Coaches typically need property, liability, disability, auto, and other forms of insurance. (See Kelley, 2003 for a more complete coverage of this topic.) Professional liability insurance deserves special mention, not only because the stakes are high, but also because this aspect of insurance can easily be misunderstood. Why bother? The rationale may be as simple as that doing so will allow you to sleep better at night, knowing your assets are protected and that you have anticipated the cost of your legal defense if a lawsuit should arise. At this point, the insurance landscape for coaches is quite unsettled. Because coaching as a distinct field is so new, the lack of experience (such as claims history) with the pool of insureds makes underwriting these policies difficult.
Best Practices
This section highlights some best practices to attend to in your coaching practice. These areas are by no means exhaustive of the facets of your work that require attention. Rather, they are illustrative of the aspects of a coach’s practice that can support and lend structure to effective coaching. In many ways, adhering to these practices will help to keep you centered, grounded, and fully present as you deliver coaching to clients.
The code of ethics of the International Coach Federation serves as a set of specific guidelines that articulate the ICF’s philosophy of coaching, definition of coaching, the standards of ethical conduct, and a pledge of ethics. A detailed analysis of each of these provisions is beyond the scope of this chapter. Moreover, these guidelines are continuing to evolve, so a professional coach is well advised to keep apprised of changes to these guidelines and additional material, which will further interpret and clarify the standards of conduct for coaches. The ICF’s code of ethics is found in Appendix A in this book and at the website of the International Coach Federation at www.coachfederation.org/eweb.
Record Keeping
At the slightest hint that something may be going awry in a coach–client relationship, it becomes even more imperative that you keep good records and document your activity in the coaching relationship. The discipline of maintaining good records is vital and may help if you ever become a defendant or need to testify in court. Presumably, if you have attended an accredited coach-training program, one aspect of your training will include documenting a client relationship over time (in essence, a longitudinal case study). By incorporating this discipline into your practice, you are prepared if you ever need to defend a particular action you took in a coaching relationship. Admittedly, needing to document your actions seems contradictory to holding a client in a place of unconditional positive regard; yet from a professional practice perspective, it is indeed a prudent approach. Moreover, documentation can be part of holding your client accountable for his expressed goals.
Confidentiality
Chapter 5, “Developing and Maintaining Client Trust,” offers a much more thorough treatment of the issue of confidentiality, but this issue is worth mentioning in a more general treatment of legal issues and coaching. A nearly universal tenet is that conversations and subject matter of a coach–client relationship are understood to be confidential. Despite this nearly universal understanding, what are the limits of confidentiality? The ICF code of ethics states:
Protecting Confidentiality by Asserting Privilege
At the time of this writing, no recognized coach–client privilege is comparable to attorney–client privilege, priest–penitent privilege, doctor–patient privilege, and so on. Thus, if a coach were somehow required to testify in a lawsuit through the subpoena process, the coach would be required to testify or face the possible risk of contempt of court, unless a judge could be persuaded that a coach–client privilege existed.
Emerging Issues
As codes of ethics emerge, as more and more coaches seek formal coach training, and as practices develop, the field of coaching appears to be gaining increasing momentum as a discrete profession. Among the traditional attributes of a profession are elements such as a well-defined body of knowledge and expertise, and widely accepted and adopted ethical principles. As codes of conduct develop in a profession, one by-product that emerges is something in tort law known as a standard of care. If one gains a particular credential in the field of coaching and represents oneself as a master certified coach, there is a strong likelihood that the bar, in effect, will be higher and that the holder of such a credential will need to coach in a manner consistent with the requisite standard of care and competency of a coach holding such a credential. One way to maintain competence and uphold the standard of care is by continued education.
Professional Continuing Education Issues
Another aspect of credibility for a new field such as coaching is how coaching intersects with other, more established fields. The following case arose in a somewhat arcane area regarding continuing education credit for lawyers: Ash Grove Group v. Minnesota Board of Continuing Legal Education (Minnesota Supreme Court docket number C2-84-2163), 2003.
The subject of the seminar was career satisfaction for judges and lawyers. After several years of wrangling over credits at the administrative level (the Board of Continuing Legal Education), the sponsor of the program eventually sued the CLE Board, and the matter was argued in the Minnesota Supreme Court in September 2003. The key issue was whether a coaching-style seminar that involved seminar attendees in coaching exercises grounded in adult development was “directly related to the practice of law” or simply personal development and thus not eligible for CLE credit. Ultimately, the Minnesota Supreme Court essentially acknowledged the validity of the coaching component of the seminar and issued a more expansive rule that accommodated courses such as the one in question. (See Keeva, 2004.)
Marketing and Hype
Coaches can get in both ethical and legal hot water by overstating credentials or capabilities. The ICF code of ethics states: “I will accurately identify my level of coaching competence, and I will not overstate my qualifications, expertise, or experience as a coach.”
The law allows a certain amount of puffing in the sale of goods or services, but excessive braggadocio about the benefits of coaching can be elevated in court to a warranty of results, or even charges of deceptive trade practices if outlandish benefits or outcomes from coaching are promised.
The Uniform Commercial Code attributes an implied warranty to the sale of goods. By analogy, if your website or direct-mail piece, in effect, assures a superb outcome with every coaching relationship, a court could imply that superb results were either expressly or impliedly warranted. Coaching outcomes, of course, are highly variable, so do not oversell outcomes in your promotional materials. Focus instead on processes that provide opportunities for personal growth and development, and the guiding hand that the coach provides in helping clients realize those opportunities.
Application
In the following scenario, we present a case that highlights several issues that frequently occur in executive coaching sessions. Among the issues that arise in this scenario are the demands of a client’s role in an organization, the political context in which a coaching relationship happens, competing demands of personal and work commitments, the sometimes fuzzy boundaries between coaching and therapy, and the ever-present array of ethical issues that may surface during and after coaching engagements.
References
Block, P. (2000). Flawless consulting: A guide to getting your expertise used (2nd ed.). San Francisco: Jossey Bass.
Elias, S. (2003). Trademark: Legal care for your business and product name. Berkeley, CA: Nolo Press.
Hudson, F.M. (1999). The handbook of coaching: A comprehensive guide for managers, executives, consultants, and human resource professionals. San Francisco: Jossey Bass.
Keeva, S. (2004). CLE for the whole person. American Bar Association Journal, 76.
Kelley, D. (2003). The business of coaching: A comprehensive guide to starting and growing your coaching practice. Salinas, CA:Clarity in Action.
Shapiro, F. (1993). The Oxford dictionary of American legal quotations (p. ix). New York: Oxford University Press.
Williams, P., & Davis, D.C. (2002). Therapist as life coach:Transforming your practice. New York: W.W. Norton.
Additional Resources
The resources listed here are merely a sampling of a wide array available. Rather than overwhelm the reader, the purpose of this annotated list is to provide a starting point for high-quality tools in the area of law and coaching. Most of these tools, in turn, include rich bibliographic resources. Inasmuch as Internet search engines, such as Google and Yahoo, are becoming increasingly sophisticated, using the technology available for your research can help with specific inquiries. Moreover, governmental websites are offering an ever-increasing amount of primary legal materials online, as well as providing tools to help streamline your search.
Besenjak, C. (2001). Copyright plain & simple (2nd ed.). Franklin Lakes, NJ: Career Press.
Very readable explanation of basic intellectual-property concepts, with an emphasis on copyright law.
Bloomsbury Publishing PLC (2004). The ultimate small business guide: A resource for startups and growing businesses. Cambridge, MA: Basic Books.
Comprehensive compendium of action lists, directories, resources, checklists, and planning tools that affect small businesses.
Boulay, D.-N., & Pohlman, K.J. (2003). The entrepreneur’s legal guide: Strategies for starting, marketing and making your small business profitable. Naperville, IL: Sphinx Publishing.
Offers tips, legal alerts, questions, and resources to allow readers to consider the unique aspects of their own situations. Avoids the cookie-cutter approach that sometimes afflicts this type of publication.
Carter, G.W. (2003). J.K. Lasser’s taxes made easy for your home-based business (5th ed.). Hoboken, NJ: John Wiley & Sons.
A practical handbook for self-employed individuals, whether sole proprietors, partnerships, or corporate entities. Offers a realistic, thorough discussion of the choice of business form, as well as references to the Internal Revenue Code, regulations, and key legal decisions.
DuBoff, L.D. (2004). The law (in plain English) for small business. Naperville, IL: Sphinx Publishing.
Exceptionally clear and accurate descriptions of commonly encountered legal questions that affect small businesses. This text contains expanded coverage of several topics found in this chapter, such as contract and intellectual-property issues.
Elias, S., & Stim, R. (2001). Patent, copyright & trademark: An intellectual property desk reference (4th ed.). Berkeley, CA: Nolo Press.
Comprehensive collection of definitions, statutes, forms, and text to help readers navigate the complex world of intellectual property.
Floyd, P.M. (2003). Counseling the unlicensed counselor. Hennepin Lawyer 72, 22–25.
Excellent and insightful analysis of the Unlicensed Counselor Law recently enacted in Minnesota. Although its emphasis is on the Minnesota Statute, the commentary applies to the settings in other states where legislation has been pending or enacted.
Garner, B.A. (Ed.). (1999). Black’s law dictionary (7th ed.). St. Paul, MN: West.
This classic resource is perhaps the most widely sold single volume about law in the United States. The dictionary provides a basic foundation for deciphering the vocabulary of the law, which is a fundamental requirement of understanding legal concepts.
Irving, S., & Michon, K. (2000). Nolo’s encyclopedia of everyday law: Answers to your most frequently asked legal questions. Berkeley, CA: Nolo.
Broad-based coverage of a wide variety of personal and business-related legal issues. This text provides basic, straightforward answers to frequently asked questions about legal issues.
Sharma, P. (1999).The Harvard Entrepreneur’s Club guide to starting your own business. New York: John Wiley & Sons.
A manual designed to fuel and support entrepreneurial energy. This text provides not only an overview of the context for setting up a business, but also a perspective of the legal, economic, and regulatory climate that affects entrepreneurs.
Shea, B., & Haupt, J. (1995). Entrepreneur Magazine small business legal guide. New York: John Wiley & Sons.
Somewhat dated, but still useful as a sourcebook for forming and managing a small business.
Steingold, F.S. (2003). Legal guide for starting and running a small business (7th ed.). Berkeley, CA: Nolo.
One of the best and most current resources available at a modest price for a fairly comprehensive guide.
Warda, M. (1998). How to register your own copyright (2nd ed.). Naperville, IL: Sphinx Publishing.
Resource guide covering the legal issues and procedures to register your copyrighted material, complete with appropriate forms from the U.S. Copyright Office.
Whitworth, L., Kimsey-House, H., & Sandahl, P. (1998). Co-active coaching: New skills for coaching people toward success in work and life. Palo Alto, CA: Davies-Black.
Excellent overall coaching resource with numerous forms, coaching agreements, and tools to assist in the management of a coaching practice.
Williams, P., & Davis, D.C. (2002). Therapist as life coach:Transforming your practice. New York: W.W. Norton.
A resource to better understand the demarcation between coaching and therapy. The description of the history and evolution of life coaching is especially useful to understanding the background and distinctions between the fields of psychotherapy, counseling, and coaching.