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BusinessColumnistsJamie Herzlich

Small Business: When inspectors or regulators come calling

Brian Valdini, owner and chef at fatfish Wine

Brian Valdini, owner and chef at fatfish Wine Bar & Bistro, in Bay Shore on Sept 4, 2014. Credit: Barry Sloan

A visit from an inspector or regulator can spark fear and trepidation in even the most confident small-business owners.

Government officials can come knocking -- often unannounced -- in various capacities, from health to safety to tax compliance.

Knowing how to deal with their visits is half the battle, say experts, noting these types of visits are par for the course in an environment of increasing regulation.

"With more regulation comes more examination," says Braden Perry, a former federal enforcement attorney and a partner at the Kansas City, Missouri, law firm of Kennyhertz Perry LLC. "It's becoming more and more common."

The key is being prepared, says Perry, whose firm assists companies in government investigations and examinations.

Ideally you'll have notice that inspectors are coming, but that's not a requirement, he says. "At times they show up unannounced."

If you know they're coming in advance, prepare before their visit to have all the documents they're asking for handy, says Perry. It's wise to consult with a lawyer first, though, particularly if they're requesting information or documents deemed privileged or confidential.

"It's much better to be prepared and have the information available than scramble at the last minute," says Perry.

Knowing what they're looking for in advance can help move the process along, says Brian Valdini, chef-owner of fatfish Wine Bar & Bistro in Bay Shore, who had to work with inspectors on multiple levels as he rebuilt his restaurant after superstorm Sandy. About 60 percent of his waterfront eatery was damaged.

Valdini and his architect tried to be proactive, familiarizing themselves with state and town requirements so they would understand the inspectors' expectations and be able to comply with code and avoid delays.

"Mutual cooperation" and taking heed of the inspectors' suggestions helped move the now-complete eight-month, $800,000 rebuild process along, says Valdini.

Some of the requirements from state and local authorities were new, such as incorporating steel support columns throughout the structure. It increased costs but will help his structure withstand another storm, he says.

"It's so important to cooperate, because there are many reasons the code is there, for the health and safety of your customers," says Valdini.

The same is true for routine health inspections.

"There may be new codes or regulations in food handling that you may not have known," says Valdini. "So use it to help educate your staff and improve the safety of the customers."

Valdini was prepared for his visits, but what if an inspector or regulator shows up unannounced?

You can still prepare, says Mark Reinharz, a labor and employment attorney at Bond, Schoeneck & King in Garden City who has helped companies deal with Department of Labor-related safety and wage-and-hour visits.

Train your security guard or receptionist on what to do in this scenario (for example, not letting inspectors roam free; informing management they are there).

You also want a designated go-to person if the government does come knocking, says Reinharz.

"At least two people should be designated in case one is on vacation or out," he notes.

Ask for credentials and find out why they are there. "If you are uncomfortable, you do have the right to refuse entry, and they most likely will get a search warrant," he says. "It will buy you some time."

You could also try asking them to come back at a later date, he notes, saying you're not prepared but will try to pull documents together.

If you do allow them access to the building, make sure they're accompanied by a company official and that person is taking notes, so he or she can understand infractions being cited and make sure there are no discrepancies, says Reinharz.

The way you interact with them can make a big difference, says Dean Hyers, principal of SagePresence in Minneapolis, a learning and development firm focused on high-stakes communication. Show confidence, positiveness and warmth, he notes.

"The confidence shows I'm not afraid, and warmth is sort of inviting and creates comfort for everyone," Hyers says.

Confidence is largely communicated through eye contact, he says, adding that longer sustained eye contact shows confidence.

Showing positiveness and warmth doesn't mean you have to give them everything they ask for, but it relays that you're trying to be cooperative.

Keep in mind they're likely feeling uncomfortable too.

"Part of the discomfort is they know you are uncomfortable and afraid of them," Hyers says. "They're on edge already."


What to do if a search warrant is executed at your business:

1. Don't interfere with the agents in their search.

2. Demand a copy of the warrant and the business card (or name) of the agent in charge, including the office or agency that he or she represents.

3. Be sure the highest-ranking employee of the company on the premises is informed of the situation.

4. Accompany agents and take notes.

5. Ensure only those items referred to in the search warrant are taken.

Source: Braden Perry, Kennyhertz Perry LLC

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