Running a [Jailhouse] Business: Practical and Legal Considerations

It takes a certain kind of person to be a creative entrepreneur. A successful business is made up of more than just a good idea. Good ideas are key, but they are also a dime a dozen. Solid execution is needed to bring that idea to fruition, to turn that idea into a going concern, to have that idea make money.

Building a business involves juggling competing demands – product development, marketing strategy and sales, finances, resources, inventory, customer fulfillment, and employees.

When guiding a creative enterprise, a business leader has to balance practical considerations with the imperatives of legal requirements. Unless, of course, it is an illegal business.

In season 4, episode 4 of “Orange is the New Black,”  Piper Chapman’s monopoly in the prison dirty panty business is jeopardized when competition enters the market. In addition to having to deal with an upstart start-up, Piper is peppered with potential entrepreneurial problems like discriminatory employment practices, wage and hour disputes, disloyal employees without non-compete restrictions, no copyright protection in the her industry, ineffective negotiation and dispute resolution tactics, inadvertent trade secret disclosure, unhealthy company culture and not-so-unfair competition.

All in just three minutes.

Let’s break down Piper’s business challenges, her management style and decision making strategies in response to those challenges:

Employment Discrimination: Blanca questions why Piper has not hired her to work in the panty business. The implication is that Piper’s refusal to hire Blanca is because she belongs to a protected class. In most employment-at-will states, an employer can refuse to hire an employee for any reason or no reason, but not for an illegal reason. The illegal reasons to refuse to hire someone are on the basis of: race, religion, sex, age, disability, or national origin. Those are protected classes. Snarling, nasty, disheveled, and slightly crazy is not a protected class.

If Piper refused to hire Blanca because she is Dominican, that would be an illegal reason. If Piper refused to hire Blanca because she didn’t think Blanca would take the job seriously, that would be a legitimate business reason. Once Piper lays out a legitimate business reason, Blanca has to prove that the real reason she wasn’t hired was her national origin. Without that proof, it’s not a discriminatory employment action.

Cease and Desist: When Piper learns that someone is copying her game, she sets about trying to put an end to it by having a direct but pleasant conversation with a person who may have a line to the problem, “You may not know this but . . . . and it has to stop.”

The polite approach, whether in person, on the phone or by email, is usually the first step in the dispute resolution “Ladder of Enforcement” (the top rung is litigation or, in prison, probably worse).  In many cases, a simple, well-reasoned request to stop the offending behavior with a solid explanation of the proprietary rights that support the request will end the matter.

Instead, Piper gets schooled by Maria.

Copyright in the Fashion Industry: Maria tells Piper that she doesn’t “have a copyright on the dirty underwear business.” That statement contains a hard nugget of truth. Clothing is considered a useful item and there is only limited protection available in the fashion industry.

Maria is confident that she knows her stuff and informs Piper that the competition has come to town.

Trade Secrets: Without a copyright or other proprietary protection for her business, Piper’s only competitive edge over Maria is her secret business process which she carelessly begins to reveal. Maria takes thoughtful note.

Trade secrets can be any confidential business information such as sales methods, distribution methods, customer information, and vendor lists – information that is not generally known or easily accessible to those who aren’t in the inner circle of a particular industry.  If a business wants to protect its valuable secrets, it must keep them secret by not telling anyone what they are. In this case, how to smuggle dirty panties out of prison to meet the demands of a fetishized customer base would constitute a trade secret (and they can keep it a secret as far as I’m concerned).

Negotiation: When Piper realizes that the threat of a competing business is real, she tries reasoning with Maria. Negotiation is a tactic that takes place on all rungs of the Ladder of Enforcement when proprietary rights are violated. Piper’s obtuse, condescending approach doesn’t advance her cause though, especially in light of the fact that she has no leverage. So far, Maria is holding all the cards and is playing them well.

Work Force Problems: In an at-will employment situation, employees can quit on a moment’s notice without a reason (and employers don’t need a reason to fire them). If there’s no employment contract with an enforceable non-compete provision or other restrictive covenant, former employees can go to work for the competition.

Exit interviews, like the one Piper had with Flaca and Maritza, can be useful in improving a company’s corporate culture and increasing the chances of retaining those employees who remain. Here, Piper learned that money isn’t everything, that sometimes slipper socks will carry the day, that being nice counts a lot and that insincerity is an insult. These are all solid lessons in management that could make Piper a remarkably effective leader, if she heeds them.

And which, of course, she doesn’t.

Building a Management Team: Building an effective and charismatic management team is critical to the success of a growing entrepreneurial enterprise. Company leadership needs to surround itself with only the best and brightest in order to receive solid advice on business strategy. People with positive attitudes and behaviors, upbeat personalities and who are respectful of others will lift a company’s spirit and help drive the team forward.

Piper chose to hire a thug in an attempt to build a posse instead of a dedicated member of a cohesive management team who would set an example for other employees. And she failed at getting a good thug. Instead, her sidekick is an unenthusiastic thug impersonator who is willing to use her limited intimidation skills in furtherance of the enterprise, but would rather not.

Piper decides she has to handle the situation and confronts Maria herself.

Idea Protection: Piper is quickly moving to the top of the Ladder of Enforcement as she struggles to find a mechanism to protect her business after Flaca and Maritza quit. She uses aggressive dispute resolution tactics but her negotiation skills have not improved. Neither has her leverage.

There are really only two ways to protect an idea – keep it a secret or lock it down with a contract. Piper has done neither. Other than that, you have to beat ’em in the marketplace.

Unfair Competition: Piper just can’t put together a convincing case that Maria has done anything untoward by starting a competing business. She hasn’t misappropriated trade secrets, breached any contract, or infringed any intellectual property rights. The best Piper can come up with is that Maria is paying her employees in slipper socks but they seem to be OK with that and it may not be a minimum wage violation in prison.

All in all, Piper’s not doing so well juggling the responsibilities of managing a growing business. She is unprepared for competition and that has rattled her, she’s lost employees and given away trade secrets. She’s letting her emotions rule her actions.

It’s difficult to separate emotions from business decisions when you feel your hard work and ingenuity are threatened. But you have to stay cool.

Because it isn’t war. It’s business.

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2 thoughts on “Running a [Jailhouse] Business: Practical and Legal Considerations

  1. Alison Holt

    What a great approach to a sometimes boring subject! I actually read through your entire post on legal stuff with interest. And your parallels were spot on. My only question is, when you list the protected classes, is sexual orientation one of them, or is that just in certain states?

    1. Kathryn Goldman Post author

      Alison,

      Sexual orientation is not a protected class under federal law. Certain states, counties, and cities consider sexual orientation a protected status and have for many years. Baltimore City and Montgomery County, Maryland do, for example. The State of Maryland added sexual orientation as a protected class in 2001.

      Kathryn

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