Consulting on Y2K issues can be profitable, but it also exposes you to tremendous risks if you don’t have the proper legal protection behind you.

Y2K and the Law

Consulting on Y2K issues can be profitable, but it also exposes you to tremendous risks if you don’t have the proper legal protection behind you.

• By Harry Brelsford
• February 01, 1999

I’ve been eating a lot of rubber-chicken lunches lately. My firm’s entry into the small-business Y2K consulting area has resulted in the requisite lunch invitations from fraternal, business, and trade associations to discuss Y2K. But Y2K has been more than chicken lunches for me. This consulting area has also forced me and other consulting MCSEs to evaluate how we conduct our business and perform our work.

Warranty of Merchantability

Before delving into Y2K specifics, let me discuss a few legal matters that many MCSEs encounter. The first matter involves how well software applications work and who’s responsible when they don’t. Perhaps you’ve experienced this when you’ve installed an operating system or application that doesn’t work perfectly all of the time. Although we MCSE-types understand that that’s life, our secular business clients see things differently. These are the business managers who start backing out $2,000 or more per hour in lost company revenue when BackOffice checks out. These people want someone—perhaps you—to be responsible. In short, your client’s network downtime may expose you to financial liabilities you didn’t anticipate. Often, this is because clients assume that you’re responsible for the fitness or “warranty of merchantability” of the software you install and maintain.

Clearly, such shouldn’t be the case. If your client purchased an application from a software manufacturer, you should modify your consulting engagement letter to state that you are ultimately not responsible for the software’s performance. The engagement letter that I use clearly delineates that I’m a consultant retained to install software purchased by the client. I make no claims toward the fitness of the software product itself. Periodically, I also try to manage client expectations by reminding them that I’m serving as their consultant to install their software. It’s only smart.

Y2K Specifics

This leads me to the pluses and minuses of having a Y2K consulting practice, traps and all. It is, indeed, a popular and profitable offering that MCSEs should consider. But by offering your Y2K consultant expertise, you’re clearly exposed to potential legal liabilities. Here’s the drill.

Suppose you assess a business’ Y2K fitness using techniques that you’ve learned from Y2K consulting books and the Web (and the articles in this issue!). You issue a letter that reflects not only your findings but also the work you performed to cure the Y2K problems. Several months hence, the magic day arrives: January 1, 2000. When everyone returns to work that following Monday (January 3rd), the business that you “certified” as Y2K-compliant begins to experience strange computer-related occurrences. Such occurrences prevent the business from performing its work fully. Shortly thereafter, you receive a letter asking you to appear in civil court to defend yourself. Bummer.

This unfortunate case study is likely to become reality for those MCSEs who try to enter the Y2K consulting field unprepared. So what can you do? First, spend the $1,000 or so it takes to have a fully qualified contracts attorney review your engagement letter and Y2K certification letter. Well-prepared communications and documentation can save your bacon. Second, fully explain those forms of communication (engagement letter, Y2K findings, and so on) to your client at the beginning of the engagement and, if possible, during and at the end of the engagement as well. This isn’t just a courtesy—it makes your actions and behavior that much more defensible before judge and jury. Third, read on for my discussion regarding professional liability and errors and omissions insurance.

BackOffice to Boardroom

The services MCSEs perform are no longer limited to the back office. Instead, they’re often observed from the boardroom, making it more important than ever to have some form of insurance to protect you. As a professional, this insurance is typically known as professional liability insurance or errors and omissions insurance—call it malpractice insurance if you like. Here, the idea is that, as a professional, you’re held to a high standard of performance. But if you’re negligent, for whatever reason, you might be responsible for the financial damages and havoc you’ve wreaked on the injured party.

Well, being the smart MCSE that you are, somewhere along the way you’d better have acquired professional liability insurance to protect your assets (and your behind too!). This type of insurance will protect you from claims. Properly structured, it’ll pay off any damage awards assessed against you plus cover your legal fees. Do not provide Y2K consulting services without it. You can acquire such insurance from a number of insurance brokerages. To find an insurance agent to underwrite your professional liability insurance needs, start by asking the attorney you retained to draft your engagement letter who his or her insurance broker is. If that doesn’t work, ask that accountant you hired to manage all of your Y2K consulting practice profits!

Merchant of the Trade

Our industry is changing. We MCSEs, MCPs, MCSDs, and the like are no longer viewed as just hackers, mere computer guys and gals. Now clients and top management view us as experts. With this increased visibility comes increased likelihood of litigation. And, like the architect who appears in court when a suspended dance floor crashes in a hotel, MCSEs, et al., will get to know the courtroom when enterprise-wide WANs fail because of design negligence. In fact, I now take project meeting minutes just like architects and general contractors do on construction projects.

So what does it all mean? Should you vacate your MCSE designation and join the ski patrol up on a mountain pass? Perhaps not. By managing your professional consultant affairs intelligently, you can join the ranks of happy, healthy, and wealthy MCSEs across the land. So, rewrite that engagement letter with your attorney, be careful about what you say (especially in written reports), and acquire professional liability insurance. And be sure to raise your consulting rates to cover those insurance premiums! Good luck.