Rush on Business : Iowa Corporate Lawyer & Attorney : Rush Nigut of Brick Gentry Law Firm : Serving Des Moines, Cedar Rapids, Davenport, & Sioux City

Are You Drug Testing? Make Sure to Comply with Law

If you are a private Iowa company that drug tests your prospective or current employees it is important that you pay attention Iowa Code section 730.5. This statute sets forth the obligations of private sector employers involving drug testing in Iowa. I have dealt with several employers who were surprised by the requirements of Iowa Code 730.5. Does your company have a written policy specifically for drug testing? Do you conduct random testing? If an employee tests positive are you prepared to allow that employee to go for drug treatment? These are just a few considerations addressed in the statute.

Before deciding to drug test you should make sure you review the requirements of Iowa Code 730.5 with your lawyer. Performing drug tests may be necessary in your business but you need to make sure you are acting within the requirements of the law. Mistakes could be very costly and subject you to significant liability.

Click here for more information regarding human resource audits for businesses.

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Articles of Incorporation or Organization Only Part of the Story

Now for the rest of the story . . .

Imagine a client that becomes embroiled in a disagreement with a 50/50 business partner. The two formed a LLC through a lawyer who was unfortunately not a business lawyer. The lawyer set up a limited liability company and drafted articles of organization. The problem - no operating agreement or initial meeting minutes.

Unfortunately this happens all too often. Without an operating agreement it is very tough to settle potential disagreements. How do you value the company? Who has authority or management rights? How are disputes settled? All of these items could have been set forth in an operating agreement. Instead, the parties may be staring a judicial dissolution in the face.

When do you need a shareholder agreement (Corp) or an operating agreement (LLC)? It is important to have one even if you are the sole shareholder or member. It helps establish corporate formalities to insulate you from personal liability. However, it is absolutely imperative to have such an agreement if you have more than one shareholder or member. That is the case even if the shareholders or members are family or best friends. Having a well-written shareholder or operating agreement can help prevent significant problems down the road.

Click here to learn about forming a corporation or limited liability company.

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A New York administrative law judge ruled that a city worker cannot be fired for surfing the Web. The judge said surfing the web is equivalent to reading a newspaper or talking on the phone, providing a combination of communication and information that most employees use as frequently in their personal lives as for their work. He added, "For this reason, city agencies permit workers to use a telephone for personal calls, so long as this does not interfere with their overall work performance. Many agencies apply the same standard to the use of the Internet for personal purposes."

Under the facts of this case, the administrative law judge ruled a only a reprimand was appropriate. But employees that think they now have a free pass to surf the Internet on the job should not get too excited. A well-written employment policy on Internet use would still allow employers to discipline employees if necessary for excessive Internet use. Those same policies would allow the employer to discipline an employee for excessive personal phone calls or reading the newspaper on the job. Overall, it is doubtful this decision will have wide-ranging impact in the private sector and employees should be careful to follow the written policies of the employer.

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Corporate Minutes Help Maintain Limited Liability Shield

Corporate minutes often seem unnecessary and mundane. Here's an article that discusses the importance of minutes and good record keeping in order to maintain limited liability in your corporation or limited liability company.

Click on the Inc article to learn more.

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Over the past twelve years I have had the opportunity to work with well over one hundred businesses. Many of them have been successful but many of them unfortunately did not make it. The common thread among those that did not make it? You guessed it. No written business plan and in most cases no planning at all.

Where do you start in writing your business plan? I suggest reading the book, How to Write a Winning Business Plan by Joseph Mancuso. I noticed most recently you could get a used copy for $.02 on Amazon plus shipping. But don't be fooled by the price, this is an excellent book full of good examples and tips for writing a top notch business plan. I also suggest you visit the SCORE Web site. The Web site has loads of information for entrepreneurs. You should also follow SCORE's Five Tips for Making the Most of Your Business Plan.

To learn more about incorporating your business or setting up a limited liability company please visit Sullivan & Ward's Web site.

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Thinking of Starting a Business? Consider Bizstarts

Are you starting a business? Do you need financing? Have you developed a marketing plan? Do you know how to do a balance sheet or profit / loss statement?

If you need a little guidance in getting started with your business you should consider calling Monica Dolezal of Bizstarts. Monica has thirty years experience in the banking business and has probably worked with over a thousand small businesses during her career.

She provides seminars and works with entrepreneurs one-on-one. She serves as an advisor to help you in the start-up phase. Check out her Website at www.bizstarts.biz

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Outsource Your Legal Work to Iowa:

I have recently read several articles concerning the outsourcing of legal work to India and other countries. In fact, outsourcing is becoming popular for high level legal work including mergers and acquisitions. I have often wondered - why don't companies outsource their legal work to Iowa? Relatively speaking we have lower hourly rates than larger metropolitan areas of the country and the quality of lawyers is excellent among the Iowa bar.

So take note and send that business to Iowa.

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Retaliation Claims Pose Threat

Iowa is known as an "Employment at Will" state. The mantra is that an employer may fire someone for "any reason" or "no reason at all" - as long as that reason is not discriminatory. However, there are exceptions to this rule. One of the major exceptions is when a termination violates the "public policy" of the State of Iowa. A violation of public policy often invokes a retaliation claim. You may need to worry about a retaliation claim under Iowa law if your reason for terminating the employee involves any of the following:

1) Filing a workers' compensation claim;
2) Filing a wage/hour claim;
3) Filing an IOSHA complaint;
4) Garnishment of wages;
5) Refusing to submit to a polygraph, except under law enforcement circumstances;
6) Participating in or refusing to participate in a labor union;
7) National Guard Duty;
8) Jury duty;
9) Taking time off to vote or voting for a particular candidate;
10) Deliquent child support payments / assignment of income;
11) Participation in a court-ordered drinking drivers course;
12) "Whistle Blowing" by public employees;
13) Request for the employee's personnel file;
14) Refusing to Commit an illegal act.

There are also federal laws which may give rise to retaliation claims.

It is important to keep in mind that a retaliation claim may be valid even if the original claim had no merit. It is important to establish a policy against retaliation and to faithfully follow it. If you have questions about whether you can terminate an employee please consult your attorney before doing so.

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AVOIDING DEFAMATION CLAIMS IN RESPONDING TO REFERENCE CHECKS: Iowa Code Chapter 91B.2

A significant potential liability faced by employers is defamation. To defame someone is to make a false statement that injures the person's reputation. A written defamatory statement is known as libel. A spoken defamatory statement is slander. In order to have a legitimate defamation claim the false statement must be communicated to a third person either in writing or orally. Generally to be defamatory the statement must be one of fact. Usually statements of opinion are not considered defamatory.

Job references often present a problem relating to defamation. Section 91B.2 of the Iowa Code provides potential immunity for information provided by employers about current or former employees.

1. An employer or an employer's representative who, upon request by or authorization of a current or former employee or upon request made by a person who in good faith is believed to be a representative of a prospective employer of a current or former employee, provides work-related information about a current or former employee, is immune from civil liability unless the employer or the employer's representative acted unreasonably in providing the work related information.

2. For purposes of this section, an employer acts unreasonably if any of the following are present:

a. The work-related information violates a civil right of the current or former employee.

b. The work-related information knowingly is provided to a person who has no legitimate and common interest in receiving the work-related information.

c. The work-related information is not relevant to the inquiry being made, is provided with malice, or is provided with no good faith belief that it is true.

Rather than run the risks many employers have a no comment policy whereby they give only the dates of employment and positions held. This is not particularly helpful to a prospective employer and it may actually hurt the employee's chances of getting the position because enough information is not known. In a bizarre twist some employers have actually been sued by prospective employers for not providing pertinent information regarding the current or former employee.

One potential solution is to adopt a no comment policy but to make an exception where the current or former employee approves in writing the employer providing a reference and release the employer from any liability associated with issuing the reference.

Whatever policy is adopted be sure you communicate it in writing to employees in the company handbook and follow it faithfully. The policy should identify those in the company that are authorized to give references and it should prohibit everyone else in the company from doing so.

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Talkin Baseball:

Let's take time away from business and corporate law. Let's talk baseball.

One of the bright spots in the major leagues this year is the play of Indianola, Iowa native Casey Blake for the Cleveland Indians. Casey is hitting over .400 and currently ranks in the top ten in batting average and on-base-percentage. Could an all-star game be in his future? A great start is no guarantee but Casey has historically played his best ball after April and May. Let's go Tribe!

On the downside, it is Barry Bonds. Bonds may very well be the greatest hitter that ever lived. (My Grandpa is probably rolling over with that comment but I never saw Ted Williams). I once saw Bonds receive four straight intentional walks. Sixteen straight balls. Pitch number seventeen? Bonds hit it out of the park. Who else could do that? Despite the revelations in Game of Shadows there is no conclusive proof that Bonds knowingly took steriods. It is tough to defend Bonds but I find it hypocritical the way Major League Baseball has acted with Bonds, McGwire, Sosa et al. MLB glorified the pursuit of the single season home run mark and fans returned in droves to stadiums across the country. (Recall that baseball was practically dead before Sosa and McGwire did their magic). Then came Canseco and his book. Next, Congress put the pressure on several sluggers and now the target is Barry Bonds. MLB recently announced it plans to investigate Bonds to determine if he used steriods.

It appears Bonds may be prosecuted for perjury. Interesting. I recall Rafael Palmeiro testified before Congress that he did not take steriods - shortly before he tested positive for steroid use. Was he prosecuted? No. In fact, the President of the United States (and former Texas Rangers owner while Palmeiro played there) supported his friend 100 percent. Bush believed Palmeiro did not take steriods even after a positive test! Bonds? The guy could really use a friend.

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Employer Personnel Files in Iowa - Part II

A typical personnel file may include the following:

-Employment application, along with supporting documents such as a resume, transcripts and interview notes;
- Recommendation letters and reference checks;
- Copies of non-compete agreements with any prior employer;
- Offer letters and/or employment contracts;
- Form I-9;
- Tax withholding forms;
- Job description;
- Copies of any required licenses or certificates required for the position;
- Receipt for the employee handbook;
- Testing materials, if any (Not drug tests or other medical related tests);
- Training records relating to safety, job competency, sexual harassment, etc.
- Evaluations;
- Awards and disciplinary actions;
- Pay records;
- Personal contact information - home address, telephone number, name of spouse and emergency contact
- Exit interview notes and/or form;
- Recommendation letters and notes of references given to prospective employers.

Employers should establish a records retention policy. When documents are required by law, the law usually specifies how long the document needs to be retained. In absence of a law, the applicable statute of limitations should be the guide. (A statute of limitations is a time period after which a lawsuit will be barred unless the claim is filed within the applicable time period.) Also look at your internal workings to determine if certain documents are needed in order to respond to requests for information.

If information is kept electronically, restrictions should be placed on who can access that information just like paper documents. Also back-up information needs to be kept off-site in order to protect against disasters or theft.

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Employer Personnel Files in Iowa

Employers should maintain a separate personnel file for each employee. An employer should also maintain a medical file which is separate from the personnel file. Both sets of files should be secured or locked. Access to those records should be restricted to a need-to-know basis and designated individuals should be trained in how to handle such records. The files need not contain everything related to the employee. Instead, management should determine in advance what documents are, and are not, to be kept in the file. In addition, it is a good practice to organize the file into sections so particular items can be located easily. Files should be periodically reviewed in order to ensure compliance with your policies and procedures.

Next post ... what types of documents should be kept in the personnel file.

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Do you want to build the next Subway? Curves? or Jackson-Hewitt?

Ask yourself these questions in deciding whether you should franchise your business.

1)Are you making a good living in your business?
2)Have you operated multiple locations?
3)Do you have a proven system of operation?
4)Are the profit margins large enough for the franchisee to make a good living, support employees and pay you a royalty?
5)Do you have the time to devote to a franchise operation?
6)Do you have the skill set to promote a franchise operation?
7)Do you have start-up and operating capital?
8)Will franchisees be able to get financing from afforable sources?
9)Does your business have a unique selling proposition?
10)Does success of the business depend on skills people have or can quickly acquire?
11)Is the market stable enough to provide for growth over several years?
12)Are you able to support franchisees once you get them in business and do you have something to offer them beyond getting them in business?

If the answers to these questions are "Yes" then perhaps you are a candidate to franchise your business.

Click here for more information regarding franchise UFOC and agreement review services.

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If you are considering a franchise you should conduct appropriate due diligence. One of the most important things you should do is contact as many current franchisees as you possibly can. For some reason this is often overlooked.

I strongly suggest you keep talking with current franchisees until you find someone who is willing to describe some problems or issues with the franchisor. Trust me - you will learn a lot more about the franchisor in that conversation than all the glorifying remarks put together. Because a franchisee has a problem does that mean you should look elsewhere? Not necessarily. It just means you are now able to make your decision with open eyes.

Click here for more information regarding franchise UFOC and agreement review services.

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Franchising is the most popular and fastest growing business model in the United States. There are thousands of franchises on the market. A franchise is a business "system" that allows people to share brand identification, a proven method of doing business and a successful marketing and distribution system. The selling point of franchising is that your assets are being put into a proven business. You may have the opportunity for a faster start up, developing a customer base more rapidly, and experiencing profitability with less risk.

With all opportunity there are pros and cons. The pros of franchises are that there is often a proven formula, owner training is available, and there is an ability to thoroughly review past records and company history. The cons of franchises are the royalty and national advertising fees are often significant and continue even though in some cases the ongoing support of the franchise is not stellar. A franchisor may get you into business but what they do after that is probably most important. If you pick a franchisor that does not have a proven system or good name identification what are you really buying? It may also be difficult to pick the right franchise or the right industry given the myriad of choices and sometimes financing options are limited.

If you are considering franchising a good resource to contact is Joe Cooney of Frannet. Joe is the Frannet consultant for Iowa and Nebraska. He routinely holds seminars in the Des Moines area and throughout Iowa. One of these seminars may help you decide whether franchising is right for you.

If you have any questions or need assistance reviewing a franchise agreement or Uniform Franchise Offering Circular you should contact a lawyer. Click here for more information regarding franchise UFOC and agreement review services.

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Iowa Federal Court to Host Teflon Lawsuit Battle

Numerous class action lawsuits filed against DuPont have been consolidated in the Federal District Court for the Southern District of Iowa for pretrial proceedings. Approximately one-third of the nation's population may be affected. The suits allege that DuPont knew for more than 20 years that Teflon and its component chemicals had the potential to make people sick - and hid that fact from consumers. DuPont contends the material is safe.

The class of potential plaintiffs could well include almost every American that has purchased a pot or pan coated with DuPont's non-stick coating. The lawsuits include six Des Moines residents who are represented by Des Moines lawyer Kimberly Baer of Wandro & Associates.

The lawsuits call on DuPont to:

-Pay damages to every member of the class to compensate them for purchasing replacement cookware.

-Create a fund for ongoing medical monitoring of consumers who purchased cooking products made with Teflon.

-Create a fund for independent scientific researchers to further investigate the potential for adverse health effects to consumers who used cooking products containing Teflon.

-Require that DuPont provide a warning label on cooking products regarding the potential adverse and harmful effects of Teflon.

This is sure to be one of the biggest legal battles of the next several years - and we get a front row seat.

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Why Incorporate?

Here are three excellent reasons to incorporate:

1) Protect Your Assets

When you incorporate or form a limited liability company (LLC), you protect your assets including your money and home. As long as you follow the corporate formalities your company is legally separate from you as an individual so that any debts or liabilities do not put your bank account or home at risk.

2) Pay Less Taxes
There are often tax benefits to incorporating or forming an LLC that allow you to save money by paying less in taxes.

3) Enhance the Perception of Your Business

If you plan to have employees or seek investors incorporating or forming an LLC is usually a first step in enhancing the perception of your business and demonstrating that you are business savvy.

Click here to find out more about incorporating your business or forming an LLC.

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