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

Des Moines, Iowa lawyer and broadcaster George Davison shares his interesting insight and resources on George Davison Iowa Law.  Many of you may know George from his work on WHO radio as a news anchor.  He sports one of the best all-time radio voices I have heard.  George is also an adjunct professor at DMACC teaching courses business and corporate law. 

George is one of the few lawyers that make listening to case law updates at CLE seminars fun and enjoyable.  His reviews of cases such as the recent decision in favor of DMACC on discrimination and retaliation claims are some of the best around. 

George's blog is one for the blogrolls.

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It's been a long time since I have written about the Microsoft-Iowa case but the hearing for final approval of the $179.95 million settlement is this Friday, August 31.  The settlement received preliminary approval from Judge Rosenberg back in April and I anticipate the judge will grant final approval of the settlement.

Class members are entitled to receive $16 for each copy of Windows or MS-DOS they purchased; $25 for each copy of Microsoft Excel; $29 for each copy of Microsoft Office; and $10 for each copy of Microsoft Word, Works and Home Essential software. Consumers do not need proof of purchase to be reimbursed for up to $200.

Microsoft will provide one-half of the difference between $179.95 million and the unclaimed cash and vouchers to Iowa public schools in the form of vouchers that may be used by the schools to purchase a broad range of hardware products, Microsoft and non-Microsoft software, and professional development services.

One of the more interesting aspects of the settlement is that claims from consumers are trickling in very slowly.  As of August 1, 2007, the AP reported that only a little more than 55,000 Iowans have filed claims.  Class members are able to claim $200.00 without a receipt.  It is likely that most of the claims are far below $200 but even if the 55,000 Iowans claimed an average of $200 that  means the total payout for the class members is approximately $11 million at this point.  Probably not too surprising because I think most people have a hard time working up any outrage over Microsoft's actions.  

The plaintiffs lawyers, on the other hand, have requested $75 million in legal fees and expenses for the case.  Initially Microsoft objected to the amount of the fees when Conlin requested more than $75 million but it is my understanding there will be no objections because Conlin has agreed to reduce her claim to no more than $75 million.  (What would Brett Rogers say about this?)  The judge will decide how much is awarded in fees. 

For details on how to file a claim please go to www.iowamicrosoftcase.com.  You must file your claim by December 14, 2007 or within thirty (30) days after the court grants final approval on the settlement, whichever is later.  

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Drake University Law School is hosting a Risk and Responsbility in the 21 Century Symposium on September 7, 2007. 

The goals of the symposium are (1) to explore the notion of risk, (2) consider how we should respond to it in this century, both in the private and in the public arena, and in doing so, (3) examine the responsibilities of individuals, private institutions, and government.

The featured speaker is Tom Vilsack.  Vilsack is the former two-term governor of the State of Iowa and former presidential candidate.  He is now a visting distinguished professor of law at Drake Law School and an attorney with Dorsey & Whitney.

Also scheduled are a number of other terrific speakers including best-selling author Phillip Howard, trial lawyer Marc Stanley, Connecticut Law School professor Tom Baker, Harvard Business School professor David Moss, Drake University business professor Tom Root, Cedar Rapids Mayor Kathleen Halloran, and Iowa Insurance Commissoner Susan Voss.

The event has applied for six hours Iowa and federal CLE credit.

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Congratulations to Vince Basile of Aerospace Geartech who is featured in an article about the Business Innovation Zone (BIZ) in today's Des Moines Register Business section.

Executive Director Mike Colwell worked with Vince to obtain grants through the Iowa Department of Economic Development and DMACC in order to purchase two manufacturing businesses (one from Ilinois and one from Florida) and move them to Iowa.  Colwell also helped Vince with his business plan and other strategic issues. 

Vince is an example of how persistance pays off.  He would tell you that his search for a business was not easy.  He looked at many different businesses until he found the right one (I guess two) for him.   He is now in a business that fits his skill set and passions.  He is extremely resourceful which will serve him well as he moves forward with his new business venture.

I also cannot say enough about the guidance and expertise of Mike Colwell.  Every time I talk with him I learn something new about business and entrepreneurship.  Central Iowa businesses are extremely lucky to have such a great new resource.  If you are a start-up entrepreneur or a business looking for growth or capital, I highly recommend talking with Mike.  BIZ does not actually make investments in companies but it does help entrepreneurs locate grants and find investors.  BIZ is also able to provide assistance with improving business plans and open up valuable networking opportunities for new entrepreneurs.  The thing I like best is that Mike won't always tell you what you want to hear.  His objectivity and honesty is refreshing. 

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Iowa intellectual property lawyer Brett Trout has a terrific post on IowaBiz illustrating why it is dangerous to steal online contracts.  Brett says,

I have seen companies steal terms of use agreements and privacy policies from websites that have nothing to do with their line of business. Not even taking the time to read the contracts, they unwittingly leave in the original company's name, address and preferred jurisdiction. An Iowa company looks pretty awkward explaining to a court why their contract dispute should be tried in Albuquerque.

Terms in contracts are construed against the drafter. If you leave in an ambiguity, the court will read it in favor of the people suing you. That is why lawyers take such care in customizing contracts to your business and its goals.

Sometimes it is almost laughable how many companies copy the terms of use and other online policies of major Web sites.  In doing some research for an online auction company I noticed several of the companies I researched had the same online policies.  Was it just coincidence the policies were strikingly similar to eBay?  Well, I guess if it ain't broke . . .

Even if you use standard terms of use policies and other online policies you will need some customization for your particular business needs.  Discuss with your lawyer whether he or she has standards forms that can be customized for your business.  Most eCommerce lawyers have such forms.  But it is a good practice to avoid directly copying the terms of use and other online policies of other companies.

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Many businesses make the mistake of treating employees as an independent contractors so they can save money on taxes, red tape and benefit coverage.  The risks associated with this approach is often not worth it.

Businesses that misclassify workers often find themselves embroiled in wage and hour lawsuits or workforce development audits.  These businesses could also face tax penalities and lack of insurance coverage in key liability situations.

Often, businesses treat employees as independent contractors because they fail to fully understand the distinction between the two categories.  The most important difference is whether or not you have the right to control the work.  Other factors, such as where the work is performed, who provides the equipment, how payment is made and if there are set hours, also play an important role.

Generally, an employee is someone whose manner of work the employer has a right to control, even if the employer does not actually exercise that control.  True employees are sometimes known as W-2 employees because of the W-2 form issued to them for federal income tax purposes. 

On the other hand, an independent contractor is someone you engage to perform a certain task, but whose manner of work you do not have the right to control.  You have the right to tell your independent contractor what it is you want done, and you remain free to dismiss them if you do not like the work (depending on your contractual arrangement).  Ultimately though it is the results you are interested in.  The manner in which the results are accomplished is up to the independent contractor and is not subject to your control.  An independent contractor is given a 1099 form to report income for federal tax purposes.

If you have questions about whether to treat workers as employees or independent contractors be sure to consult with an employment or tax lawyer.  This area of the law is more complicated than just the control issue.  Tax lawyer Tripp Atkins is currently analyzing the 20-factor IRS test for determining an employee or independent contractor on his blog.

The safest course is to treat workers as employees if the workers' status as an independent contractor could reasonably be questioned.   

Photo on Flickr by Partsnpieces.   

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Want some great business advice?  Looking for something interesting?  Try out these posts:

Matt Gardner has an interesting post on his Wealth and Estate Planning blog about the "pot of gold" Iowa landowners are sitting on because of the renewable energy craze and why they should review their estate plan.  (Sounds like Iowa farmers have something in common with today's hip-hop stars  - both ignore estate planning). 

Michael Moore (this one's no sicko) talks about what not to do when it comes to employment record retention / destruction policies on his Pennsylvania Employment Law Blog.  Michael has written some great material on this subject and has some terrific comments on this blog as well. 

Roy F. Harmon III addresses record retention for ERISA Plan administrators on his Health Plan Law blog.

Carl Lingren shares key interviewing tips for employers on his Employer Ease blog.

Brett Trout says technology lawyers are so hot but have you seen this guy's face lately.  (Trust me, there is a story there).

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It is possible to form your own corporation without a lawyer's help.  Every day, many entrepreneurs do exactly that by using online incorporation kits.  I have written about such companies in the past.  There is definitely a segment of the market these incorporation companies serve.

The most obvious motivating factor for setting up a corporation on your own is to save fees.  But there is a potential trade-off.  You now subject yourself to the hassles of filing a corporation yourself and the possibility of filing erroneous paperwork.  At least if you hire a lawyer you have someone to blame, right?

But the real question to ask yourself is this:  "Have I considered how it all fits together?"  See this post on incorporating in Iowa for a checklist of steps.

But filing articles of incorporation is only one step in the process.  Have you also considered:

• Is a Corporation the right entity for me?
• Bylaws.
• Shareholder Agreements - Buy/Sell Issues.
• Board of Directors.
• Officers.
• Employees.
• Obtaining an Employer Identification Number (EIN).
• Banking arrangements.
• Issuance of Stock.
• Financing your corporation.
• Insurance.
• Whether or not to elect S corporation status.
• Corporate name protection.
• State government requirements.
• Taxes.
• How to Avoid Lawsuits.
• Following corporate formalities.
• Signing documents as an officer.
• Assigning existing business to the Corporation.
• Leases.
• Intellectual property.

The above list is just a sampling of the issues you may deal with as you start your business.  A good business lawyer should be able to help you with all these issues either by providing you with direct advice or connecting you with someone else (often accountants, bankers and insurance agents) that can help fill in the gaps.  Most business people will tell you that hiring a good lawyer is crucial to your business success.   Plus, you might actually be surprised at the cost of hiring an Iowa lawyer compared to some of the online incorporation companies.  

How do you hire an Iowa business lawyer?  I suggest you follow two rules:

1. The attorney must be experienced and competent with business law issues.  Since you are in business you probably should not hire the local personal injury, family law or other attorney that does not have experience with business law issues.  Choosing a lawyer that is not familar with business law may have serious consequences and may increase the costs because the lawyer may learn on your dime. By analogy, you don't want a plastic surgeon operating on your heart.

2.  Make sure you feel comfortable with the attorney.  Don't make a snap decision based upon hourly rates.  Do you trust the lawyer?  Did you get your call returned right away?  Is the attorney easy to talk with?  Does the attorney care about you and your business?  Does the relationship feel right?  There are many competent and experienced business attorneys in Iowa so make sure to trust your instincts.

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The Business Innovation Zone (BIZ) has its first networking event today.  The event is from 12:00 - 1:30 p.m. in the Arthur Davis conference room at the Greater Des Moines Partnership office at 700 Locust Street in Des Moines.

The featured speaker is Steven Smith, President and CEO of GCommerce.  He will be talking about early stage equity funding for startup business, and what has changed in recent years. Lunch will be provided and there will be plenty of time for networking. The cost for the event is $8 for members, and $12 for non-members.

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Jerry Kalish of The Retirement Plan Blog expanded on my post involving Document Retention and Electronic Discovery to discuss record retention under ERISA.

The post has a Q & A with basic information on document retention for ERISA plans. 

P.S.  You may also want to check out Jerry's informative post on "tax traps for the unwary" involving "S" corporations. 

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Eric Swenson of Managing People in the 21st Century discusses how small businesses will sometimes "borrow" and "modify" another company's employee handbook in an effort to save money.  Swenson's post illustrates why this is a bad idea. 

In one instance, a small company not required to offer FMLA benefits under the law was required to do so because of misstatements in their employee handbook.  The article from the Sedgwick Law Firm in California refers to an Iowa Federal Court decision by Judge Bennett in Myers v. Tursso Company, Inc.   Judge Bennett held it is possible that an employer with fewer than 50 employees within a 75 mile radius, could still find themselves "required" to grant FMLA leave, based on their conduct, even though not technically within the coverage of the statute. 

For more check out the article by Michael Fox on Jottings by an Employment Lawyer.

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From Mike Colwell of Biz I learned about Franchise Interviews which is another resource for those interesting in franchising.  The site has several interviews with successful franchisees, franchisors and franchise experts (including lawyers).

I listened to the interview with leading franchise lawyer Kevin Hein of the Denver office of Snell & Wilmer. ( An interesting interview but the actual interview does not begin until 24 minutes into the 1 hour program).  Hein shared insight on what is necessary for a successful franchise concept.  His four points:

1. Unit economics - How much can individual franchisees make?  Will it generate revenue to cover expenses, pay a reasonable salary and give a return on investment?
2. Reasonable Demand for the Product - sometimes franchises may have unique niche, yet no significant demand.  A franchise must have real interest.
3. An easily replicated system - The more detailed the system the harder it will be to replicate.  Are you able to give the same customer experience no matter the market or region.  
4. Unique marketing proposition - How do you stand out? 

Later in the program Hein struck a chord with me when he warned about franchisees "buying themselves a job".  I have noticed that many franchisees do not carefully consider whether they will receive a return on investment when purchasing a franchise.  Obtaining a return on your investment may be difficult with many franchise concepts - so be sure to analyze potential revenue and conduct your due diligence.

P.S.  Another resource to check out is Seeds of Growth which is where Mike spotted the link to Franchise Interviews.  It features some great posts to help your business grow.

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Upon my return from vacation I ran across a site called The Franchise Pundit.  I have been looking a long time for Web sites that give balanced information on franchises rather than just reciting promotional materials.  The Franchise Pundit appears to be such a site. 

If you are conducting due diligence on a franchise you may want to investigate the site.  In a short time I discovered several articles providing practical information on several franchises.  Be sure to check out the franchisor list to see if there are any articles on your franchise of interest. 

If you know of any other sites that provide fair and balanced information on franchises please let me know.

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I am excited to announce that the Sullivan & Ward law firm will publish its Iowa Law Blog beginning in mid to late August.  The firm's law blog will cover general legal issues inlcuding the following areas of law:

• Utility and electric cooperative law;
• Business law;
• Trusts and estates;
• Family law;
• Real Estate law;
• Trial & mediation; and
• Regulatory compliance.

It will be a group effort by the lawyers at Sullivan & Ward.  Our friends at Lexblog are developing the blog.  Kevin and his staff have been great to work with.  I'll let you know when it hits the blogosphere. 

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Michael Moore has an informative post on Developing a Record Retention Policy on his Pennsylvania Employment Law Blog.  Michael raises a particularly insightful issue:

Anticipate the arguments that may be made and inferences that could be drawn from the destruction of certain documents and weigh it against the expense of retaining and producing the documents.

In a comment left on my Document Retention and Electronic Discovery post Michael pointed out that businesses need to carefully consider how the destruction of records pursuant to a policy might play to a jury.  Often it may be important for a business to retain the information rather than destroy it.  He warns,

The employer that destroys old e-mails "pursuant to its record retention policy" is left with the inference that the e-mail may have existed and, even worse, it was destroyed in order to keep the truth from coming out. 

I agree that you must carefully consider these policies.  That is why it is so important to assemble a team in order to develop a sound document retention policy.  I would caution businesses to avoid pulling a form, changing the names and feel like you are covered when it comes to record retention.  You should take into account the various ways your organization stores information and be sure to get the IT staff involved in the process.  This will help you determine whether it is beneficial and practical to keep or destroy certain information.   But whatever happens, do not forget to implement a litigation hold in the event of a dispute.

Part of the trial lawyer's job in business cases is explaining to the jury how a document retention policy works, why it was implemented and the methods by which the business consistently follows it policy.  Developing trust can help alleviate the thoughts about businesses just wanting to keep the truth from coming out. 

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Yesterday I had an interesting discussion with one of my buddies.  He is an executive with a Fortune 500 company out-of-state and he was expressing his frustration with lawyers - actually his own lawyers.  He just got off the phone with one of his outside counsel when I called.  After talking with him for less than 30 seconds I could tell the last person he wanted to talk with was another lawyer. 

Although not word for word his frustrations could be summed up in a post from Dan Hull called the 7 Habits of Highly Useless Corporate Lawyers.   This post is right on the mark and should be required reading for every corporate lawyer in America.  The biggest frustration?  No. 3 - Taking a stand.  Nothing seems to frustrate business people more than a lawyer who comes down squarely on both sides of the issue. 

The cure:  try listening to your clients.  You might be surprised what you learn. 

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