Vote 'Yes' to Renovate and Update Polk County Courthouse

I generally try to stay away from politics on this blog but there is an important vote on November 5th regarding Measure A:  The Polk County Public Safety Judicial System Bond. I encourage you to vote 'Yes" for this measure.

Our Polk County Courthouse has been in use for over 100 years. While it is an architectural gem it is also badly in need of updating.  Most importantly, it is not adequately designed for security and safety needs. Violent criminals often roam the same halls with the public including jurors and children.  Also, there are numerous courtrooms crowded into the facility that were not designed for that purpose. Polk County is the busiest courthouse in the state. It was originally designed for just four courtrooms but now houses over 20 courtrooms in an effort to meet the needs of the public.

The old adage is that you can pay now or pay later. If we don't pass this measure the costs will be substantially higher down the road. At some point in the near future you can be assured that the courthouse will be overhauled or perhaps a new one built. We cannot avoid that fact much longer. It is an absolute necessity.  A smarter approach would be to approve the measure now. The cost is approximately $1.50 per month for the average homeowner. It is a small price to pay to ensure fairness and to keep our families safe.

Again, please vote 'Yes' on this important measure. 


Insight on Business - The News Hour with Michael Libbie

You can catch me tonight on the Insight on Business - The News Hour with Michael Libbie this evening at 5 pm on AM 1350-KRNT.

Michael and I will be talking franchise law and more.

It's a great program you should check out. The show runs Monday-Friday each week at 5 PM.

How to Deal with Partner Disputes

 I saw an interesting article on the LexBlog Network regarding how to deal with partner disputes. The post written by Texas restaurant lawyer, Matthew Sanderson, dealt specifically with restaurants, but the information contained in the post is applicable to any business. Sanderson recommends the following when a dispute occurs:

  1. Avoid the conflict by identifying motivators and doing your homework;
  2. Open the lines of communication;
  3. Stand up for yourself and your rights (but don't lose your cool).

I often compare partnerships to a marriage. In any marriage good communication is essential to maintaining a happy household. Where I've seen partnership disputes fester and cause problems is when the partners fail to communicate with one another. So I think Sanderson's bullet points are right on target.

Further, a helpful piece of advice for avoiding partnership disputes is to set clear expectations of what each partner is bringing to the table. Even though it isn't a part of your typical operating or shareholder agreement, you may what a letter of understanding defining the roles of each partner. Partnerships work best when the partners have complementary strengths. For example, a strong sales person combined with strong operations or details person may have a strong partnership together where two partners with the same skill set lack the balance needed to run the overall business.

Partnerships are not easy. Be sure to have a partnership agreement in place that details what happens if a dispute occurs or the partnership ends due to death, disability or other reasons. Sanderson's last point on not losing your cool is especially important. Make sure you think things through before you react and hopefully you'll be able to avoid costly mistakes if a partnership dispute occurs.

Iowa Business Law Services: Rush on Business Companion Web Site

 I am very happy to announce my new companion Web site to go along with this blog at The site will feature information on my legal practice areas, a simple way to submit information for formation of a new corporation or LLC and also a video resources section with tips on business and franchise law. We'll also feature many other business and franchise law resources as we develop out the site.

A new offering with the new site rollout is that I am immediately implementing a Subscription Services Plan to make legal services more affordable for the new or early stage company. Check it out for details.

I also set up a new Facebook page for the blog be sure to 'Like' the page for easy access to updates on business and franchise law.

Thanks so much for following Rush on Business. And look for some other exciting offerings from me very soon relating to franchise law.

Lesson # 3 From Hard Luck Franchisees: Franchisor Reservation of Rights to Sell or Transfer Business

This is Lesson #3 in a five-part series on the top reasons I've seen franchisees fail. 

Tucked away in nearly every franchise agreement is a provision that very few franchisees consider when they are purchasing a franchise business. The provision I am referencing gives a franchisor the right to sell or transfer its business to another person or entity. Now I am not saying that a franchisor shouldn't have that right. Of course a franchisor would like to reserve the right to sell its business as a succession plan or outright sale for profit. But unfortunately I've seen many franchise relationships change dramatically after the sale.

On many occasions I've found that the new franchise owners lack the spirit and care for the franchisee that the original owners may have possessed. The new franchise owners may not have the same goals or aspirations as the original owners. They may even change business models, pricing or marketing which could have a significant impact on your business. As a result, many franchise operations fail after the franchise has been sold.

If you are going into franchising, have careful and detailed talks with the franchisor about their goals. Find out if the franchisor is in talks with anyone to sell the franchise business or whether that is an ultimate goal of the franchisor. The franchisor may not always be candid with you but perhaps they will be and you will have gained valuable information in the process. If sale talks are imminent, you may be better off waiting to see what the new owner has in store for the franchise business. But no matter what be aware that the franchise business could be sold and consider carefully whether you are buying a "system" or whether you are getting caught up in the persona of the franchise owner. Because if you are buying the owner rather than the system, you may be in for a rude awakening if the franchise business is sold.

In the end, you are not likely to eliminate the risk that the franchisor could sell. An astute franchisor would not negotiate that provision away in a franchisor agreement. But consider that possibility from the start and whether the franchising "system" is right for you.  

Iowa Supreme Court Rules Employer Can Fire Woman Because She's Too Attractive

Happy New Year everyone! The first blog post of the year centers on a controversial Iowa Supreme Court decision handed down right before the holidays.

In Nelson v. Knight, the Iowa Supreme Court was presented with the question whether a male employer could terminate a female employee because the employer's wife, due to no fault of the employee, is concerned about the nature of the relationship between the employer and employee? The district court had ruled in favor of the employer on summary judgment and the employee appealed. The Iowa Supreme Court affirmed the ruling of the district court.

Nelson was a dental assistant for Dr. Knight for ten-and-a-half years. Dr. Knight admits that Nelson was a good dental assistant and one of his best employees. Nelson in turn acknowledges that Nelson generally treated her with respect, and she believed him to be a person of high integrity. 

At some point in the last year and a half of Nelson's employment, Knight began to complain about Nelson's clothes being too tight and revealing and "distracting". (Nelson denied this claim about her clothes). Then during the last six months or so of Nelson's employment, Dr. Knight and Nelson started texting each other on both work and personal matters outside the workplace. Neither objected to the texting. Both Knight and Nelson have children, and some of the texts involved updates on kids' activities and other relatively innocuous matters. Nelson considered Knight to be a friend and father figure, and she denies that she ever flirted with him or sought an intimate or sexual relationship with him. Knight's wife found out about the texts, confronted her husband and demanded that he terminate Nelson's employment.

In reading the Court's opinion, it appears Dr. Knight allegedly made at least a few comments that may have been construed as sexual harassment.  However, it is important to note that Nelson did not sue for sexual harassment but rather sued only on the basis of sex discrimination.

In a decision roundly criticized by the Des Moines Register's Rekha Basu  because of the seeming unfairness, the Court ruled ruled that the Plaintiff was not fired because of her sex. The court seemed swayed by the fact that all of Dr. Knight's other employees were women and that Nelson was replaced by a woman.  The court thought there was a distinction between (1) an isolated employment decision based on personal relations (assuming no coercion or quid pro quo), even if the relations would not have existed if the employee had been of the opposite gender, and (2) a decision based on gender itself. The Court said that In the former case, the decision is driven entirely by individual feelings and emotions regarding a specific person. Such a decision is not gender-based, nor is it based on factors that might be a proxy for gender.  The Court went on to state,

The civil rights laws seek to insure that employees are treated the same regardless of their sex or other protected status. Yet even taking Nelson's view of the facts, Dr. Knight's unfair decision to terminate Nelson (while paying her a rather ungenerous one month's severance) does not jeopardize that goal. This is illustrated by the fact that Dr. Knight hired a female replacement for Nelson. As the Platner court observed, "[W]e do not believe that Title VII authorizes courts to declare unlawful every arbitrary and unfair employment decision." 

"[t]he issue before us is not whether a jury could find that Dr. Knight treated Nelson badly. We are asked to decide only if a genuine issue exists as to whether Dr. Knight engaged in unlawful gender discrimination when he fired Nelson at the request of his wife." 

Many have questioned this decision. Thomas Crane of the San Antonio Employment Law Blog observed,


This is a difficult call for all courts.  The case law is clear that in a consensual relationship, both employees should be treated the same.  If the female worker is fired, then the male manager should also be terminated.  But, how can the boss be fired?  So, instead, the courts engage in strained reasoning about what truly motivated the boss when he fired the female worker.  This decision arose after the employer moved for summary judgment.  The court should have simply found sufficient factual issue to allow Ms. Nelson' claim to go to a jury.  Doubts about motivation should always be resolved by a jury. 

Nelson's attorney, Paige Fiedler, strongly disagreed with the all-male court's ruling stating to the Associated Press,
"These judges sent a message to Iowa women that they don't think men can be held responsible for their sexual desires and that Iowa women are the ones who have to monitor and control their bosses' sexual desires," Fiedler told the Associated Press. "If they get out of hand, then the women can be legally fired for it."


Employers Should Consider Policies on Ownership of Social Media Accounts

Daniel Burnick of the Alabama Employment Law Report has an interesting post on a case involving a disputed Twitter account where the employee left his employment, changed his Twitter account name and then kept all the followers he had with his former employer.

In Kravitz v. PhoneDog, Kravitz used @phonedog for his Twitter account while he was employed. He left his employment and changed his account to @noahkravitz. He also took 17,000 followers with him which left his former employer with the task of building an entirely new follower base. PhoneDog had no policies in place regarding who owned the social media account.  An extended legal battle occurred but was recently settled.

As Burnick points out, the key is to have policies in place about who owns social media accounts when they are used on behalf of the company. To date, I have yet to see a single employer who has taken the initiative to address the ownership of social media accounts in their employment handbook. It's an issue that many business owners may overlook. But the time required to rebuild a Twitter or other social media follower base is invaluable. If you've worked hard to capture a strong social media following you won't want to make the same mistake as PhoneDog.

It's a great idea as you enter the new year to review your handbook policies and procedures to make sure your current with existing laws and trends.  

P.S. Also consider the issue if you are buying a business. Do not assume that you will automatically become the owner of a Twitter or other social media account when you buy an existing business. You will want to specifically address the issue in your purchase agreement.

IASourceLink is an Online Resource Tool For Iowa Small Businesses is a new online resource available to help small business owners and entrepreneurs across Iowa. I haven't had a ton of time to explore the site but I impressed with the information available on my initial review.

One neat feature is the Iowa Business Concierge service available in collaboration with MyEntre.Net. The business concierge service allows business owners to ask questions to get pointed in the right direction. 

For those in Central Iowa, you'll want to check out for business resources in the Central Iowa region. 

Be Aware of Independent Contractor Misclassification

 In my last post I shared my ABI Quick Bits Interview on Wage & Hour Lawsuits. In that interview I discussed how I often hear employers reference "1099 employees". I cautioned that you should make sure not to confuse independent contractors and employees. They are separate worker classifications and it's important the your workers are classified correctly.

A recent post from Epstein Becker & Green builds on that thought by stating that Independent Contractor Misclassification Should Remain a Key Area of Concern for Employers. The post discusses on the Department of Labor will continue to work with state and federal agencies, including the IRS, to share information and jointly investigate worker misclassification. 

With the re-election of President Obama, employers can expect more awareness around worker misclassification issues by federal agencies in particular because of the Affordable Care Act ("ACA") 50-employee threshold. Federal and state agencies will likely have a watchful eye on employers teetering on that mark.

The penalties and expenses for misclassification of your workers are significant. It is recommended that you conduct a wage and hour audit periodically to make sure your business is in compliance.

ABI Quick Bits: Wage and Hour Lawsuits


I recently sat down for an interview with Leisa Fox of the Iowa Association of Business & Industry to discuss wage and hour lawsuits. For a blog post I wrote on the topic see here.

Be sure to check out the other Quick Bits videos on a variety of business topics from ABI.

Rush Nigut to Speak at ABI Social Media Roundtable

Rush Nigut of Brick Gentry, P.C. will be one of the featured speakers at the Iowa Association of Business and Industry's Social Media Roundtable on November 14, 2012 at the Honey Creek Lodge Resort. Rush will deliver the keynote general session presentation on New Developments and the Future of Social Media. He will also lead one of the HR breakout sessions on Social Media and the Litigation Process. For the marketing track he will be a panelist on Learning Best Practices from Companies in Iowa Who Actively Use Social Media.

For more information on the seminar please see the event agenda.

Supreme Court Upholds Affordable Care Act

Yesterday the United States Supreme Court upheld, in a 5-4 decision, the constitutionality of the individual mandate under the Affordable Care Act. I am no expert on the act and I have not had time to closely review the decision. Consequently, I suggest you do what I am doing and go read some of the best coverage on the Web from lawyers around in the country in the Affordable Care Act section of the LexBlog Network. There's no question we all need to be informed.

If you are interested in reading the entire decision you can find it here.

Please note that Rush on Business is not a political blog and I will not be posting comments that are politically motivated. Any comments analyzing the decision and its potential impact are welcome.

Employee Wage Misclassification Should Be Taken Seriously

Last December I wrote about how an employee wage misclassification case cost Oracle $35 million. The question about whether an employee is exempt v. non-exempt is often misunderstood by employers. Often, employers want to avoid paying overtime to employees.  So employers will play a game of Russian roulette by paying those workers a salary instead of hourly. 

Have you reviewed your employee wage classifications recently? If not, we recommend that you do so. We have found in our reviews that employers large and small often make mistakes in classifying the wages of their workers. Sometimes even companies with sophisticated HR departments make errors - just ask Oracle. And companies right here in Iowa make mistakes too.

A tremendous resource regarding employee wage classification found on the Department of Labor website at There's great information on the site about the tests used to determine whether employees are exempt or non-exempt . Don't wait for a lawsuit to review your wage practices. By then, the horse will be out of the barn and you'll likely find yourself paying a substantial settlement or judgment.



Business Succession Planning Seminar

Over the years I've noticed that very few businesses actually plan for selling or passing on their business to employees or family. It's one of the most important things any business owner can do.

I've teamed up with business coach Monte Wyatt to provide a free seminar to business owners on business succession planning. The seminar is Friday, April 13, from 11:30 a.m. to 1:00 p.m. at the Brick Gentry offices located at 6701 Westown Parkway, Suite 100, West Des Moines, IA 50266. We will provide lunch.

If you'd like to come please RSVP by sending an email to Seating is limited to 20 people. We would love to see you there!


Iowa Creativity Summit March 1st at Drake University

Lawyers are not immediately recognized as the most creative souls on the planet but some of the best lawyers I know definitely have the the creative spark. I have seen many who were classic doodlers, photographers and painters. Some of them were also the most creative in the courtroom and ultimately very successful in winning cases. That's why I am intrigued by the Iowa Creativity Summit that is scheduled for March 1st at Drake University (Olmstead Center). Your registration includes dinner and two workshops led by best selling author Matthew E. May. The evening program begins at 5:15 p.m. and ends at 9:45 p.m.

This is a great opportunity for business leaders and employees to familiarize themselves with the creative process. As the program says, creativity isn't just for marketers or designers, it's for everybody. Even lawyers and entrepreneurs!

For more information on the program click:  Iowa Creativity Summit

For more information on Matthew E. May click: The Laws of Subtraction

Employers: Are you Protecting Your Intellectual Property Rights?

Jason Shinn of the Michigan Employment Law Advisor had a great post entitled "Is your company making this mistake when it comes to employees and intellectual property?" The post centers on a lawsuit filed by an employee of Marvel Entertainment who claimed he created the Ghost Rider character back in the 1970s. With the recent success of the movies, video games and promotional products, the value of the character has increased substantially and the employee wanted his share.

Shinn's post discusses how Marvel eventually won the lawsuit filed by the employee, but it wasn't easy, and the case took four years to litigate.

The importance of written agreements with employees and contractors that create intellectual property cannot be understated. A case I will never forget involved the sale of a business. At the 11th hour a contractor claimed to own all the intellectual property a business owner was trying to sell. No agreements existed between the business owner and the contractor. Fortunately, we were able to negotiate a reasonable figure that the contractor would accept to allow the sale to go through but the lack of an agreement did cost the business owner money and almost cost them the sale.

So I wholeheartedly agree with Shinn's advice:

In this regard, for companies that want to make certain they are the owner of a work - whether the work is created by an employee or independent contractor - the best advice is to require employees and independent contractors to execute an assignment and work-made-for-hire agreement at the outset of the relationship so that copyright ownership vest in the company.

Don't wait until it's too late. That's a mistake you don't want to make.

Rush on Business You Tube Channel on the Air!

I am pleased to announce that I now have a Rush on Business You Tube Channel where I'll post short videos on various aspects of business and franchise law. I have a few videos posted so far and I'll add content weekly.

New videos include:

Should You Include Your Spouse When Forming a Small Business LLC?

Where Should Iowa Residents Incorporate or Form an LLC for their Small Business?

If there is a topic you think would be interesting, please let me know!

Employers & Social Media: NLRB 2nd Report Concerning Social Media

Jon Hyman wrote on his Ohio Employer's Law Blog that the NLRB has issued a 2nd report on social media as protected concerted activity.  If you are an employer considering discipline or termination of an employee resulting from social media activity you need to be very careful. Jon points out:

This report underscores that employees’ use of social media to discuss the workplace and work-related issues, and the impact of business’s social media policies on those discussions, remains at or near the top of the NLRB’s priorities. Because the NLRB is taking such an interest in this area, employers act at their peril if they discipline or discharge an employee for social media activities, or roll out a social media policy, without the advice and input of counsel well-versed on these issues.

Bottom line:  Discipline of employees making disparaging comments about your company through blogs, Facebook, Twitter and other sites could land you in trouble. You should read the report of the acting NLRB general counsel. It's one thing to have rules that prohibit plainly egregious conduct through the use of social media but be VERY cautious if have rules trying to curb what employees can say about your company. 

A Post I Wish I Had Written: For All the Clients that Hate Lawyers

Over the last 5 years that I have been writing this blog, there haven't been many Iowa business lawyers who write a blog on a regular basis. But when I was looking at Mike Colwell's Startup Models site, I noticed a new blog from business lawyer Chris Sackett of Brown Winick called BizB4Law.

Chris wrote a post I wish I had written called I Like Clients Who Don't Like Lawyers.  Chris says,

This post, of course, runs the risk of offending lawyers, but I suppose the whole premise is that lawyers need to get over themselves and think like the business people who are their clients.

Well said. It's a super post. Check it out.

If you're working on a business plan or financial model for your startup business, be sure to check out Startup Models too. It could save you a lot of time, expense and effort.

Wage and Hour Misclassification Costs Oracle $35 million

In my experience, wage and hour issues are often misunderstood by employers. Employers often treat employees as "exempt" in order to avoid paying the overtime owed to "non-exempt" employees. As a plaintiff's attorney said in one of my previous blog posts on the subject:

"I can hit a company with a hundred sexual harassment lawsuits, and it will not inflict anywhere near the damage that [a wage and hour suit] will."

A post from the California Injury Attorneys Blog discusses a recent settlement in which Oracle ageed to pay $35 million for employee wage and hour misclassification. As discussed in the post wage and hour misclassification cases often are class actions which result in large sums paid by Defendant employers.

For more information see my tips for avoiding wage and hour lawsuits.