Writing the Better Contract from Anita Campbell- Part II

Former general counsel and small business owner, Anita Campbell, offers sage advice in her post on the Build a Solo Practice Blog about how to write a better contract .  What is the better contract in Anita's view?

  1. First and foremost, the better contract protects the client.
  2. The better contract is written in plain English.  (A novel concept indeed!)
  3. The better contract is written for a 12th grade education or lower.
  4. The better contract incorporates standardization.

A word of caution concerning standardization of contracts:  Clients will often take a standardized contract and fail to adapt it appropriately for the current business transaction.  Clients should be reminded that it is a good idea to have the business lawyer review the agreement to make sure it adequately protects the client in the current transaction, contains the actual terms of the current transaction and fulfills the goals of the current transaction.  I can't tell you how many times I have seen the embarassing situation where a business person took a standardized contract and failed to revise it appropriately for the situation.  It happens often when people pilfer agreements from the Internet and fail to modify the terms.  If litigation occurs, the result of this carelessness could be a verdict against the client.

Anita's solution involves providing a set of instructions to the client along with the standarized contract.  Included in the instruction sheet is the direction to have the business manager consult the corporate lawyer before signing or implementing the agreement.  This may work well with organizations that have in-house counsel but is probably less intuitive for businesses with outside counsel.  I offer the reminder to always have contracts reviewed by your business lawyer.

Hat tip to Susan Cartier Liebel and her Build a Solo Practice Blog.  Susan is passionately building one of the best blogs in the country.  Notice I didn't limit it to legal related blogs either.

 

SBA and FranNet Team Up to Offer Online Training for Franchising

The Small Business Administration (SBA) and FranNet have teamed up to offer an online training course for those interested in franchising.

The free online course on franchise basics provides three key sections that examine more than 10 essential areas relating to franchising, including Whether Franchising Right for You and How to Choose the Right Franchise. The course also covers franchising options, strategies for growth, and pitfalls to avoid. Course participants will be able to better understand franchising and decide if it is the best small business option for them.

For more information please be sure to contact Joe Cooney who is the FranNet consultant for the Iowa / Nebraska region.  I have found Joe to be a very helpful resource.

How to Write Contracts for Business People

Anita Campbell of Small Business Trends shares her thoughts about how to avoid the contract from hell on the Build a Solo Practice site. 

As a former general counsel and now a small business owner, Anita has been on both sides of the fence when it comes to contracts.  According to Anita, here are some things to avoid in your next contract:

  • Too much legalese.
  • Using adverbs like "whereas" and "heretofore".  It's kind of like using "COMES NOW" for pleadings.  Does anyone really talk like that?
  • More than 5-7 defined terms.
  • Attaching multiple exhibits.  I can speak from experience that multiple exhibits is a real pain for the drafter so I can't imagine what it is like for the reader.
  • Making it so hard to understand that it leads to avoidable litigation just because no one can understand it.

 

Franchising? Check Out These Resources

Teri Rasmussen of the Ohio Practical Business Law Counsel blog has gathered some excellent resources for those who are interested in pursuing a franchise to start a business.

Thanks to Teri for referring to a couple of my blog posts but I also recommend checking out the Small Business Administration's consumer guide to buying a franchise as well as attorney Mike Hamblin's 4-part series on franchising.

 

Notify Insurers Immediately About Claims

In a recent blog post, Daniel Schwartz of the Connecticut Employment Law Blog reminds employers just how important it is to notify insurers under their employment practices liability insurance.

This advice is not just critical in the employment context.  It is vital for every type of insurance your business may have.  If a claim occurs be sure to notify your insurer immediately.  The failure to do so may result in a denial of coverage.

Thanks to Daniel for the reminder.

Business Estate Planning & Charitable Giving

Acorn Do you have an estate plan?  It has been reported that approximately sixty percent of people in the U.S. do not have a will.  Of course having a will is critical if you have children but let's not forget about another baby - your business.

As the owner of a closely held business much of your wealth may be tied up in the business.  If you have not planned properly you may cause tremendous problems for your heirs.  After paying probate and estate taxes your heirs may also encounter liabilities that were payable upon your death.  All this during a time where the business may have decreased revenues due to your death.

Fortunately proper planning may eliminate many of these problems.  Using buy-sell agreements and trusts are two of the ways that business owners can protect their assets and reduce taxes.

Another important life-goal for business owners is charitable giving.  This week's Des Moines Business Record has an informative article on available options for starting your own philanthropic legacy

Even if you are young, consider an Acorn Fund through the Greater Des Moines Community Foundation.  For an initial contribution of $1,000 and a commitment of $600 per year until the amount equals $10,000, a young business owner could start their own permanent endowment fund.  And not only do you get the deductions for charitable contributions but you may also be eligible for additional tax credits.

photo on flickr by Norma Desmond

Employee Terminations: Focus on Behavior, Not the Person

VIctor Aspengren on the IowaBiz site has a great article about  focusing on the behavior rather than the person in employee terminations

Super advice.  Be sure to read it.

2008 Iowa Employment Law Conference

Come join Brick Gentry attorneys Matt Brick and Douglas Fulton for the 2008 Iowa Employment Law Conference sponsored by HR OneSource at Prairie Meadows on April 23rd.  There will also be speakers from the Department of Labor, Director of Veteran's Employment and Training Service, and a Committee Chair to the International Association of Chiefs of Police.

By the way, be sure to check out Matt Brick's new Iowa Lawyer blog.  He is off to a great start with some interesting topics.

Franchise Due Diligence: Ask what they don't do well

One of my franchisee clients offered a very simple question that every prospective franchisee should ask of other franchisees when conducting due diligence:

What doesn't the franchisor do well?

He says this evoked the best responses from franchisees when he conducted his due diligence.  If you are considering a franchise be sure to talk to as many franchisees as possible.  Speaking to only a handful is not enough. 

For more information be sure to read this article on franchise due diligence resources.

Overdocumentation in Employment Cases

In last week's Tip of Week (yes, I am a little behind), John Phillips of the Word on Employment Law raises the interesting perspective that it is possible to overdocument in employment cases.

Some of John's warnings on overdocumentation include:

  • Documentation on trivial matters.
  • Creating a paper trail right before an employee is terminated.
  • Documenting conduct or performance issues for an employee when you have not done the same for others.
  • Summarizing in a document right before an employee is terminated all the things you wanted to document when the conduct occurred but didn't.
  • Preparing documentation after the employee is terminated.

Granted, John's point is well taken.  It is important to be fair and consistent in the documentation of employee performance and conduct.  Employees should be treated in a consistent manner and it is best to document performance and conduct as it occurs. 

However, I am not sure I necessarily agree that it is best to go forward without any documentation at all when the documentation has not been done right away.  It depends on the circumstances.  There are times when a summary of events written after the fact may be helpful.  Much of this also depends on the way the document is written.  And of course I would never advocate that anyone fabricate evidence.  

Please consult your employment lawyer for advice in a particular situation.   

Take This One to the Bank: F-Bombs in Depo Are Bad Idea

The Dickinson Law Firm's Iowa Banking Law Blog ignores its disclaimer and provides some legal advice:

F-Bombs in a deposition are a bad idea!

It's just another subprime market meltdown.  One F-bomb is a mistake.  Two might be forgiven.  But 73?  That's gonna get you sanctioned every time.

 

Evaluate the Strength of a Franchisor

Are you considering a franchise business?  Read this blog post on evaluating the strength of your franchisor before signing on from the First Prize Franchise blog.

Time and time again I see people invest their life savings into franchise operations.  Some of these people achieve great results but others do not.  There is no validity to the claim that franchise operations are less likely to fail than non-franchise operations.  One critical aspect to consider in my view is the brand itself.  Is the brand recognizable?  If not, the franchise better have a fantastic system, unique concept or protected intellectual property.  Otherwise, I think you need to question whether the franchise is right for you.

Could Something as Generic as SEO Really Be a Registered Trademark?

The term "SEO" stands for search engine optimization and has been around for a decade.  Heck, I've probably been familiar with the term for about nine years.  I can't imagine that someone could trademark a term as generic as SEO but that appears to be happening.

Read Brett Trout's blog for this interesting development.

P.S.  This just in, Brett Trout to trademark "IOU".

Electronic Workplace: Dangers & Pitfalls

Today I will present at the Central Iowa SHRM monthly meeting located at Copper Creek Golf Course on electronic workplace issues. The electronic workplace is all around us. Computers, voice mail, internet, intranet, e-mail, fax machines, laptops, PDAs, videoconferencing, social media, blogs and more are common features in the American workplace. The development of the electronic workplace has not come without legal implications. The same technology that allows us to perform work more efficiently creates several twists on several areas of employment law. We will explore many of the dangers and pitfalls in the electronic workplace:

I. Email

  • Discovery in Litigation
  • Record Retention
  • Discrimination, harassment and other concerns

II. Internet

  • Accessing Inappropriate Material
  • Social Media and Blogs
  • Copyright violations

III. Employee Privacy Rights

  • Electronic Communications Privacy Act
  • Handbooks - lower expectation of privacy
  • Consistency

IV. Telecommuting

  • ADA
  • Workers' Compensation

V.  Employment Ads and Resume Posting on Internet

Program details:  Tuesday, April 8, 2008 at Copper Creek Golf Course, 4825 Copper Creek Drive, Pleasant Hill, Iowa.  Registration begins at 7:15 a.m. Business Meeting begins at 7:40 a.m. Program begins at 8:00 a.m.

1.0 General recertification credit has been pre-approved.

Thanks to the Central Iowa SHRM Chapter for the invitation.

Iowa Small Business Financing & Assistance Program

A new program from the non-profit Iowa Foundation for Microenterprise and Community Vitality (IFMCV), will provide a statewide mechanism for Iowa's microentrepreneurs to connect with community development agencies for assistance. Among the groups spearheading the effort are the Greater Des Moines Community Foundation and the Community Vitality Center (CVC), a policy analysis center based at Iowa State University. The program specializes in providing loans of $35,000 or less to small businesses.

State legislators are considering ways to fund microenterprise assistance programs that would be offered through the Iowa Department of Economic Development. An appropriations bill now under consideration would provide $500,000 to fund a microenterprise specialist at the IDED and begin a microloan program, using unspent Grow Iowa Values Fund dollars.

These are exciting developments for the state's small businesses which have long been ignored in Iowa. For more information please read this article from the Des Moines Business Record.

Pizza Hut: A Tough Employment Situation Any Way You Slice It

The Des Moines Register had an article about how support has poured in for a Pizza Hut Delivery driver that was suspended from work after he shot an alleged armed robber.  The employee had a valid handgun permit but a Pizza Hut human resources representative indicated that employees are not allowed to carry guns "because we (Pizza Hut) believe that is the safest for everybody."

I saw a clip where the delivery driver spoke with the TV media and he was obviously shaken by the incident.  He said he appreciated the fact his employer had given him the time off without automatically taking action against him. 

I know many readers on the Register blogs have been critical of Pizza Hut but they appear to be handling this difficult situation rather cautiously.  They have not terminated the driver at this time but rather have suspended the employee pending an investigation. 

Public opinion is definitely in favor of the driver.  Even a state senator has publicly stated his position that the company would be wrong to fire the driver and vows to stop buying Pizza Hut products if the driver is fired.  So this is a tough one for the company and there are no easy answers.  I don't envy the employer's position on this one. 

Ultimately I suspect the employer will enforce its policy but I will let you know as this unfolds.

photo on flickr by hashcakes.

 

 

 

BlawgIT has Moved to Its Own URL

Iowa's first legal blog has moved to its own url at www.blawgit.com and new posts will no longer be available at its former blogger site. Iowa patent attorney Brett Trout has achieved remarkable success with his blog.  It is an award winning blog that provides tremendous information on patent, trademark and Internet law.

Brett is also the author of Cyber Law:  A Legal Arsenal for Your Online Business.  It's a great desk reference that I highly recommend.

Brett also occasionally (I guess often) demonstrates his unique sense of humor.  This blog is a real treat and one of the best around so be sure to visit often. 

Iowa Secretary of State Corporate Biennial Reports Due Today

It's no April Fool's joke, the Iowa Secretary of State corporate biennial reports are due today, April 1, 2008.  If you have not filed your report be sure to do so today.  In Iowa, limited liability companies are also required to file the report.  If you file online the cost is $30.00 for the filing fee.  The cost is $45.00 if you file a paper report.

If you do not file your report a notice is generated and eventually your corporation will be administratively dissolved after the notice.  You can get your corporation or LLC reinstated but that will cost you additional time and effort.  You also cannot get reinstated unless you have paid all applicable state taxes.

So get your report filed today.  If you know your corporation # and pin # you can file the report by going to the following link:

https://www.sos.state.ia.us/BiennialReports/index.asp

 

What You Need to Know About Retaliation Claims

Pennsylvania employment lawyer Michael Moore has an excellent post on Five Things Every HR Generalist Should Know about Retaliation Claims.  Michael notes that the number of retaliation claims rose 18% in 2007 to a record high, doubling since 1992.  His post covers the following areas:

  • What is unlawful retaliation?
  • What is "Adverse Action" by an employer?
  • What is "Protected Activity by an employee?
  • Promptly investigate comments & complaints regarding discrimination.
  • Monitor supervisors for adverse action following an employee complaint.

In my experience, employers are usually cognizant of discrimination and harassment claims. However, they are often blindsided by retaliation claims. The successful resolution of a discrimination or harassment complaint means you are only halfway home. Supervisors and employees must not retaliate against the employee who complained. This is especially important because of a United States Supreme Court decision lowering the burden for employees to show retaliation.

Here are some proactive measures employers can take in order to avoid retaliation claims:

  1. Make sure your employee handbook includes a policy prohibiting retaliation.
  2. Always have alternative reporting avenues.
  3. Conduct supervisor and management training on harassment, discrimination and retaliation. 
  4. Make sure supervisors and management have been asked the tough questions when it comes to employee discipline. Make sure the discipline has nothing to do with the complaints of harassment, discrimination or retaliation. 
  5. Periodically talk with the complaining employee to determine if anyone has retaliated against them. If performance is an issue for the employee be sure to bring this to the attention of the employee and make sure to document your conversations. Document! Document! Document!

As always, be sure to consult your employment lawyer for advice in specific situations.

Today's Lawyers Must Be Mindful of Social Media and Pretrial Publicity

Des Moines attorney Charles Kenville has a great post on the need for lawyers to be mindful of the new media exposure in their cases.  Chuck has a criminal law bent to his post but his reminder is just as true for civil cases.

I know from experience that savvy businesses are acutely aware of blogs and other social media in their trial preparation.  In particular, Microsoft did a great job a staying in contact with Des Moines patent attorney Brett Trout and I when the Microsoft-Iowa litigation was going full steam.  But the plaintiffs were not to be outdone.  We routinely received updates from the plaintiffs' public relations team as well.

The bottom line is that lawyers engaging in trial law today ignore blogs and social media at their peril.  Learn how to read RSS feeds to stay on top of pretrial publicity.  You will be glad you did.

Should Employers Allow Employees to Start Businesses?

Seeds I read a Des Moines Register article this past week on a young man who is starting a business while employed by another company.  According to the SBA deputy director in Iowa this happens frequently.  I must say that I greatly admire anyone who has the courage and desire to start their own business. But my question is whether this is good for employers?

This is not an easy question.  On the one hand it is important for an employee to grow and allowing an employee to create a business on his or her own time may in fact create a more productive and happy employee.  Particularly if the employee is starting a business that is different than the employer and they do it on their own time there may be no harm.

On the other hand, an employer pays an employee to do their job.  The employee's allegiance should be to the employer as long as that employee is receiving wages and other job benefits, right?

I must confess that I am not sure whether there is a right answer and it probably depends on the circumstances.  I am aware of many successful companies that draft policies that prohibit outside business activities while many other successful companies provide an environment that encourages employees to start their own companies.

One important risk in allowing employees to start businesses while on the employer's dime is the potential for the employer to start a similar business and steal clients.  This should be prevented.  One way to do this is with a non-compete agreement.  Other ways employers can protect themselves is through the use of confidentiality and non-solicitation agreements

But employers may want to read this article on what to do when an employee betrays you.  Unfortunately, many employees are not as upfront and honest as the young man in the Register article.  Employees have a legal obligation to act in the employer's best interests.  If an employee breaches this duty an employer may have an enforceable right.

Photo on flickr by Burpee Gardens.

Great Business Resources

Ohio business lawyer Terri Rasmussen has an excellent overview of the resources available on the SBA Website.  (With a hat tip to Joel Libava on the Small Business Trends Blog for the original post).  Terri also refers to a helpful post from Anita Campbell on the Ten Ways Business.gov Helps Your Business.

While I couldn't agree more with these posts about the valuable information found on the SBA Web site, I would add I find the Kauffman eVenturing site to be one of the most useful business resources on the Internet for pure business advice and information.  The quality of the ideas and writing on the Kauffman site is outstanding.

P.S.  If you are looking for an interesting interview, be sure to take some time to listen to Central Iowa's very own Sherry Borzo interview Anita Campbell on the dsmBuzz site.  It's terrific!

A Must Read: Cautionary Tale About Partnership

A cautionary tale about partnership from Richard Fox on the Kauffman eVenturing site is an absolute must read.  Fox shares how he thought his legal background would protect him well as he created shareholder agreements, buy/sell agreements, voting trusts, special bylaws and articles of incorporation when he entered into a business partnership.  But even he was surprised when a 50 percent partner tried to sell the company out from underneath him after his father's funeral.  To make matters worse the partner tried to sell the company to their number one competitor.

Fortunately for Fox he was able to ultimately sell the company for a handsome price because he continued to concentrate on building the business rather than retaliating against his partner.  But it's pretty clear Fox believes any business person should be extremely careful when taking on partner.  He offers the following priceless advice (with my comments following):

  • Know Your Existing Shareholders' Rights. Shareholders of private companies—even minority shareholders—hold the same legal rights as shareholders of public companies. When you accept shareholders, you accept the same scrutiny that comes with being a public company without the benefits. Understand that you can never be adequately prepared for a shareholder who wants to maliciously assert their shareholder rights to cause you problems. 

(Comment:  In Iowa, all shareholders are entitled to the financial information of the company as well as copies of all corporate documents   I strongly suggest you keep all copies of all important corporate documents and financial information routinely, not just when you need them.  In particular make sure you have any documents that would evidence ownership rights.  It is my experience that often one partner will have access to the corporate documentation while the other partner does not.  Don't let that happen to you).

  • Avoid Taking on New "Legal" Shareholders. Entrepreneurs sometimes give ownership interests to key employees to allow them to share in the equity growth of the business. For the reason stated immediately above, you might consider offering "phantom stock," (read this article for more on phantom stocks) which carries all the economic benefits of common stock ownership without the potentially abusive rights of legal ownership. A lawyer should be able to advise you on the details. 

(Comment:  My experience with clients is that most employees really want to be paid more.  I know entrepreneurs often want employees to feel as though they have a "piece of the action".  But I also caution you to think twice about employee ownership).

  • Take the high road. Rather than counter-suing the partner, Fox chose to put his energy into building the business. Not only was it good for the business, but it kept from muddying the waters any further and made a much needed ally out of the company's other corporate director. 

 (Comment:  This is very difficult to do is some situations.  Sometimes you may have no alternative but to fight back.  But I agree it is critical to continue growing the business). 

  • Be prepared for anything. Pushed to the edge, some people will fight back with extreme measures. Although secretly passing legislation is extreme, be prepared for the unexpected.

(Comment:  I have learned this lesson the hard way myself with business partners in a few of my endeavors.  Do everything you can to protect yourself.  Start by knowing your rights and make sure to document, document, document.  Adversity often brings out the worst in people but amazingly people also change with substantial success.  Researchers have found the mere presence of money changes peopleIt is also a good idea to have a trusted confidant that can help you vet a potential partnership without emotion).

  • Sell on your way up. Entrepreneurs are "hard-wired" to grow businesses. The idea of selling is usually a far-away concept that is considered, but knowing the best time to sell is not intuitive. Don't wait until you can see the peak because chances are your buyers can see it too and will discount the price accordingly. Plan on a full year for the sale process to be completed; if you pull the trigger too late, you may miss.

(Comment:  This is a tough one for most business people.  You need to have a little luck on your side to sell at the right time.  But it's just like investing in the stock market.  You will likely never sell at the peak so don't be greedy.  A business sale should be a win-win for the buyer and seller). 

Overall, I just can't stress enough the importance of carefully considering whether a business partnership is right for you.  I often joke that it is not a matter of "if" but a matter of "when" the partnership will end.  But this is one joke I don't consider to be a laughing matter.  Fox's tale proves it.   

Rush Nigut Joins Brick Gentry, P.C. Law Firm

Today is my last day with the Sullivan & Ward law firm.  This coming Monday I am taking a hop, skip and a jump over to the law firm of Brick Gentry, P.C. in West Des Moines, Iowa.  This is actually almost literally true as the Brick Gentry law firm is located across the parking lot just to the west of my current office location. 

It is difficult to leave my friends at the Sullivan & Ward firm but I am excited by this new opportunity.  Brick Gentry is a growing law firm with an excellent reputation in the Des Moines legal community for over 40 years.  The firm now consists of approximately twenty-five lawyers practicing in a wide range of areas including business law, municipal law, health care law, employment law, litigation and real estate.   

I'll join the firm as a shareholder and continue to work with my current business law clients and litigation matters.  Rush on Business will also continue although you will notice some changes to the links and contact information on the blog in the next couple of days. 

My new contact information is:

Rush Nigut, Brick Gentry, P.C., 6701 Westown Parkway, Suite 100, West Des Moines, IA 50266.  Phone:  515-274-1450; Fax:  515-274-1488; email:  rush.nigut@brickgentrylaw.com

Thank you again to all of you that read this blog.  I appreciate your support and look forward to this next step in the journey.  Stay tuned for more because I have a few plans ahead to mix it up and enhance the blog.  I'll need to settled in but I am looking forward to working on some new challenges very soon. 

photo on flickr by phxpma

 

 

Ten Tips for New Small Businesses

Here's some great tips for new small businesses.  Some terrific advice.  The top ten tips as listed:

  1. Save up as much money as possible before starting.
  2. Start on a shoestring.
  3. Protect your personal assets.
  4. Understand how--and if--you will make a profit.
  5. Make a business plan, no matter how short.
  6. Get and keep a competitive edge.
  7. Put all agreements in writing.
  8. Hire and keep good people.
  9. Pay attention to the legal status of your workers.
  10. Pay your bills early and your taxes on time. 

I especially appreciate the emphais placed on paying your payroll taxes on time, particularly the portion you withhold from your employees' wages. (See the commentary on No. 10).  It is critically important to understand that a corporation or LLC will not protect you from personal liability in the event these taxes are not paid.  (For an example, see a post from my favorite blogging accountant, Joe Kristan).

Is Blogging Hazardous for Your Career?

As a blogger you may want to read this post from the Write Stuff on how to protect your online reputation

The post discusses how several employees have been fired from their jobs for writing controversial blog posts including a Web designer that shared stories and opinions about co-workers on a personal blog, an airline attendant who posted photos of herself in an empty jet, and the former CNN reporter who published opinionated entries on his blog.

As pointed out:

In each instance, the blogger’s justifications and legal arguments may be compelling. But that doesn’t change the fact that they all have one thing in common: Termination from lucrative positions that permanently clouds their employment histories.

The post goes on to give some great reminders including

  • Blog as if your employer is watching and behave accordingly.
  • Don't mix business and personal matters.
  • Research company employee handbooks and/or consult HR before blogging.
  • Consider what you stand to gain against what you stand to lose.
  • If you are monetizing your blog check your company's conflict of interest policy.
  • Blog truthfully and accurately.

Above all, whether you are blogging on a personal or business blog, you must be cognizant of whether your words and actions could damage and/or embarass your employer.  If so, you shouldn't be surprised when you receive your pink slip. 

And also always remember the shortest corporate blogging policy:  "Be professional".

Interview Tips to Live By

I don't know a single employer that can't use some good interview tips.  Fortunately for us Ohio Employer attorney Jon Hyman shares how to avoid hidden interview traps  and common stereotypes to avoid during job interviews.

These are great posts so be sure to check them out.

Deleted Email Case Provides Important Lessons

The Electronic Discovery Blog of K & L Gates has an informative post on a recent electronic discovery decision out of the Northern District of Georgia. 

In the case the court found that deleted emails were not reasonably accessible and the defendant had no duty to search backup tapes for emails of a sexual nature.

Lessons from this decision:

  1. DIscovery requests for emails should be relevent, specific and limited by time, sender and recipient.
  2. Following a written document retention and destruction schedule can prevent spoilation sanctions.
  3. Plaintiffs should request company-wide email perservation and not rely solely on the fact litigation has commenced.  Requests should also include the names of individuals from whom you want the emails.
  4. If the costs of retrieving emails on backup tapes are too high, judges are reluctant to order production.

Read the entire decision here.

 

Retailer: Make Sure You're Covered By Insurance

Brian Honnold of Professional Solutions Insurance Services shares important information on IowaBiz that every retailer should know about their insurance coverage when you build out your new retail space in your local mall or strip center.

If you don't fully check out your coverages chances are you will be sorry.

 

 

Key Differences Between UFOC and New Franchise Disclosure Document

As disclosed in the last post the new amended FTC rule concerning franchise disclosure documents requires franchisors to update their UFOC by no later than July 1, 2008.  After July 1, 2008, franchisors must comply with the new FTC rule only.  Currently, franchisors may comply with either the former rule or the new rule.

Here are some key differences between the former rule and the new rule:

  • Use of unaudited financial statements.  Start-up franchisors may phase-in the use of audited financial statements.  In this case the franchisor must clearly and conspicuously disclose that the franchise has not been in business for three or more years and cannot include all required financial statements.  (There may still be requirements to submit audited opening balance sheets in registration states).  Franchisees should make sure to review the financials carefully as always.
  • Financial Statements.  The FTC will allow the use of financial statements prepared according to U.S. generally accepted accounting principles ("GAAP").  There must be separate audited financial statements for any parent that "commits to perform post-sale obligations for the franchisor or guarantees the franchisor's obligations" in the disclosure document.
  • No Broker Disclosures.  The Amended FTC rule eliminates the broker disclosure requirement.  However, the broker will need to be listed on the Receipt Page because the Receipt Page requires the franchisor to identify all "franchise sellers".
  • Litigation.  Franchisors will be required to disclose material franchisor-initiated litigation against its franchisees.  The rule will be more lenient as a franchisor will only have to disclose actions that the franchisor filed during its last fiscal year - not the last 10 years. Further,  a full description of the case will not be necessary.  If a counterclaim is filed against a franchisee the disclosure will need to be treated as any other franchisee-initiated action and the regular, full disclosure will be required.  (Franchisees will need to more fully investigate whether franchisor-initiated litigation occurred whether it is in the disclosure document or not).
  • Financial Performance Representations.  The new rule encourages franchisors to provide financial performance representations but it is still voluntary.  Franchisors may provide a more detailed cost and expense analysis which could be helpful for prospective franchisees.  Also, franchisors may provide financial representations based upon a subset that shares the same characteristics. 

There are other differences so be sure to talk with an attorney experienced in franchise matters if you are looking at purchasing a franchise.

 

Franchise Disclosure Document Pitfalls

Interested in franchising your business and have an extra 36 minutes? 

You may want to listen to this informative podcast on AllBusiness featuring franchise lawyers Julie Lusthaus and Warren Lewis discuss the pitfalls of the Franchise Disclosure Document (formerly known as the UFOC).

The new amended FTC rule concerning franchise disclosure documents requires franchisors to update their UFOC by no later than July 1, 2008.  After July 1, 2008, franchisors must comply with the new FTC rule only.  Currently, franchisors may comply with either the former rule or the new rule.

Stay tuned for the next post on some of the differences between the new franchise disclosure document and the UFOC.

New Proposed FMLA Regulations

The Department of Labor recently released new proposed regulations concerning the Family Medical Leave Act (FMLA).  Since the proposed regulations are 477 pages, it is nice that Ohio employment lawyer Jon Hyman has provided a excellent overview.

Jon simply has one of most informative employment law blogs around.  Here are his highlights of the new regulations:

Except in emergency situations, employees will be required to follow the employer's policy for notification of FMLA leave, eliminating employees' ability under the old regulations to take up to 2 days after an absence begins to notify their employer that they intend to take FMLA leave. This change will greatly improve employers' ability to plan and schedule around employees' medical leaves.

  • Employers will be able to directly contact employees' doctors when employers have questions about FMLA medical certification forms that the doctors have filled out. Employers will no longer have to go through the employee as an intermediary, or retain their own doctor to contact the employee's doctor. While this change may have some effect on employee privacy, it will greatly improve the flow of information and streamline the ability of employers to make proper decisions based on full and complete medical information. This rule will also eliminate the expense and burden of companies having to retain their own doctors simply to ensure that a form is properly filled out.
  • To employers' dismay, the regulations do not change the time increments in which employees can take intermittent leave, but do require that an employee using intermittent leave use the employer's regular call in procedure except in emergencies. Thus, employees will still be able to take intermittent leave in very short increments, continuing for employers the administrative nightmare of intermittent leave, albeit with some additional notice.
  • Employers will be entitled to require employees to obtain certification of FMLA-eligible medical conditions twice a year instead of annually.
  • Currently, the clock under which employees accrue their 12 months of service for eligibility has no time limit, even after multiple breaks of service. Thus, if I work for 6 months for a company, and return 10 years later, I am eligible for FMLA leave after another 6 months. The new regulations place a 5-year cap on years of service for calculating eligibility, except for military or childrearing leaves, or where rehiring is covered by a collective bargaining agreement.

Please note that I often find many small employers mistakenly believe they are subject to the FMLA regulations.  Generally, the FMLA covers employers with 50 or more employees, and employees must have worked for the employer for 12 months and for 1,250 hours of service during the previous year to be eligible for FMLA leave.  So be sure not to create a situation where you are responsible for FMLA leave if you are not required to do so.

As always, seek the advice of an employment lawyer in your particular situation.

flickr photo by mahalie

Blawg Review Has Iowa Encore

My reign as the host of Blawg Review is coming to an end.  But never fear, Brett is here!

Next week Mr. Trout keeps the Blawg Review right here in the great state of Iowa.  I guess we will find out whether patent attorneys really do have all the fun.

As for me, I'll get back to some regular business law related posts next week. 

Blawg Review #147

Welcome to a RAGBRAI inspired Blawg Review.  What is RAGBRAI?  The Register's Annual Great Bicycle Ride Across Iowa is an annual seven-day ride across the state.  Heading into its 36th year, RAGBRAI is the longest, largest and oldest touring bicycle ride in the world.  It's not a race.  It's an experience.   And since Blawg Review is a carnival, nothing says carnival in an uniquely Iowa way like bicycles, spandex, pork chops, pie, frivolity and 10,000 of your closest friends!

The weather in Iowa is frigid this winter.  As the weekend of this Blawg Review approaches Iowans brace for another heavy snow.  Our friend Charlie Longbrief looks at the floor below his stationary bike and dreams of summer.  A person can stand only so many YMCA spinning classes.  He thinks back to his first RAGBRAI as a twenty year old when law school hadn't yet entered his mind and the biggest celebrity on the ride was Oakland Raiders great and Miller Lite spokeman Ben Davidson.  Now it's nothing to see the likes of lawyer turned politician John Edwards or the bicycling legend himself, Lance Armstrong.  Armstrong may have participated in the famous New York City Marathon but his heart will always belong with RAGBRAI.  Listen for yourself:

Day 1:  Missouri Valley to Harlan  - 58 miles

This year's ride starts in the river town of Missouri Valley.  While performing the traditional dip of his back tire in the Missouri River, Charlie sees Liz Overton of the Iowa Law Blog who warns him that because of the $350,000 settlement in a 2004 RAGBRAI death bicyclers better beware of the new proposed legislation from the Iowa State Association of Counties.

Unfazed Charlie gets on his bike and sets out on his adventure.  But as he rides off he does ask himself whether Mad Kane is right.  Is it wise to travel with friends particularly where tents are involved?

About 15 miles down the road Charlie takes a break and starts getting an earful from New Yorker Eric Turkewitz about how State Farm has been hit with a RICO lawsuit over alleged sham medical exams.  That hasn't been reported elsewhere and Charlie worries whether State Farm might be doing the same thing in Iowa.  Charlie is so interested he and Eric ride the rest of the way to Harlan together.  Although its only the first day Turkewitz remarks that he agrees with Lance Armstrong . . . RAGBRAI is a hell of lot more fun than his beloved New York City Marathon.

As he pulls into Harlan, Charlie finds himself a little short on cash and heads off to find an ATM.  There he sees John Crenshaw who starts telling him about the biggest scams banks are pulling off everyday. Charlie just shakes his head in agreement as he pays the $2.00 charge to get the money out of the ATM.  After a little angel hair pasta its time to hit the sleeping bag.  There is a big week ahead and unfortunately Charlie isn't twenty any longer.

Day 2:  Harlan to Jefferson - 83 miles

The next morning Charlie wakes up bright and early and sets off for Jefferson.  He has some clients that are buying a business nearby and that reminds him he should heed Larry Staton Jr.'s advice to know what you are getting when you buy a trademark from an existing business.

About half way to Jefferson our city boy is a little mesmerized by the miles and miles of corn.  It makes him wonder whether Farmer David will be able to pay that large patent judgment he now owes Monsanto as reported by the Patent Baristas.

In Scranton, just short of Jefferson, Charlie sees a big group of people gathered in a park off the town's main drag.  There he sees Dan Slater of the WSJ Law Blog who explains that all the hoopla is because the M & M boys have turned their attention to the RAGBRAI water slides because the Naked Cowboy drove them outta of Dodge.  The revelers love it and the log jam causes a very slow ride into Jefferson that evening.

Day 3:  Jefferson to Ames - 56 miles

It's a big day for politicians on the way to Ames, home of Iowa State University.  Barack Obama and John McCain are expected to make appearances today.  Hillary Clinton is here too and keeps talking about how the Florida and Michigan delegates must count.  Obama shrugs it off by saying even his six year old knows it wouldn't be fair to count votes where there was no campaign.  But at least Florida has made significant strides in improving its jury system according to Juries.  While Diane Levin points out voters can learn a lot from the field of negotiationEugene Volokh shares that John Mellencamp may be able to stop McCain from playing his songs after all.

All the political talk has people addressing serious issues on the road today.  Riding on a three person tandum, Leon Gettler of Sox First tells Charlie that Sarbanes-Oxley not only failed to stop the subprime meltdown, it contributed by giving investors the false confidence that they could rely on the law, and not prudence to protect their market holdingsScott Greenfield shares that Congress has a pending bill that may immunize banks from paying billions in dollars to a small Plano, Texas companyPatently-O adds that although DataTreasury is not directly mentioned in the bill it is pretty clear that Section 14 is directed primarily at the company

As Charlie rides into Ames he sees Kevin O'Keefe and  Holden Oliver of What About Clients engaged in a heated discussion about whether corporate clients really want a lawyer that blogs.  O'Keefe says yes while Oliver says no.  It then gets a little personal when O'Keefe accuses Oliver of being someone else.  Charlie blames Teri Rasmussen who started the whole thing when she said every client should want a lawyer who blawgs.

Day 4:  Ames to Tama-Toledo - 75 miles

Charlie gets ready to head off to Iowa's version of the twin cities today.  In the pancake breakfast line he meets Connie Crosby who is kind enough to introduce him to David Bilinsky.  David tells Charlie all about how there is a great need for law firms to turn their senior partners into business leadersDavid Maister overhears them and chimes in that one-firm firms are often quite successful.

After an uneventful morning Charlie witnesses an accident on today's route where someone goes to the hospital.  It looks like the rider will be okay but David Harlow of HealthBlawg warns that hospital-acquired infections are a real problem.  Iowa estate lawyer Matt Gardner says that even if the rider makes it through he should still think about the disposition of his bodily remains.

 As he enters Tama (or is it Toledo), John Phillips of the Word on Employment Law almost runs smack into a little beagle that darts in front of him.  The incident causes John to conclude that beagles should no longer be excluded from the Animal Employment Protection Act (AEPA).  John is obviously a little excited about the near miss and starts rambling about how he handled the situation a whole lot better than Roger Clemens handled the accusations from Brian McNamee.

Day 5:  Tama-Toledo to North Liberty - 82 miles

Now that we have passed the mid-way point for this year's ride, everyone is a little loosey-goosey today.  Charlie's cadence starts to pick up as the wind blows with the sweet smell of pork chops.  That could only mean that Mr. Pork Chop is nearby.  As he pulls off the roadside to visit our pork chop hero, Charlie sees that Iowa legal blogger extraordinaire Brett Trout and his band of Iowa legal bloggers are engaging Mr. Pork Chop in a battle of wills to determine who has the loudest pork chop call.  Sadly, while Trout may be Iowa's toughest attorney he is no match for Mr. Pork Chop in this arena.  Hear why:

 

After a pork chop and a short nap Charlie rides along to catch up with Michael Moore who discusses risk management in employee terminations and explains sometimes the "How" is as important as the "Why".  Pretty soon both of them come across a big party along the roadside.  A crowd is gathered around Dennis Kennedy who apparently is still celebrating his blawgiversary and birthday.  During the party Tulane Law Professor Alan Childress wonders aloud whether any Iowa legal counselors had ever been in trouble like the lawyer that got into trouble with his state bar by trying to talk his way out of a ticket for deer hunting.

Still a little full from his banana cream pie, Charlie and his new friend Charles H. Green ride along at an easy pace discussing that as more and more banks and consumers walk away from loans--and contracts gone bad, we are reminded that legally binding contracts are often only as strong as the morality of those signing them.

That evening after dinner there is lots of entertainment in North Liberty.  At a concert Cathy Gellis proclaims, "I need a husband!"  The revelation causes Jon Hyman to explain what happens when office romances go bad.  But Cynthia Shapiro, who received her RAGBRAI pass from George's Employment Blawg, says you might be able to have that office romance if you know a few secrets.  When Jennifer Jaskolka-Brown overhears them she warns them that email has made it much easier to collect damaging evidence in divorce cases.

Day 6:  North Liberty to Tipton - 62 miles

Charlie decides to join the Lance Armstrong peloton this morning for some fun.  As you might expect with Armstrong the ride is a little faster paced today.  There are several others brave enough to join the pack this morning: