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Business Law

Monday, October 17, 2016

Oral Contracts & The Statute of Frauds - Is the Agreement Binding?

There is a widespread misconception that verbal contracts are unenforceable.  Nevertheless, a contract made orally with another party, without embodying the particular terms in a signed writing, can still be valid and binding. Even so, any disagreement concerning the deal may pose multiple problems for both parties.  In order for the court to give a verbal contract legal effect, the terms of the deal will have to be demonstrated. This could involve pricey litigation and an extensive discovery process.  Therefore, it is advisable to have an attorney draft any contractual agreement.

Moreover, according to the Statute of Frauds, there are certain contracts that must be in writing in order to be legally binding.  This may include contracts for the sale of land or real estate, surety agreements, in which one person guarantees to take over another's contractual obligations, and service agreements that take over one year to complete.  Other agreements that must be written to be legally binding may include agreements “made in the consideration of marriage,” or those made for the sale of goods valued at $500 or more. If the requirements for contractual validity are not met, either party runs the risk of the other party rescinding the contract by declaring it void.

The Statute of Frauds not only aims to prevent deception or fraud; it requires precise terms to be set in writing for a contract to be valid. The Statute of Frauds typically requires the document to include a description of the “subject matter” of the agreement, the main stipulations to the deal, and the signatures of the parties.  Nevertheless, these requirements may vary with the sale of goods under the Uniform Commercial Code, where a signature by the “party to be charged” may be sufficient.  For a sale of goods, the terms typically should include the price and quantity of the goods. 

Sometimes, if the contract is unenforceable under the Statute of Frauds, it may be saved if one party suffered by relying on the contract and if the injured party can prove this reliance in court.  Likewise, an exception may exist if “specially manufactured goods” were provided under the contract or one party “partially performed” what was required by the agreement.  The outcome may also vary if two merchants were the contracting parties.  Seek advice from a licensed business law and contract attorney to evaluate agreements and determine whether they are legally enforceable. 


Monday, September 26, 2016

Copyright Protection and Fair Use

Authors often want to understand the eligibility of their writings for copyright protection. Legal copyright registration provides the copyright holder with a collection of special rights. Under the U.S. Copyright Act, a rightful owner maintains the “exclusive right to reproduce, distribute, perform, display, license, and . . . prepare derivative works” founded on his or her creations.  However, these “exclusive” rights are curtailed by the “fair use” doctrine, which typically allows others to use your work legally for certain limited purposes, such as “criticism, comment, news reporting, teaching, scholarship, or research.” 

A court makes the final determination about whether a particular use of a registered work comes within the “fair use” doctrine. Factors that a court may use to verify whether a particular use is permissible under the statute may include “the purpose and character of the use.”  For instance, if a third-party utilizes your registered work for an educational and nonprofit purpose, the use is unlikely to be categorized as copyright infringement.  

The court may also look at “the amount and substantiality of the portion used in relation to the copyrighted work as a whole.”  It is likely to be copyright infringement if a large portion of the work has been used, where the user is effectively usurping the work as his or her own.  The court may also analyze “the effect of the use upon the potential market for, or value of, the copyrighted work.”  Furthermore, if a third party did not publish the work in question, the action may still constitute fair use. 

Copyright protection spans “architectural design, software, the graphic arts, motion pictures, and sound recordings.”  Consulting with an intellectual property lawyer will clarify whether a particular type of work qualifies for legal protection. It is important to remember that legal action may not be brought until work is registered, even if blatant copyright infringement transpires. 

Qualified intellectual property lawyers are dedicated to keeping their clients in compliance with the Copyright Office and protecting them from being subjected to the civil fines that may result from improper actions.  Engaging the services of a licensed intellectual property lawyer will not only protect original creations but provide necessary advice on whatever legal recourse is available.  


Monday, September 5, 2016

The Federal Trade Commission Act and its Affect on Advertising


The law forbids businesses from including baseless statements or assertions in their advertisements.  According to the Federal Trade Commission Act (FTCA), a business must ensure that their representations are not misleading or unfair, and the entity must have data that supports all claims.  Evidence may, for example, be substantiated based by surveys, expert testimony, or scientific studies and tests. 

A “deceptive” advertisement, as described in the FTC's "Deception Policy Statement" is one that suggests or omits a critical fact in an attempt to mislead customers. Similarly, an “unfair” advertisement is categorized as one using a deceptive practice that may result, or has resulted in, significant customer harm.
Read more . . .


Monday, August 22, 2016

What Employers Should Not Ask In An Interview

Most employers know that their workers are protected from discrimination while they are employed.  Surprisingly, some are unaware that prospective employees are protected throughout the application and hiring process as well.  Title VII of the Civil Rights Act of 1964, Title I of the Americans with Disabilities Act, the Pregnancy Discrimination Act and the Age Discrimination in Employment Act of 1967, as well as other Federal and state laws, are all applicable to prospective employees.  Therefore, employers must be extremely careful about the questions they ask individuals applying for a position.

Employers should shy away from asking any questions that might give a prospective employee reason to believe they were not selected for a position due to discrimination.  Employers should not inquire about an applicant’s race, unless it is for an Equal Employment Opportunity Commission purpose (which should be noted).  They should also not ask about an applicant’s citizenship status and instead should inquire as to whether the individual has authorization to work in the United States.

Employers should also be sensitive to discrimination based on gender and sexual orientation when conducting interviews.  They should not ask gender-related questions or anything regarding pregnancy or children.  It is also not a good idea to ask a prospective employee about marital status or religion.  An employer might be concerned that a prospective employee will miss work due to young children or religious holidays.  But, if they are concerned about an applicant’s attendance, they should only ask about attendance records at previous places of employment.  Now, many states have laws relating to discrimination based on sexual orientation and employers should be careful not to inquire about this detail as well.

Individuals with disabilities are protected under Federal and state law.   An employer should never ask about a disability.  All that matters is that the individual is able to perform job duties, so an employer should only inquire about functioning in that respect.  For example, if the applicant is interested in an inventory position that requires standing for the entire 8 hour shift and lifting heavy boxes, but the applicant suffers from a disability, the employer should only ask whether their disability prohibits them from performing these duties.  Many states now have or are in the process of passing laws that prohibit discrimination based on criminal convictions, so employers should be aware not to ask about an applicant’s criminal history unless they are sure it is allowed under their state’s law.  For the same reason, employers should not ask about credit history or personal finances unless these characteristics have a direct affect on the applicant’s ability to do their job. 

If you are a business owner, it is in your best interest to put together a list of interview questions for prospective employees and to review that list with an experienced attorney.  You should also be sure that all of the parties conducting interviews are aware of the rules relating to interview questions and abide by them.


Monday, August 8, 2016

When Must a Business Charge Sales Tax on Out-of-State Purchases?

A 1992 Supreme Court decision Quill Corp. v. North Dakota established the principle that an out-of-state retailer does not have to collect state sales tax if it does not have a physical location—a store, business office, or warehouse—in the state where the purchase originated.

Theoretically, the consumer placing the order in a state that has a sales tax could be responsible for paying the tax on an out-of-state order.  An out-of-state retailer can voluntarily collect sales tax and remit it to the state, but there is no legal obligation for it to do so.  Because requiring consumers to "self-report" on large numbers of small transactions is burdensome, states generally do not do it, except on very expensive out-of-state purchases.

 

Sales Taxes on Online Transactions 

The long-established principle that out-of-state stores with no in-state presence need not collect sales tax has been challenged in the Internet era.  Many brick-and-mortar businesses have complained that out-of-state online companies have an unfair advantage because they do not have to charge customers sales tax.  States have also lost billions in sales tax revenue to tax-free online orders. 

In 2008, New York enacted the so-called "Amazon Tax" forcing Amazon and similar e-tailers to collect sales tax.  New York got around the Quill requirement of a physical presence in the state because Amazon has countless affiliates and "associates" marketing products through it, and some of those are located in New York.  Other states have enacted similar laws.  Illinois, for example, passed the "Main Street Fairness Act" targeting online retailers with affiliates in Illinois.  Currently Amazon collects sales tax in 23 states.

Some online retailers, such as Overstock.com, have cancelled affiliate programs in states with an "Amazon Tax" to avoid having to collect state sales taxes.

 

Which States Have an "Amazon Tax"?

Currently 23 states have sales taxes on online retailers like Amazon:

Arizona

California

Connecticut

Florida

Georgia

Indiana

Kansas

Kentucky

Maryland

Massachusetts

Minnesota

Nevada

New Jersey

New York

North Carolina

North Dakota

Pennsylvania

Tennessee

Texas

Virginia

Washington

West Virginia

Wisconsin

South Carolina will start collecting tax in 2016.  Five states have no sales tax at all -- Alaska, Delaware, Montana, New Hampshire, and Oregon.  Others have yet to target online businesses.

 

Summary

Businesses online or off that have no physical connection to a state, other than shipping products to it, are generally shielded from having to collect sales tax by Quill.  Businesses that have a physical presence in a state may have to collect sales tax if required by state law.  Those with no physical presence but with representatives, affiliates or associates in a state may be required to collect state sales tax by laws like the Amazon Tax.  An experienced business law attorney can assist you in determining whether you are obligated to collect sales taxes.


Monday, July 18, 2016

Pitfalls in Providing Employee References

Employees do not always depart on the best of terms. When that is the case, what are your obligations in terms of disclosure when a prospective employer contacts you to check for references? Keeping negative opinions to yourself might seem like a surefire way to stay out of court. A bad reference might lead an employee to file a lawsuit, but that does not mean he or she would be successful. Theories of liability include defamation, negligent misrepresentation and negligent referral.

Particularly risk-averse employers follow a policy of only confirming employment when someone calls for a reference. This approach does not necessarily insulate you from liability, however. In workplace violence situations, for example, you might find yourself in litigation for simply providing dates of employment for an individual when you were aware of his or her tendency toward or history of violence or other misconduct.

When providing a reference, share only factual information. Hunches, gut feelings and bad vibes are not good topics for discussion. For example, if you suspected a former employee was stealing from you, but you never had conclusive proof, it is probably advisable not to mention your suspicion. The best course of action is usually providing complete and accurate information to anyone checking a reference. Some states have passed laws providing varying degrees of immunity to employers who provide honest references about former employees.

When you are asked for a reference, you should keep track of:

  • which employees you were contacted about;
  • who contacted you;
  • the date of any conversations;
  • the method of communication (phone, email, in person); and
  • what you said, particularly if you provided anything more than confirmation of employment.

An experienced business law attorney can effectively advise you about providing employee references and other challenging issues you face in running your business.


Monday, June 27, 2016

Commercial Lease Disputes

Sometimes a business grows more rapidly than expected and its leased space is no longer large enough. Other times a business finds itself losing money and unable to pay rent. In those instances, it is the commercial tenant that desires to break its lease. There are times, however, when a commercial landlord seeks to break a lease and even threatens eviction for reasons that may lack merit.

A commercial lease is basically a contract that establishes a relationship between the parties and outlines the respective rights and obligations of each. These documents can be confusing and complex. Resolving a commercial lease dispute often involves business, contract and real estate laws.

Unlike residential leases, where the law heavily favors tenants, in the commercial world, the law tends to be more even-handed. The terms of the lease (even if all you have is an oral agreement) are most often going to be what governs the outcome of the dispute. This reflects the view that both parties involved in commercial lease agreements are sophisticated business entities that can protect their interests.

Since the terms of the lease are most likely going to govern if you file a lawsuit and take your dispute to court, it is essential that anyone evaluating your case examines your lease in depth. Even if an out-of-court settlement is negotiated, familiarity with your particular lease agreement is crucial for anyone advising you. Many commercial leases contain a dispute resolution clause that might require mediation or arbitration. These options can often lead to a resolution in less time and with less expense than traditional litigation.

Assessing damages and amassing the means to prove those damages is another important component to handling a commercial lease dispute. Typically, monetary damages are sought. There might be a clause in the lease regarding attorneys' fees. Again, it is vital that a competent and informed review of your particular lease is made to properly guide your case.

Contact an experienced business law attorney today to discuss your commercial lease dispute and learn what legal options are available.

 


Monday, June 6, 2016

Common Frivolous Suits Filed Against Small Businesses

Frivolous lawsuits are an all-too-common problem for small businesses. This is because, under current laws, there is almost no risk to trial attorneys or their clients for bringing even absurd cases to court. While large companies routinely retain attorneys and have the financial means to protect themselves from frivolous lawsuits, small businesses may be left out in the cold if served with an unwarranted lawsuit. Regardless of whether there is any validity to the plaintiff's claim, the small business owners will have to hire attorneys and will typically incur legal fees even if they win the case.

 

Disturbing Statistics about Frivolous Lawsuits against Small Businesses

There are two common types of frivolous lawsuits small business owners have to deal with: product or professional liability and personal injury. According to a recent survey, such unnecessary lawsuits cause financial, not to mention emotional, damage throughout the country. Some of the alarming statistics concerning small business owners in the U.S. are:

  • Over 50 percent of all civil lawsuits target small businesses annually
  • 75 percent fear being targeted by a frivolous lawsuit
  • 90 percent settle frivolous lawsuits simply to avoid higher court costs
  • Owners pay $20 million out of their own pockets to pay tort liability costs
  • U.S. tort costs have increased more than the gross domestic product since 1950
  • On average, those earning $1 million per year spend $20,000 of it on such lawsuits

How Can Small Business Owners Protect Themselves from Frivolous Lawsuits?

The best way for small business owners to protect themselves from frivolous lawsuits is to consult with an experienced, reputable business attorney to help them evaluate possible areas of vulnerability in their company. The attorney should assess their potential exposure in terms of:

  • Employment law, including harassment, discrimination and wrongful termination
  • Intellectual property (IP), protecting them from unintentional theft of IP
  • Contracts management
  • Electronically stored information (ESI)
  • Fraud, establishing internal controls to prevent employee fraud

 

Beyond retaining helpful legal counsel to protect their businesses, small owners must, of course, ensure that they are taking proper precautions in terms of quality control of their own products, services, plant maintenance and staff behavior.

Insurance against Frivolous Lawsuits

If small business owners want optimal protection against frivolous lawsuits, they should look into the possibility of purchasing property or liability insurance for their company. After having an attorney examine their business practices to ensure that they are taking all possible precautions against being sued, they may want to consider buying an insurance policy their lawyer deems appropriate.


Monday, May 16, 2016

Common Lawsuits Brought Against Small Businesses

It is impossible to predict every lawsuit that a small business might possibly face. There is nothing to prevent angry vendors, entitled customers, or disgruntled employees from filing a lawsuit, even if there is no legitimate basis for it. The more a business owner delegates responsibilities to employees, the greater the risk that an employee makes a mistake and exposes the business to a lawsuit. Even the most vigilant, hands on business owner is bound to make a mistake that can lead to a complaint filed against the business.

The most common lawsuits brought against businesses are wrongful termination suits brought by employees or candidates who have suffered a negative employment action. This can be anything from being fired to being demoted or even passed over for an advancement opportunity. If the employee or candidate believes that the action was taken for a reason related to race, gender, religion, identity, or another protected classification, that employee might file a lawsuit. For this reason, it is important to document any sort of negative or positive behaviors at work, so that if an employee does complain of discrimination, the courts can see the employee’s work history and the real reason why he or she may have been passed over for a promotion. Disparaging remarks made about any of these protected classes have no business in a work place as they can create a hostile work environment and lead to lawsuits as well.

Many employers choose to save money by denying their employees overtime pay. This can create many extra costs, as employees will sue for the money they are owed, and the legal fees can be significant. It is a good idea to have contracts establishing the boundaries of a relationship between an employer and an employee to minimize confusion.

It also makes sense to put agreements with vendors and customers in writing. The contracts should include a general description of the work to be performed, a list of any items to be delivered, a project schedule with deadlines, the fee, and the circumstances under which additional fees might be charged, warranties included with the work, how long the contract lasts, how it can be terminated, and how disputes will be resolved.

Personal injury lawsuits against businesses are also common, so it is important to make sure that a place of business is kept in safe condition. Floors should always be dry and warnings should be presented to customers of any dangerous conditions. Drivers should be selected carefully as any accident they cause can be made the responsibility of the business that employs them. Employees who are injured at work are usually precluded from suing their employer and are instead referred to worker’s compensation courts which have their own legal fees. Most states require employers to carry insurance in case of a workplace injury.


Monday, April 18, 2016

What is a 501(c)(3)?

A 501(c)(3) nonprofit is one of a class of 29 different types of tax-exempt, nonprofit organizations under section 501(c) of the tax code. Most charitable organizations that receive donations from individuals in the United States are organized as 501(c)(3) nonprofits. The 501(c)(3) status is the most coveted type of nonprofit status because donations to these organizations can be deducted from income for tax purposes by the donors. This makes fundraising significantly easier.

501(c)(3) tax exemptions are reserved for businesses that operate for religious, scientific, literary, charitable, or educational purposes. They are also permitted when the organization provides services to test products for public safety, aims to prevent cruelty against children and animals, or fosters national or international amateur sporting competitions. A group trying to convince an American city to host the Olympics can be a 501(c)(3) even if it is not a charity in the traditional sense. In order to qualify as a religious organization, a church must comply with the rules outlined in IRS publication 1828 or risk losing its tax exempt status. All 501(c)(3) organizations are prohibited from engaging in supporting political candidates, and there are hard limits to the amount of lobbying a charitable organization may make to influence legislation.

To qualify as a 501c)(3), an organization must include in its articles of incorporation or bylaws restrictions on its power to operate for profit. Without this restriction, the organization’s tax exempt status will be denied, both by the Internal Revenue Service and by the state government. A 501(c)(3) company must receive a substantial portion of its funding by soliciting donations from the general public or government grants. If the organization raises most of its money by selling products or providing services, it cannot operate as a 501(c)(3), even if all the money raised is used for charitable purposes, though for small fundraisers, like carwashes or bake sales, exceptions may be permitted. An organization that receives significant income from private donations and government grants is called a public charity. Another type of 501(c)(3) is a private foundation, which is also tax exempt, and which may also receive tax-deductible donations. Private foundations, however, earn the bulk of their money through investments and endowments. This money is then donated to other charitable organizations.


Monday, March 28, 2016

When Is It OK to Fire an At-Will Employee?

The overwhelming majority of employees are considered to be at-will employees. If an employee works without a contract stating otherwise, that person’s employment is considered at- will for its duration. This means that the person serves at-will and either party may terminate the employment at any time. Even though an explanation is not always given as to why an employee is being fired, there are still some reasons for termination that are unacceptable in the eyes of the law. It is important to be aware of these instances to avoid the appearance of improper behavior and the potential for economic repercussions  as a result.

Termination is not the only action that may be actionable. Under specific circumstances, an employee is permitted to file a claim against an employer for any negative employment actions, including cutting back available hours, pay reductions, or demotions in title. Any negative employment action may give rise to a lawsuit if the employee can prove that the basis of the negative employment action is improper or discriminatory.

Federal law prohibits discrimination against employees on the basis of race, gender, national origin, disability, religion, genetic information, or age, if the employee is over the age of 40. Many states add additional protections including protection from discrimination against employees due to sexual orientation or gender identity.

Other restrictions against firing or other actions that negatively affect job status also exist. It is illegal to fire someone one, or otherwise negatively affect their employment, in retaliation for their filing of a legal claim, whether for discrimination, sexual harassment, or workers compensation. An employer also may not use a person’s ability to work as an incentive to force him or her to take a lie detector test. No individual can be legally fired for complaining about OSHA violations, for refusing to commit an illegal act, or for reporting an illegal act committed by a co-worker or employer (whistle blowing). If an employee exercises a legal right, like voting or taking family leave based on the Family Medical Leave Act, he or she cannot legally be fired for the lost time.

Terminating or otherwise negatively affecting an individual's employment because of any of the above-mentioned events is illegal. Employers should go out of their way not to fire employees contemporaneously with such events, even for other causes, since this may give the appearance of impropriety,and potentially provoke an expensive lawsuit.


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