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Business Law Issues and Trends

Monday, June 16, 2014

Questions You Shouldn't Ask or Answer During an Interview

Job-seekers have to be ready to respond to any interview question asked of them, but not every question has to be answered. 

To ensure that employers do not discriminate against candidates based on age, gender, race, health and family arrangements, there are certain regulations which restrict the type of questions which are permissible during an interview. Below, we explore several topics that may be problematic and should not be asked of potential employees: 

Questionable Questions

Let’s take a look at a few topics that may be problematic. 

  • Age: Does anyone like to be asked their age unless just turning 21? Probably not. While an interviewer may ask whether a candidate is over the age of 18 or 21, he or she may not ask for a specific age.  
  • Nationality: An interviewer can ask whether a candidate is legally allowed to work in the U.S., but he or she can’t ask about the applicant’s nationality or status as a citizen. 
  • Religious beliefs: Same goes for questions that ask about religious beliefs. The interviewer may be in the right if he or she needs to know if the interviewee can work on certain holidays, but otherwise, this topic should be off limits.
  • Health: While in many states an interviewer cannot ask if a candidate smokes, he or she may inquire as to whether the applicant has ever violated any corporate policies on alcohol or tobacco. Furthermore, an employer may ask whether the person being interviewed uses illegal drugs, is able to lift a given weight, or can reach items at a specific height. They also can ask if the individual is capable of completing certain tasks associated with the job and if any reasonable accommodations might be needed.
  • Family status: Employers want to know about an applicant’s availability which may sound like a legitimate concern.   They cross the red line, however, when they try to determine if a candidate has children or plans to have children in the future. An interviewer also cannot ask about an applicant’s maiden name or marital status.
  • Criminal record: A prospective employer is allowed to ask the applicant whether or not he or she has ever been convicted of a crime that relates to the job, but may be restricted from asking whether the candidate has ever been arrested.
  • Military service: An interviewer cannot discriminate against a member of the National Guard or Reserves. He or she can, however, ask if a candidate will anticipate any extended time away from work. 

Acing the Interview Process

The interview process can be a stressful time for employers and employees alike, but it will be a smoother process if you have a basic understanding of what can and can’t be asked during these initial meetings. 

As a candidate being interviewed, remember that if you’re asked a question which you’re not comfortable answering, or you think may be illegal, be sure to keep a positive attitude and try not to focus on the negative and instead deliver an answer which showcases your ability to fulfill the requirements of the job. For example, you may be asked if you can have a babysitter in a moment’s notice if an unexpected work emergency pops up. In answering this question, you may be concerned that you will be divulging too much information about your family life and, like many mothers, you may fear that they may not hire you because of the responsibilities that come along with motherhood. Rather than answering the specific question about a babysitter, you may instead wish to say “I am very flexible and am able to travel or work late when the need arises.” This answer addresses the interviewer’s question while preserving your privacy and also keeps the conversation going in a positive direction-one which showcases why you are the best candidate for the job. 

As an employer looking to hire a new employee, it’s important that everyone in your organization from the receptionist to the hiring manager who might come in contact with the candidates have a basic understanding of what topics and questions are off limits. You might even consider having a list of approved questions and a list of questions which are prohibited, regardless of the position being filled. These procedures should be a matter of strict company policy and should be reviewed each year to ensure compliance with all discrimination laws. 


Friday, June 13, 2014

Overview: Buy-Sell Agreements and Your Small Business

If you co-own a business, you need a buy-sell agreement. Also called a buyout agreement, this document is essentially the business world’s equivalent of a prenup. An effective buy-sell agreement helps prevent conflict between the company’s owners, while also preserving the company’s closely held status. Any business with more than one owner should address this issue upfront, before problems arise.

With a proper buy-sell agreement, all business owners are protected in the event one of the owners wishes to leave the company. The buy-sell agreement establishes clear procedures that must be followed if an owner retires, sells his or her shares, divorces his or her spouse, becomes disabled, or dies. The agreement will establish the price and terms of a buyout, ensuring the company continues in the absence of the departing owner.

A properly drafted buy-sell agreement takes into consideration exactly what the owners wish to happen if one owner departs, whether voluntarily or involuntarily.  Do the owners want to permit a new, unknown partner, should the departing owner wish to sell to an uninvolved third party? What happens if an owner’s spouse is involved in the business and that owner gets a divorce or passes away? How are interests valued when a triggering event occurs?

In crafting your buy-sell agreement, consider the following issues:

  • Triggering Events - What events trigger the provisions of the agreement?  These normally include death, disability, bankruptcy, divorce and retirement.
     
  • Business Valuation - How will the value of shares being transferred be determined? Owners may determine the value of shares annually, by agreement, appraisal or formula.  The agreement may require that the appraisal be performed by a business valuation expert at the time of the triggering event.  Some agreements may also include a “shotgun provision” in which one party proposes a price, giving the other party the obligation to accept or counter with a new offer.
     
  • Funding - How will the departing owner be paid?  Many business owners will obtain insurance coverage, including life, disability, or business continuation insurance on the life or disability of the other owners.  With respect to life insurance, the agreement may provide that the company redeem the departing owner’s shares (“redemption”).  Alternatively, each of the owners may purchase life insurance on the lives of the other owners to provide the liquidity needed to purchase the departing owner’s shares (“cross purchase agreement”).   The agreement may also authorize the company to use it’s cash reserves to buy-out the departing owners.  

Thursday, April 17, 2014

Do You Need Meeting Minutes?

Regardless of the size of the business, corporations (including those organized under Subchapter S) must observe all of the required formalities in order to maximize the benefits of a corporation. Corporate meeting minutes document the decisions made by the company’s board of directors, and are necessary to preserve the “corporate veil” in the event of a lawsuit or other claim against the company. If corporate formalities are not observed, your own personal assets may be at risk.

One such formality is the maintenance of a corporate record book containing minutes of meetings conducted in accordance with the company’s bylaws. Even in a one-person corporation, board resolutions must be drafted, signed and kept in the corporate records. Every major decision that affects the life of the business must be ratified by a board resolution contained in the corporate records.

There is no specific required format for meeting minutes, but the document should include any important decision made regarding the company, its policies and operations. Minutes should include, at a minimum:

  • Date, time and location of the meeting
  • Names of all officers, directors and others in attendance
  • Brief description of issues discussed and actions taken
  • Record of how each person voted, whether the vote was unanimous and whether anyone abstained from voting
  • Vote and approval of the prior meeting’s minutes

How do you know whether a decision needs to be documented in the meeting minutes? Generally, if a transaction is within the scope of the company’s ordinary course of business, it need not be addressed in the minutes. On the other hand, major decisions should be documented in the minutes, such as:

  • Significant contracts
  • Leases
  • Loans
  • Marketing campaigns
  • Reorganizations and mergers
  • Employee benefit plans
  • Elections of directors or officers

Non-incorporated entities such as limited liability companies are generally exempt from performing such formalities.
 


Monday, March 10, 2014

Email @ Work: Is There Any Expectation of Privacy?

The proliferation of high-speed communication devices have made us more productive and more vulnerable in terms of our privacy. Desk-bound workers may be tempted to use the office email account to engage in personal communications – however, they do so at some risk to their privacy. How much privacy can employees expect for their electronic communications at work? Practically speaking, it is safe to presume everything may be monitored by your employer.


Read more . . .


Monday, January 14, 2013

Start-up Business: When is the Best Time to Consult with a Lawyer?

If you are starting a new business, it is vital that you assemble your team of advisors immediately. Many entrepreneurs are short on cash during the start-up phase, and forego retaining legal counsel or other professional advisors in order to preserve capital for other aspects of the business venture. But this approach is usually penny-wise and pound-foolish. And many small business start-up lawyers are a lot more affordable than you think.


Read more . . .


Monday, August 6, 2012

Top 3 Real Estate Tips for Small Businesses

For the vast majority of small businesses, the company’s first and only real estate transaction is entering into a lease for commercial space. Whether you are considering office, manufacturing or retail space, the following three tips will help you navigate the negotiation process so you can avoid any unpleasant surprises or costly mistakes.

“Base Rent” is Not the Only Rent You Will Pay
Most prospective tenants focus their negotiation efforts on the “base rent,” the fixed monthly amount you will pay under the lease agreement. You may have negotiated a terrific deal on the base rent, but the transaction may not be the best value once other charges are factored in. For example, the majority of commercial lease agreements are “triple net,” meaning that the tenant also must pay for insurance, taxes and other operating expenses. When negotiating “triple net,” ensure you aren’t being charged for expenses that do not benefit your space, and that you are paying an amount that is in proportion to the space you utilize in the building. Another provision to watch for is “percentage rent,” in which a tenant pays a percentage of revenue in excess of a specific amount. This may not be a bad thing, as it provides the landlord with an incentive to help ensure your company is successful.

There’s No Such Thing as a “Form Lease”
Most commercial property owners and managers offer prospective tenants a pre-printed lease containing your name and various terms. They often present these documents and adamantly explain that it is the landlord’s “typical form lease.” This, however, does not mean you cannot negotiate. Review every provision in the agreement, bearing in mind that all terms are open for discussion and negotiation. Pay particular attention to the specific needs of your business that are not addressed in the “form lease.”

Note the Notice Requirements
Your lease agreement may contain many provisions that require you to send notification to the landlord under various circumstances. For example, if you wish to renew or terminate your lease at the end of the term, you will likely owe a notice to the landlord to that effect, and it may be due much earlier than you think – sometimes up to a year or more. Prepare a summary of the key notice requirements contained in your lease agreement, along with the due dates, and add key dates to your calendar to ensure you comply with all notice requirements and do not forfeit any rights under your lease agreement.
 

 

 


Sunday, October 2, 2011

Avoid Piercing the Corporate Veil

Many business owners establish corporations to shield themselves from personal liability for business debts and protect their personal assets from creditors of the company. When established and maintained properly, a corporation is treated under the law as an independent entity, with many of the rights afforded to individuals. Such rights include the ability to own and transfer property, enter into contracts, obtain funding and to initiate legal action. A corporation is a separate, distinct entity, apart from its shareholders; as a result, only the corporation’s assets can be seized to pay judgments or satisfy other debts owed by the company.

However, business owners can lose the liability protection afforded by the corporate business structure through simple, common mistakes. Certain corporate formalities must be observed in order to preserve the corporation’s status as a separate entity apart from its owners. Failure to comply with these requirements may permit creditors to “pierce the corporate veil” and seek payment from the individual shareholders directly.

To ensure the corporate veil remains intact, the corporation must act like a separate and distinct entity, and the shareholders must treat it as such. If certain corporate formalities are not consistently observed, a court may find that the corporation is merely an “alter ego” of the individual owner(s), and the corporate structure may be “disregarded”. When this occurs, the corporate veil is pierced and the individual shareholders can be held personally liable for the debts of the company.

The most frequent mistake owners of small corporations make is commingling of assets. The corporation and the shareholders must treat themselves as separate entities. The corporation should have its own bank and credit card accounts. Business owners should clearly document and account for expenditures made from corporate accounts if they were for personal benefit. In other words, do not use the corporation's funds for other than legitimate company expenditures.

The second most frequent mistake is to forget to keep up-to-date corporate records. Often, business owners will engage in certain actions - such as buying or selling a building or taking out a loan to purchase machinery - without noting in the corporate minutes that such actions were approved by the corporation. The corporation’s financial and corporate records must be documented. Most states also require that the shareholders and the directors meet at least once per year. A record of these meetings, in the form of minutes or written resolutions must be properly executed and maintained by the company.

The benefits associated with the corporate structure are manifold. But, as is frequently the case, these benefits can be lost by failing to "play by the rules".


Sunday, August 30, 2009

You Are On Notice

As most employers know, there are a myriad of federal and state laws that govern the relationship between employer and employee. These laws can be complex and seemingly designed to be understood only by lawyers (which is not surprising considering that they were written by lawyers). For example, the Family and Medical Leave Act was enacted to serve a noble and socially desirable purpose but the end result has been a plethora of litigation that, over the years, has confused judges and employers alike. The Fair Labor Standards Act and New Jersey’s Wage and Hours law have caused many an employer to misclassify and incorrectly pay employees – with severe financial penalties for the employers and good fees for the attorneys. However, there is one aspect of all of these laws and regulations that is quite easy to understand and comply with; notice requirements.

Employers have some very specific notice requirements. Failure to provide the various forms of notice required by federal and state law can result in sanctions for the employer with attendant expenses, as well as a loss of legislated employer rights. For example, failure to post the required FMLA notices can result in the employer losing the right to take action against an employee who does not fulfill his/her obligations under the law. In addition, the failure to post can support allegations of interfering with an employee’s FMLA rights and cause an employee’s leave to not be designated as FMLA leave, thereby potentially entitling an employee to 12 weeks of leave in addition to time already taken.

The U.S. Department of Labor outlines, in various federal regulations, the notice requirements for employers. A list of required posters is available at the Department of Labor website, www.dol.gov/osbp/sbrefa/poster/matrix.htm. New Jersey’s Department of Labor and Workforce Development also lists the required posters and notices at http://lwd.dol.state.nj.us/labor/employer/content/employerpacketforms.html. Several of the notices can be printed off of the web site. Workers compensation insurance carriers will have the required notices for this mandatory benefit, and general business insurance carriers will be able to supply (or procure) the mandatory Occupational Safety and Health Act posters.

In short, proper notice is the foundation of ensuring that employers and employees alike are aware of their rights and obligations under the various employment laws. Since the employer controls the workplace, the employer is responsible for ensuring that notice requirements are met.

Notice has been served.

 


Sunday, August 23, 2009

Is My Time Really Your Time?

Cell phones, pagers, emails, text messaging…technology has provided numerous ways to keep in touch with each other. We are always “on” and available. If we want to avoid someone, it is no longer sufficient to say “I never got the message” because we can always get the message, no matter where – or when.

Employers have been quick to grasp the benefits of this technology. The distinction between work time and personal time is becoming blurred.  More and more, employees at all levels (not just executives) are expected to be “on call”, available to work when contacted even when off-the-clock. However, is this legal?

Whether on-call time is compensable often presents a perplexing problem for employers. In determining whether an employee must be paid while on call, we first have to determine if the employee is ''engaged to wait'' or ''waiting to be engaged.''  Skidmore v. Swift & Co., 323 U.S. 134 (1944).  Both the federal Wage and Hour laws and the New Jersey Administrative Code look to whether the employee in question was free to use the “on call” time for personal purposes, or whether the conditions for being “on call” were sufficiently restrictive that the employee could do little more than sit around, waiting for the employer’s call.

The general rule is that non-exempt employees are entitled to receive compensation for on-call time if they are required to be at work and are unable or not permitted to perform personal activities during that time. For example, if an employee is required to remain at home on a day not normally worked, so as to be available to respond to a customer's service call, that employee is considered "engaged to wait" and must be paid at the appropriate rate. In contrast, if the employee is free to leave his home and engage in personal activities (shopping, entertainment, visiting) subject to the understanding that he may be contacted and asked to respond to a service call within a reasonable period of time, the employee is "waiting to be engaged". The employer may pay additional compensation but generally is not required to do so.  As such, employees who are required to carry a beeper, cell phone, or other similar device, or to stay within a certain distance from their home in case of an emergency, are generally not compensated for that time. 

Whether this is a good employment practice, however is the topic for another writing. My time should be my time but, with technology it is becoming your time, too.


Wednesday, August 19, 2009

Truth or (Unintended) Consequences?

Reading today’s Wall Street Journal discussing the ramp-up of regulation enforcement by the Department of Labor reminded me of a television program quite popular several years ago. It was called "Truth or Consequences" and, if I remember correctly, launched the TV career of Bob Barker. The WSJ article described how the Department of Labor will hire hundreds of new investigators (and probably hundreds more support staff) so as to significantly increase enforcement of our many labor laws and workplace rules.

Generally, I believe this is a good thing. We could use a little more enforcement in many areas, what with the billions of dollars being spent by Washington on stimulus projects and the generally laize faire approach of the previous administration. However, this article got me thinking about the "law of unintended consequences", which states that no matter what you thought would happen, something else will probably happen that you hadn’t even thought about. It’s that "something else" that I am concerned about.

In my experience, few business people really object to following the rules that govern their industry. What most do object to, though, are the myriad forms, multiple and often duplicate reports and documents, and other bureaucratic nonsense that the enforcement agencies require. The most frequent complaints I hear from my business clients concern the complexity of the rules, conflicting messages sent by the agencies and the amount of time --- and money --- spent on reporting to the government. And this is just on the federal level. When you add in the state requirements, the burden is mind boggling. Yet, history clearly shows that more oversight means more rules, reports, responses, and investigations.

Right now, most businesses owners and managers are paddling like mad to keep their head above the financial waters. More feeding of the bureaucratic maw will only take time and resources away from actually making more products, delivering better services, or inventing the next "killer app". Can we afford the additional drag on our economy?

More regulation and enforcement will certainly increase the need for lawyers, so I guess the adage "every cloud has a silver lining" certainly applies here. However, I can't help but be concerned that, no matter how laudatory the goal we may be creating costly and perhaps unneeded burdens on the productive sectors of our society. Slower or minimal recovery from our economic ills may be the result, and more and longer lasting unemployment the unintended consequence.

Keep an eye on this as you look for the recovery in your area.


Monday, August 17, 2009

Welcome

As an attorney, I am always asked by my clients: "what is the law?" I am expected to know the answer, and most of the time I do (or can research it).  But every once in a while, answering the question "what is the law" requires more than an explanation of statutes, administrative codes, or an analysis of case law.  The answer goes deeper, to the fundamental reason why we have laws in the first place.
  
A very wise and thoughtful person once told me that we have laws to tell the other guy what to do (or not to do, as the case may be). No one ever believes that a law is needed for me; only someone else. Yet, society is made up of me and thee and your “me” is my “thee”. Consequently, my response to the question sometimes is no more than the law is whatever is needed to make sure you and I can get along together. The rest is commentary.

Which brings me to the point of this blog. An attorney is – or should be – more than an expert in the written or decided law. He or she should also be a counselor, advisor, confidant, and guide to others. The attorney should provide information as a matter of course. However, she or he should also be willing to share opinions based on knowledge, experiences, and (hopefully) wisdom. This is the commentary.
 
This blog – also known as a “blawg” for its legal focus – will present my opinions and comments on issues, cases, and events in the law that affect all of us. I invite you to respond and contribute to it. Comment on what I have written, even if (and especially if) you disagree. Offer your own comments and wisdom, as well as ideas for topics to be discussed. I look forward to communicating with you through this media and in the near future, in person.


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