Law Office of Adam P. Whitney Blog
Outside General Counsel Posts - Page 2

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Business Owners and Partners Should Be Paranoid

Fox Moulder’s motto was “Trust No One.” Lawyers can understand this paranoia. Divorce lawyers know spouses cheat. Criminal lawyers know clients steal (and worse). You should know that your business partners and key employees that you trust the most can betray you. This includes both majority and minority shareholders in close corporations, members of LLC’s (Massachusetts limited liability companies), and partners in partnerships. Sadly, this also includes family members in a family business.

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Breaking Down the NLRB’s New Joint-Employer Rule

Over 14.5 million Americans belong to labor unions in the United States today, so it should come as a welcome sign for business owners who interact with third party workers such as subcontractors and franchisee employees that only those workers over whom they have substantial direct and immediate control will they be obligated to under the NLRA.

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Get Ready for a Different World for Your Business When the Pandemic Is Over.

Private businesses will be back. It has to be. By definition, entrepreneurs are resilient and versatile. If your business is closed or running a skeleton operation, this is the time to think about how the world will be changed when things get back to “normal.” I recently wrote about examining your existing business here: Make the Best of this Difficult Time When Your Business Is Closed or Slowed. You should also plan to move forward.

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Covid-19 and Law Practice

It’s been a crazy ride for several weeks. In some ways, the practice of law is the same. In some ways, it’s different. Sometimes it just feels different. In spite of the photo, I've been able to work in my satellite office and have been the only one here.

Business Owners and Partners Should Be Paranoid

'Spy Cat' found at https://flic.kr/p/DkYRhP by sonstroem (https://flickr.com/people/sonstroem) used under Creative Commons Attribution License (http://creativecommons.org/licenses/by/2.0/)

Fox Moulder’s motto was “Trust No One.”  Lawyers can understand this paranoia.  Divorce lawyers know spouses cheat. Criminal lawyers know clients steal (and worse).  You should know that your business partners and key employees that you trust the most can betray you.  This includes both majority and minority shareholders in close corporations, members of LLC’s (Massachusetts limited liability companies), and partners in partnerships.  Sadly, this also includes family members in a family business. 

I refer to all such persons as “partners,” because that is how people generally think of one another.  The term itself, partner, holds a special meaning of trust to the business person, as it should.  It’s no coincidence that the word also means a person with whom one has an intimate relationship, also founded on trust.

Trust may work fine for you, but don’t trust blindly. Someone reading this blog has a partner who is cheating them.  The obvious form of this is that the cheating partner is taking more than his or her share from the business.  He is paying his car payments from the company accounts while you pay for your own car.  She secretly increased her salary without informing you. Maybe’s he’s paying for his mistress’ apartment.  Or his cocaine addiction.  Or gambling.  Or her son’s college tuition. Maybe he’s going on shopping sprees with the company credit cards.  Maybe she fires you when you complain.  Or cuts your salary and forces you out.  This is a classic freeze out.

Sometimes the partner who is not in charge of the books can cheat as well.  By submitting false expenses. By moonlighting. By directing the business to his own secret company or a friend’s company.  By taking the customer’s payments.  By preparing to leave and start a competing business.  Maybe both of you are cheating the other in your own way.

I’ve seen all of these things, and much more happen.  It’s human nature to be tempted in financial matters.  It’s easy to tell yourself that you deserve it because you work hard. Your partner is lucky to have you.  Or to tell yourself that you’ll pay back the money next month.  There is always some justification.  

If you sense something is wrong, it probably is.  If you nip small things in the bud, you may be able to save the business.  Get involved in all aspects of the business.  You need access to the company books and financial records on a regular basis.  You generally have a right to this information.  If you let things go for too long, it may be too late to save your company.

If you discover that your partner has cheated you in some way or the other, you do have legal recourse.  That’s true even if you are not 100% clean yourself. Start to take control of the situation by addressing it directly.

Adam P. Whitney

617.338.7000

awhitney@awhitneylaw.com

www.awhitneylaw.com

Fine print: the above is not legal advice, but general information.  I cannot provide legal advice without a written fee agreement and a full review of your legal matter.

Breaking Down the NLRB’s New Joint-Employer Rule

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GUEST POST BY BRANDON SLOANE

On February 26, 2020, the National Labor Relations Board (NLRB) issued a final rule clarifying the standard for determining joint-employer status under the National Labor Relations Act (NLRA). The NLRB’s ruling is significant for any employer covered under the NLRA (which includes nearly all private-sector employers) because a joint-employer finding carries with it significant rights and obligations that a joint-employer must recognize for its employees. 

A joint employer under the NLRA accepts some of the duties and responsibilities that are accorded to an employee’s primary employer. These include: 1) for unionized employees, the joint employer must participate in collective bargaining over the terms and conditions of employment, 2) any picketing directed at a joint employer that would otherwise be secondary (unlawfully picketing someone other than your employer) is considered primary and thus lawful, and 3) each joint employer may be found jointly and severally liable for the other’s unfair labor practices under the NLRA. 

The Final Rule, which will go into effect on April 27, 2020, has five major aspects:

  1. It specifies that a business is a joint employer of another employer’s employees only if the two employers “share or codetermine the employees’ essential terms and conditions of employment”;

  2. It clarifies that the list of essential terms and conditions are: wages, benefits, hours of work, hiring, discharge, discipline, supervision, and direction; 

  3. It provides that a joint employer is one that possesses and exercises such “substantial direct and immediate control over one or more essential terms and conditions of employment of another employer’s employees” as would warrant a finding that the business meaningfully affects matters relating to employment;

  4. It defines “substantial direct and immediate control” as control “that has a regular or continuous consequential effect on an essential term or condition of employment”, and control that is not exercised on “a sporadic, isolated, or de minimis basis”; 

  5. It specifies that evidence of indirect or contractually reserved (but never exercised) control over essential terms of condition, and of control over mandatory subjects of bargaining under the NLRA other than essential terms and conditions, are indicative of joint-employer status, but only to the extent that it supplements evidence of direct and immediate control.

The Final Rule represents an attempt by the NLRB to clarify unsettled law as to which employers qualify as joint employers under the NLRA. In 2015, the NLRB issued Browning-Ferris Industries (BFI), 362 NLRB No. 186, which held that a company could be deemed a joint employer if it had merely indirect, limited and routine, or contractually reserved but never exercised control over a business’s employees. The BFI ruling helped to enforce joint-employer status for a larger number of businesses under the NLRA. The ruling particularly impacted a business owner’s duties to subcontractors or franchisee employees. The level of control that a business owner or franchisor had over these types of employees is usually more attenuated than what general contractors and franchisee owners would have. But the BFI ruling held they could still be joint employers with indirect or potential control. 

 The Final Rule, with its necessary requirement for substantial direct and immediate control, will in all likelihood eliminate the obligations that these business owners owed to franchisees and subcontractors under the logic of BFI. The ruling represents a win for employers, who will now have a better sense of exactly which workers they owe NLRA rights and obligations to. 

Over 14.5 million Americans belong to labor unions in the United States today, so it should come as a welcome sign for business owners who interact with third party workers such as subcontractors and franchisee employees that only those workers over whom they have substantial direct and immediate control will they be obligated to under the NLRA. 

Brandon Sloane is a third-year student at Boston College Law School. He aspires to become a Massachusetts labor & employment attorney after graduation.

Fine print: the above is the work of the author only. The above is not legal advice, but general information.  I cannot provide legal advice without a written fee agreement and a full review of your legal matter.


Get Ready for a Different World for Your Business When the Pandemic Is Over.

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Private businesses will be back. It has to be.  By definition, entrepreneurs are resilient and versatile.  If your business is closed or running a skeleton operation, this is the time to think about how the world will be changed when things get back to “normal.”   I recently wrote about examining your existing business here: Make the Best of this Difficult Time When Your Business Is Closed or Slowed.  You should also plan to move forward.

Things will be different.  Like after 9/11, our world will change when businesses are allowed to reopen and/or be fully operational.  No one can predict exactly all the ways that the business world will change, but we can probably all agree that personal hygiene practices are going to be a big issue.    

You can best predict how your own business will be impacted, but you should take some time to really think about it.  If you serve the public, what additional hygienic steps will take to protect the public and your employees?  How can you use some ingenuity to gain an advantage over your competitors?   

Should you even implement policies on hand-shaking, coughing, washing hands, etc.?  While such policies are a no-brainer if you are in the food business, all businesses will have to consider such policies and others.  Can you take an employee’s temperature?  Will any policies run afoul of existing laws or place you at risk for employee lawsuits?  How will your new policies jibe with wage and hour laws?

How can you change your sick-leave and work-at-home policies to recruit and keep the best talent?  What policies do you need if the pandemic subsides, but then picks back up again in the fall or winter?  How do new state and federal laws impact what you can do?   

How can you take advantage of video conferencing for meetings and training or even job interviews?  I think we all see that Zoom and other services can work really well.  

What will you demand from your vendors?  What changes do you need for your standard contracts?  There has been a lot of discussion about force majeure contract clauses.  It’s probably time to review these.  If you have arbitration clauses, do you want the option for video conference arbitration?  If you are in a litigious industry, how will it impact you if the courts effectively close for civil business (as they are now in Massachusetts, other than urgent matters)?  

The takeaway is that the world will change, so all of your contracts, policies and practices may need to change with it.  But do it smartly and do it legal.  Also, be on the lookout for business opportunities that allow your company to be part of the solution and make money at the same time.

Adam P. Whitney

617.338.7000

awhitney@awhitneylaw.com

www.awhitneylaw.com

Fine print: the above is not legal advice, but general information.  I cannot provide legal advice without a written fee agreement and a full review of your legal matter.

Covid-19 and Law Practice

'Work From Home. Doctor holding message sign for COVID-19 Pandemic at blue background' found at https://flic.kr/p/2iNhYKS by focusonmore.com (https://flickr.com/people/null) used under Creative Commons Attribution License (http://creativecommons.org/licenses/by/2.0/)

It’s been a crazy ride for several weeks.  In some ways, the practice of law is the same.  In some ways, it’s different.  Sometimes it just feels different.  In spite of the photo, I've been able to work in my satellite office and have been the only one here.

Litigation slowed but is picking back up with hearings being held via Zoom and telephone.  I hear that our hard-working state court judges are ready, willing, and able to take on matters in this fashion. They are public servants, and they want to do their jobs.

Some of the other salient issues during this pandemic:

PPP Loans; Employee Layoffs; Unemployment Issues

I’ve advised employers on laying off employees.  Then bringing them back when financing comes in.  There is potential exposure for employers every step of the way.  

I’ve counseled private businesses on how to not run afoul of PPP Loan Certifications (dreaded question 31, now alleviated for loans under $2 million).  

Both employers and employees have lots of unemployment questions, unsurprisingly.

And all the regular employment law issues do not go away in a pandemic.  I’ve had the honor to represent or consult with several nursing professionals.

Commercial Leases

I’ve represented both commercial landlords and tenants for work out agreements I would have never thought possible.  Both sides are being reasonable and working in earnest to compromise, which is great to see.  Professionalism and respect for one another go a long way to working out deals.  It’s not always just dollars and cents.

Noncompete and Trade Secret Litigation; Employers and Executives

On behalf of an employer, I geared up for a major injunction hearing for a Noncompete at the BLS, to be held via video conference.  The matter is now on hold.  I was actually working on a weekend.  During the pandemic. 

I’m helping several executives who have been terminated.  Some are dealing with issues related to company trade secrets that they needed to have access to while working at home.  This could pop up more as everyone is working remotely.  How are companies protecting trace secrets? 

I’ve helped several other executive-level employees with contracts and noncompetes.  

I represented another employer to resolve a declaratory judgment complaint about a noncompete.  

It’s interesting how many noncompete and trade secret issues are coming up.  Maybe it’s just a function of so many people being terminated and a certain percentage have noncompetes and were privy to trade secrets and proprietary business information.

LLC and Partnership Buyouts and Dissolutions

It’s an interesting time to split up a business, but sometimes shareholders and partners just need to go their separate ways.  This economy makes business valuation challenging. I haven’t seen an uprising in these matters, but it has been steady.

Business Contracts

Business marches on!  I have worked on several business contracts, including oversea supplier contracts and technology service contracts.  Some businesses remain optimistic and are prepared for this new economy.  American enthusiasm is great to see.

Real Estate Deposits

I’ve handled several disputes between buyers and sellers of real estate when the deal has failed and the parties are fighting over the deposit.  This indicates to me that more transactions are being put into question, either because of financing issues or buyers getting cold feet.

Mediations By Zoom or Phone

Many mediations are now being conducted by Zoom or even by phone.  I have several scheduled.  Let’s see how they go.  

We can all get through this and lawyers can still practice law during the pandemic and the upcoming “new normal.”  We can embrace the challenge and look forward to helping our clients.  My family and friends have fortunately remained healthy.  I know that others are dealing with tragedy and many frontline heroes are putting themselves at risk.  As lawyers, all we can do is to show kindness and respect to clients and opponents alike and be cognizant of what they may be dealing with.

By Adam P. Whitney

617.338.7000

awhitney@awhitneylaw.com