Articles Posted in Small Business

At its Annual Meeting on March 15, 2016, the members of the Belmont Tennis Club (BTC), one of the oldest tennis clubs in America, honored its venerable Groundskeeper – Charles T. “Chuck” Jennings. BTC President Alison Borelli’s remarks follow:

“Chuck, you are the Groundskeeper in name only – yes, you keep the Club in pristine shape, but you give so much more of yourself and your time. This is not part of your job description, nor are you compensated for it.  I wouldn’t be surprised if most members didn’t realize that you are not required to be there whenever the sun is shining! You could show up in the morning, ready the courts, and leave if you wished.

BTC
But, you love this place, and you devote much of your time here. You take care of so many small issues that arise that, left unattended, would fester and become much more difficult to address.

Boston business attorneys and First Amendment free speech advocates alike are closely watching the developments in the case of Dietz Development v. Perez, unfolding in the Virginia Supreme Court.
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At the center of the controversy is a business relationship gone sour, followed by a scathing review on a popular online platform.

The plaintiff business in this case is seeking $750,000 in damages for a bad review that a former customer gave him regarding his contracting work inside her home.
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Small business owners must enter into every contract with caution, making sure to have each line carefully reviewed by an experienced Boston business lawyer. Failure to do this can result in situations where the firm or even the individual owner is held liable in costly negligence or injury actions they might otherwise have been able to avoid. boston.jpg

In the corporate world, many contracts include contractual liability exclusions. This often pertains to the insurance world, but not always. In general, contractual liability (or quite literally, liability because of a contract) has a very broad meaning. It is a promise that can be enforced by the court. It creates liability where none existed.

So with regard to insurance, the insurance firm agrees that for a regular fee, they will reimburse and in some cases defend the business from claims or lawsuits brought by third parties. The insurance firm agrees to assume liability.
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Large companies aren’t the only ones facing patent troll headaches.
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Small businesses too are frequently targeted by lawsuits alleging patent infringement. Our Boston small business lawyers know that contrary to the moniker, these “trolls” aren’t some mythical ogre setting up camp under a rock. These are large, rich conglomerates of investors that exploit legal loopholes to file thousands of patent lawsuits each year. And they win many millions of dollars doing it. New England’s increasing reputation as a hub for tech companies and startups makes the issue particularly salient as we enter a period of economic recovery.

The New York Times recently profiled one such individual who earns $25 million annually, owns a 14,000-square-foot home that is now on the market for about $20 million and travels in a company jet when he’s not driving one of his 16 vehicles, six of those Lamborghinis.

This is not simply a minor nuisance. This is a sophisticated form of business, which is why all companies need to take precaution in ensuring they are insulated from such a threat.

The federal government has tried to step in on this issue, but so far to little effect. In 2011, federal lawmakers passed the America Invents Act, which made it illegal for companies to file a single patent lawsuit with numerous defendants. That means that a patent holder has to file individual lawsuits for each company against which it is alleging infringement.

However, that hasn’t done much to stop the patent trolls. Rather, it’s served to simply spawn more lawsuits.

Shell companies that exist for the sole purpose of filing patent suits are a particular problem within the technology industry, accounting for about 50 percent of all patent infringement suits in the last two years.

President Barack Obama recently addressed the issue by calling such claims frivolous, adding that he had issued an order to the Patent and Trademark Office requiring that companies be highly specific about what a patent covers when it’s first filed. However, some have said this could create more problems for legitimate patent holders.

States may be able to pass initiatives that could prove more effective. In Vermont, for example, lawmakers passed a measure banning claims of patent infringement that are made in bad faith. We hope other states, including Massachusetts, will eventually do the same.

In the meantime, small businesses need to take threats by these shell companies seriously. Typically, we find that many companies will take their first shot with “invitation” to the allegedly infringing company to “consider” payment of a license. Thoughtful response to this letter can help ward off many future legal headaches.

The language is sweetly deceptive, but ignoring the letter could be bad because if the case does later go to court, the plaintiff will be able to show that you were put on notice of the infringement, yet made no effort to respond.

Having your attorney carefully craft a response that asks specific, point-by-point questions about the patent and requests extensive documentation could be enough to put off the patent troll, who may move on to an easier target. A failure to respond on the part of the plaintiff could give rise to an effective estoppel defense later on.

However, if a patent troll persists, any involved company should insist on a non-disclosure agreement right from the start in order to continue communication.

This communication should be conducted only with thorough review by your attorney. In fact, it may be unwise to communicate directly with the individual. Simply refer all communications to your lawyer.
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With the amount of commitment required for employers to bring on full-time workers, almost one in five small business owners are opting instead to hire independent contractors.

That’s according to a recent survey from Inc.com, which sought to quantify the changing tide of how many small business owners are choosing to operate.
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Our Boston small business lawyers know that there are a number of benefits companies can realize from both contractors and full-time employees. Most tend to see independent contractors as significantly less hassle. However, there are legal considerations that companies need to make in order to avoid contract disputes and litigation.

Investing in the services of an experienced business attorney prior to hiring a contractor can help you avoid some of the most common and serious problems that can arise.
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As the economy continues its march toward recovery, many small business owners are becoming emboldened by the prospect of branching out.
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Growth of a small business has to be done in a calculated manner, and our Boston business lawyers know that there are a number of different ways through which it can be successfully achieved.

One of the options that business owners will want to weigh is whether they should go the route of sole ownership or whether they should instead turn to franchising. Each comes with its own unique set of benefits and challenges. For those considering both options, a consultation with an experienced legal team may help you determine which is best for you. There could be legal implications, depending on your size, business model and projected growth, of which you may not yet be aware.
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The Wall Street Journal recently reported there has been a 60 percent spike in the number of non-compete clause litigation actions filed against departing employees in the last 10 years.
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Our Boston business lawyers know that while some view these actions as a way to insulate companies from theft of trade secrets or the heist of business relationships or customer data, others see it as stifling entrepreneurship and healthy corporate competition.

The truth is probably somewhere in the middle, and varies on a case-by-case basis.
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A small business owner out of Nantucket has pleaded guilty to criminal charges, alleging he skirted Massachusetts law regarding proper insurance coverage for workers’ compensation. accountingwork1.jpg

Our Boston business lawyers know that these laws cover virtually all operations, no matter how small — even if the only person employed at your company is you.

That’s why it’s important to consult regularly with an attorney about all things concerning your business – including your insurance coverage – so that you don’t find yourself paying costly fines – or worse.

In many cases, these types of errors are the result of simple oversight. The government may not be understanding, though, if you find yourself under investigation.

Of course, there are times when business owners are intentionally or blatantly dishonest in reporting the number of employees or in characterizing the type of work those employees do. The aim in such cases is paying less for their insurance. That’s what’s alleged to have happened here.

According to the Massachusetts Attorney General’s Office, the 63-year-old roofing company owner reportedly downplayed elements of his business so that he could reduce his premiums. He only had to pay the minimum rate on his policy, despite the fact that the nature of his business was such that workers were actually at high risk of injury. And although he reportedly had four full-time employees working for him during the time frame between 2008 and 2010, he reported none of them.

As a result, he was charged and ultimately convicted on five counts of Workers’ Compensation Fraud, prompting a judgement of two years of probation and a requirement to pay $42,000 in restitution.

Cases like this aren’t rare. The attorney general’s office reported that last year alone, the anti-fraud unit was successful in winning nearly three dozen restitution orders totaling more than $1.6 million.

Sometimes, though, employers just make mistakes. Part of avoiding them is becoming educated regarding your responsibilities and liabilities as a small business owner in Massachusetts.

The law defines an employee as any person who is in your service under any contract of hire, express or implied, written or oral. Exceptions are interstate or foreign commerce workers (who are covered by federal injury compensation law), real estate and consumer goods salespeople who work on commission and taxi drivers who lease their cabs on a fee basis unrelated to collected fares.

Other than this, pretty much all businesses have to obtain workers’ compensation insurance for their employees. That includes even yourself and family members, regardless of how many hours a week each employee logs. Failure to do so under Massachusetts General Law c. 152 may subject your enterprise to a stop work order, as well as tens of thousands of dollars in fines and up to one year behind bars.

New businesses who need to find workers’ compensation insurance can get it through either a broker who handles business insurance or through an agent. However, you shouldn’t sign off on a contract until your lawyer has reviewed it. If you have already signed and feel you are paying too much, you do have the option of appealing your rates to the state’s division of insurance.
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Far too often, small business owners assume that settling litigation claims – regardless of whether they are indeed substantive – is merely a cost of doing business. perspective2.jpg

Our Boston small business attorneys want you to know that is not the case. The fact is, business owners have many options available to them.

The New York Times recently profiled a good example of this with the owner/operator of a luggage company that averages somewhere around $10 million in sales annually. In the time since he founded his firm in 1990, the owner says he has dealt with three lawsuits for wrongful termination.

In the first two, he threw his hands in the air and agreed to a settlement, convinced that was the only real option.

But when the third suit was filed three years ago, the owner said he refused to simply take his lumps lying down – especially as he was more than convinced he had done absolutely nothing wrong.

The employee who had filed the lawsuit was one of 14 people – 30 percent of the firm’s staff – who had been laid off after annual sales declined nearly 40 percent. The business owner said he did what he had to do in order to keep his company operational. Additionally, the employee in question had a marked dip in performance in the months leading up to the lay off. That had led to the owner reducing the worker’s commissions by 25 percent and issuing a written warning regarding improper use of the Internet and productivity.

After the employee was laid off, he attempted for years to get a settlement from his former boss. When he wasn’t successful, he filed a lawsuit claiming that by firing him, the company had breached an implied employment contract in which it was reportedly understood that he could be fired only for a “good” reason.

Further, there was an alleged “pocket dial” incident in which the employee’s phone had accidentally dialed another sales manager, who was able to listen in as the employee ranted in a private conversation about the company and fellow employees. The sales manager called the CEO into the office to listen to the conversation, and an assistant was called in to take notes.

The employee claimed this was an invasion of privacy – and the real reason he was fired. He sought a payout of $1.2 million.

The business owner refused – particularly as he had employment liability insurance that would cover his legal expenses in such cases.

Jury selection had begun when the employee said he would accept an offer of $25,000 – something that had been on the table, though the offer had since expired. The negotiations continued until they were eventually down to $10,000. The judge at that point recommended both sides end it.

The business owner said he would – as long as both the employee and the attorney would write an apology letter, stating that the action should never have been filed and that the lawyer should take more care to vet future employment claims against small businesses.

Many small business owners such as this one have learned a great deal of valuable – albeit expensive – lessons in going through employment liability litigation. Many have learned how to limit their liability in the future.

In this case, the owner learned that settlement isn’t always the only option. Indeed, business owners should carefully weigh all avenues before simply resigning to a payout. You may actually have a stronger case than you think, particularly if you take care to do the following:

  • Make sure work expectations are clearly defined. Employees need to know what they have to do to succeed in their position and they need to be frequently informed of their progress. Performance problems can be key in later litigation efforts. When an employee is fired, he or she should not be surprised by it.
  • Be tactful in your termination. A lot of times, workers who are fired can feel incensed or burned. If you want to ease the blow and limit your liability, you might consider offering a severance package – with a liability release signature required in order for them to receive it. This may also have the worker walking away feeling as if he or she has been treated fairly.
  • Don’t break the law. This seems fairly straightforward, but the fact is, the law is a complex and ever-changing beast. When you go to defend your actions in court, you need to show that you have been operating in accordance with the law. This includes things like posting all state and federal employment and labor materials in public areas, having an employee handbook and treating everyone the same. If you aren’t sure whether certain practices are in line with the law, consult with an experienced lawyer in your area.
  • Purchase liability insurance. Adequate insurance policies are an investment, and money well spent.

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The fact that employment and business laws in Massachusetts have failed to keep pace with the exponentially-expanding social media landscape should surprise no one – particularly when you recognize that the state’s “blue laws” still restrict certain firms from doing business on Sundays and holidays. keyboard.jpg

Our Boston business attorneys recognize that this has left both employees and employers with a huge question mark when it comes to legal information gathering and sharing with regard to potential applicants and current employees.

As an example, just because there is no law against using Facebook or Twitter to screen potential workers or monitor employees — does that mean you should? Are you crossing some shady legal line, or does it just make smart business sense?

On the one hand, social media networks are treasure troves of information to which companies may not otherwise have access. For example, many firms may find it valuable to ascertain whether an employee or potential employee is projecting the sort of image the firm wants to maintain. “Friending” current employees could also be a way to keep undesirable behavior in check, which may otherwise reflect poorly on the company.

There is ample concern that doing so may be a violation of discrimination laws, privacy rights, intellectual property rights and even National Labor Relations Act restrictions.

Now, there may be another consideration: A bill has been introduced by a state representative on the Committee on Labor and Workforce Development that would specifically limit an employer’s ability to mandate submission of social media log-in and password information as a condition of employment, as well as the employer’s ability to require employees to add their supervisor to their “friends” lists.

Rep. Cheryl Coakley-Rivera, who is introducing the measure, indicated that such actions open a window of information to employers that they would otherwise not be legally entitled to possess. For example, information such as a person’s age, marital status, religion, medical history or sexual orientation is readily available on these sites. Yet, current state law prohibits companies from asking applicants to reveal this kind of information — and employers are also prohibited from using it to make decisions regarding whether to hire or fire someone.

Coakley-Rivera introduced a similar bill last year, but it failed to make it into law. The new bill, called “An Act relative to social network and privacy employment,” was introduced last month. Not only would the measure make it illegal for companies to require employees or applicants to hand over passwords or add the business to its “friend” list, it bars companies from taking adverse employment action against a worker or applicant who refuses to do so.

The measure would exempt social media accounts created solely for professional use on behalf of the firm. It also would not stop a company from maintaining its policies on acceptable social media communication by employees or use of the firm’s own equipment.

As it now stands, the bill has a considerable amount of support, with 46 co-sponsors so far signing off. A total of six states have so far passed similar laws, and 11 other states have bills pending.

But even in the interim, employers may be taking a risk in requiring workers or potential workers to hand over this information. As we wait for the law to play catch-up with technology, it’s important for businesses with questions on the development of company-wide social media policies to consult with an experienced local business attorney for a better idea on how to proceed.
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MBA
Boston Bar Assosiation