A good supplier agreement is to designed to keep you out of court. It can also help you win a lawsuit if there is a dispute. If you have an ongoing relationship with a supplier, a well-drafted agreement is crucial. One especially thorny issue is creating a way to easily end a contract.  If you have an arrangement with a  supplier, there is normally an umbrella agreement which is succeeded by purchase orders.

Here is what you need to know when drafting an umbrella agreement:

• Gauge the volume and frequency of the supplies you will require. You should specifically identify the goods that are to be delivered.  You should also leave room for anticipated problems, such as a downturn in the economy which could limit your ability to purchase goods.
• Is the contract exclusive or non-exclusive? Suppliers usually favor exclusive agreements.
• Negotiate a  termination clause.
• Negotiate a  way to limit liability. If you are supplying goods like food, you don’t want to be held liable for damages for lost profits if you fail to make a delivery on time.
• Term of the agreement. You should be wary of entering into an agreement for over 3 years.  Who knows what your business will look like a decade later?
• Confidentiality. You probably don’t want your competitors to know the terms of your agreement.  Any information gleaned from a supplier agreement can be used for competitive advantage.

PURCHASE ORDERS

• Identify each order and state that it is subject to the umbrella contract.
• Create a purchase order that you can re-use.  It is best to leave time and quantity blank.
• Date the purchase order.

Be aware that problems with supplier agreements is a major source of litigation.  I recently litigated a case between a supplier and a franchisee which was a result of a poorly drafted umbrella agreement that cost the franchisee $250,000.00.

If you questions regarding supplier agreements, contact me at the Law Office of Frederic R. Abramson at 212-233-0666.

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I have written extensively about the potential problems employers can have by misclassifying their workers as employees.  The IRS has been cracking down on companies that try to pass off regular employees as independent contractors. It now may become a crime.

Congress is about to act on a bill entitled the Employee Misclassification Prevention Act that would impose criminal penalties on companies that misclassify workers. It appears that both the House and Senate is behind the bill, so it is likely to become law.

If this new law is passed, it would impose finds of $5,000.00 for each worker that is misclassified as an independent contractor. According to the American Bar Association Journal, the new law would also require employers to provide new hires with notice concerning their rights

There is an excellent and lengthy article on the subject by the large law firm Pepper Hamilton, LLP.

The new law is a natural progression of the Obama administration focus on cracking down on employers who improperly classify employees as independent contractors.

I would suggest that companies review all of their employment classifications to avoid potential criminal liability. You may be able to minimize the risk to your company by:

• Wholesale review of all of your workers.
• Restructuring the relationship that you have with your independent contractors that fall within a gray area of the law by re-classifying them as employees. I would suggest that you should err on the side of caution and classify your workers as employees if you are not sure.
• Draft written agreements with all of your workers stating their employment status.
• If you want to limit the workers that you classify as employees, you may have a third-party such as a staffing agency performing the hiring.

If you have any questions regarding independent contractor agreements or classification of employees, contact me at the Law Office of Frederic R. Abramson at 212-233-0666.

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5. 4 Ways to Protect Your Small Business from Fraud

Fraud is not limited to the Bernie Madoff’s of the world.  Because of the recession, it should come to no surprise to learn that financial problems are more likely to lead to more fraud.

Fraud is a huge problem.  According to the Association of Fraud Examiners 2008 report on occupational fraud and abuse, companies lose 7 percent of annual revenue due to this problem. The report also indicates that small businesses are more likely to be victimsthan large companies.

Small businesses are having more difficulty with fraud not only because employees have an increased workload, but also because they have less resources to stop it.

Generally fraud occurs in four primary areas.  I will provide a brief overview and let you know of ways that you can help limit your company from being a victim.

Checks

Altered checks is a major problem for businesses. What out for mistakes from payroll companies and bookkeepers.

Owners should:

• limit the use of rubber stamps
• have an outside accountant check your books monthly

Fraud to order

Employees can make fake orders. Check inventory to see if anything is missing.

Owners should:

• Conduct surprise audits
• limit access to cash
• install security cameras

Encourage employees to report Fraud

According the ACFE study, most fraud was uncovered by co-workers.

• Encourage tips and make sure they reach you.
• Make it easy for an employee to report the problem anonymously.

Fake employees

This fraud is especially prevelent in the construction industry.  A foreman on a construction site mays say has ten employees and he really has 9.  He collects the 10th  paycheck for himself.  You can avoid this by:

• handing paycheck personally
• create a computer program to detect missing hours.

If you or your company is a victim of fraud, contact me at the Law Office of Frederic R. Abramson at  212-233-0666.

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If you are planning to start a lawsuit in New York State Court, one of your first tasks is helping you lawyer investigate the facts of your case.  Believe it or not, case investigation of your civil litigation matter begins before you walk into your lawyers door and may not end until a judgement has been entered and money has been collected.

There are 2 ways of case investigation:

1. Informal fact gathering;
2. Formal discovery requests as per the CPLR. These discovery requests are generally made when a lawsuit has been commenced.

Why is fact investation important:

• It’s the law.  An attorney cannot bring a lawsuit in New York without making a reasonable investigation that your claim has merit. If you decide to bring a lawsuit without merit, you can be subject to civil money penalties by the judge.
• It helps the lawyer research the proper areas of the law.  You may believe that you have a simple case where the company that you would like to sue owes you money and they have no defense. However, a full investigation of the facts may reveal that they have a defense, such as the good that you sold to them were not delivered timely.

In New York State Court civil litigation, there is usually little argument about the law. Based on my experience, the side that is able to present the most facts, and present the most logical and pursuasive argument usually wins.  Since the vast majority of New York civil litigation cases are settled before trial, it is especially important to convince opposing counsel that the facts of your case are overwealimingly in your favor.

A good lawyer will understand the court’s rules, knows what it takes to uncover evidence helpful to your case without intervention (such as gleaning evidence from social networks) along with the tenacity to press the court to obtain all the evidence to help your obtain your desired outcome.

The Law Office of Frederic R. Abramson represents both plaintiffs and defendants in New York State Court in civil litigation. If you have any questions regarding starting or defending a lawsuit in New York, contact me at 212-233-0666

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The constuction industry is subject to more than its fair share of litigation. This not because the people who you work with are bad people (even though there a few bad apples). It is because industry itself if very complex.

There are many factors of what makes a project sucessful.  A successful project may not have anything to do with the parties involved. This includes anything from material shortages to the weather.

The people and companies involved in any given construction project are independent and often have competing business interests. The owner, contractor and architect are often at odds.

The time for an owner to begin thinking about construction litigation, which includes its avoidance, alternatives and costs is at the very beginning of the construction project. Obviously, the most important goal is to limit the possibility of a lawsuit as the most basic goal.

Unforutantely, due to the unpredicable nature of construction projects and the number of people involved in any given project there are likely to be disputes.

The time to consider litigation occurs before the point of confrontation. As an owner you should try to avoid it as much as possible by being aware of its possibility. You can do this by being careful about the people who you hire, and to define the legal rights and obligations of everyone involved in the project.

As an owner, the ability to  avoid a construction lawsuit is made likelier by the following:

• A comprehensive background check of all the participants
• A strong set of contracts that is uniquely drafted to suit your needs. This means you should avoid using the same agreement for each project and should be aware of independent contractors.
• Setting out before the project each parties administrative duties and obligations. 

You should be aware that even a contract that is drafted with every considering in mind will not inherently protect you from a lawsuit.  However, with careful planning, the likelihood of your company being involved in a costly lawsuit diminished greatly.

The Law Office of Frederic R. Abramson represents both owners and contractors in drafting contracts and construction litigation. If you have any questions, call at 212-233-0666

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2. Misclassification of Independent Contractors Crackdown
3. Employer Misclassification May Become a Crime
4. What Litigation Costs and Expenses are Recoverable in NY? How about Attorney Fees?
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