by Fred Abramson on July 12, 2010
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.
by Fred Abramson on March 2, 2010
Misclassifying an an employee as an independent contractor is one of the most expensive mistakes that a business owner can make. It does not matter whether you intentionally made the mistake. You can be subject to large penalties, fines and even subject the criminal liability. I have recently reported that the IRS has been targeting employers with independent contract workers.
The problems don’t end with the employer. Misclassified workers can lose:
- Worker’s Compensation Insurance
- Unemployment benefits
- Wage protection such as minimum wage and overtime.
Employers who hire independent contractors have an unfair advantage because labor costs less and they could charge less for their goods and services. If you are in the construction industry, a competitor who improperly misclassifies their workers as independent contractors can underbid you.
The employer who gets caught with improperly classifying workers as independent contractors can be subject to liabilities for:
- Unpaid Federal, State and Local Income Tax withholdings
- Social Security and Medicare contributions
- Workers’ Compensation Premiums
- Overtime
- Unemployment compensation
- State-mandated benefit programs
Audits
The New York Department of Labor conducts two types of audits, general and specific. The general audits are conducted randomly with nothing specific as its subject. It is interesting to note that these audits are not statistically random as specific industries, such as construction are heavily targeted. Specific groups are the subject to targeted audits as well, which are based on a variety of factors, including prior issue with improper classification. The Cornell Law Institute performed an excellent report about the misclassification of independent contractors in New York and is a great resource.
Prevailing Wage Duties
On publicly funded construction projects, some companies use missclassification as a way to avoid paying prevailing wage rates. A company that is caught can be subject to paying restitution to affected employees, fines for failing to maintain payroll and general records and submit valid and certified records.
Conclusion
Due to the increased scrutiny on the use of independent contractors, employers, especially those in the construction industry need to focus on how they classify their workers. You should conduct audits internally with legal counsel to determine if their are any issues.
If you have any questions regarding the classification of independent contractors, contact me at the Law Office of Frederic R. Abramson at 212-233-0666.
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