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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2. 23 Legal Issues for Start-ups and Businesses
3. Who Should Produce the First Draft of a Contract?
4. Ten Things you must know before entering into a contract
5. Is a Handshake Agreement Enough to Protect You?

You know that litigation could be expensive.  If your attorney is a Linchpin he will always present an analysis of the costs of defending a lawsuit to you.  Great attorneys are often able to limit the costs of litigation while continuing to defend you aggressively. Bad attorneys make lots of money by drafting unnecessary motions.

Some judges don’t allow for discovery motions, preferring issues such as the re-scheduling of depositions to be resolved at a conference. “Snake” attorneys will make the motion anyway, viewing it as a billing opportunity.

If you are subject to a lawsuit, one of the tools in your lawyers’ toolbox is a motion to dismiss. If you win a motion to dismiss, your case is over in one sweeping step.  However, if you lose and your motion is denied, your litigation costs become more expensive.  The rule outlining a motion to dismiss is CPLR section 3211. Because of its costs, the decision of whether you should make a motion to dismiss should not be taken lightly.

What should you look for when making a motion to dismiss?

• You should first review and pick apart the complaint.
• Does the plaintiff (the person who is suing you) state a cause of action?
• Are there any legal defects to the complaint?
• Does the complaint make factual sense?
• Do you have all the facts? In many cases, you need paperwork from the plaintiff, such as a contract.
• Does the court have the right to hear the case?
• Are you or your company subject to the court’s jurisdiction?  For example, if your company is being sued in New York but has never conducted business there, a motion to dismiss could be appropriate.
• Statute of Limitations. The action may not have been timely filed.

What you need to tell your Attorney

• If you company has been sued, find out the person who has the most knowledge regarding the lawsuit.
• Write a detailed summary of the facts
• Notify him of any witnesses with their address, email address, Twitter account and phone number.
• Provide all documents related to the lawsuit.

When is winning a motion to dismiss a waste of time and money?

Just because a motion to dismiss can be made, doesn’t mean that it should. There are times when winning a motion to dismiss will not dispose of the case

• If you were improperly served, but the case is still well within the statute of limitations, the plaintiff can simply re-serve you.  
• If there is a technical defect which can be easily changed by an amended pleading, such as the misspelling of your name?
• In some instances, by making a motion to dismiss you may alert the plaintiff of your defenses or missing information.

When should you make a motion to dismiss even if you will probably lose?

• For tactical reasons, you may decide to show the opposition that you are ready to go to war.
• You can obtain facts about the case earlier than waiting for formal discovery, which could take years.

As a defendant, you should always look to settle the case before a motion dismiss is made or an answer is filed. The vast majority of cases are settled before trial.  Everyone is aware that the settlement is not a sign of weakness because of the high cost of litigation.

If you or your company has been subject to a lawsuit, contact me at the Law Office of Frederic R. Abramson at 212-233-0666.

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2. NY State Court Civil Litigation- Why Case Investigation is Vital
3. When Should You Settle A Case?
4. What Litigation Costs and Expenses are Recoverable in NY? How about Attorney Fees?
5. Wage Garnishment: What should you do?

You probably spend much of your time at work in front of a computer. When you are on the run, you use your Blackberry or iPhone for both work and pleasure. But who owns the data that is created, viewed and stored while working?

If you work in New York for a private company, you have a reasonable expectation of privacy for your electronic devices, work computers and cellphones. This is especially the case when the company that you work for does not have a policy regarding internet usage. As a result, I have been advising companies to cover their bases by clearly and specifically drafting internet usage policies that explains their employees expectation of privacy.

Restrictive internet usage policies usually include the following:

1. All the data that is stored on work computers is company property;
2. Employee’s have no expectation of privacy;
3. The Employer may monitor its employees computer usage without their knowledge.

The law regarding restrictive internet usage policies have been looked at with increasing scrutiny by the courts.  For example, a recent court ruling did not allow an employer to access the Hotmail account of its employee.

Despite a written internet usage policy, employers are not immune from potential lawsuits from employees. Listed below are restrictions that employers should be aware of:

• PRIVILEGED DISCUSSIONS. Discussions regarding attorney-client communications may continue to be privileged.  If an employee is using the internet for legally permitted employee, like union organizing her communications may be privileged.
• DISCRIMINATION. Be aware that you cannot treat your employees differently while monitoring their computer usage.
• ACCESSING PRIVATE ACCOUNTS. You cannot access your employee’s Twitter account simply because they accessed their account at work.
• NEW YORK STATE LAW. Believe it or not, New York State does not have an invasion of privacy law.  Be aware that you cannot fire an employee simply because she tweets.

Be aware that case law is changing on this subject.  As a word of caution, use your common sense and think about the golden rule.

For more reading:  Who Owns all the data in the Workplace

If you have any questions about who owns your data at work, contact me at the Law Office of Frederic R. Abramson at 212-233-0666.

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2. Business Immigration: The Distinction Between Doing Business and Work
3. 4 Ways to Protect Your Small Business from Fraud
4. Employers with Independent Contract Workers are Targeted by the Government
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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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3. What are the penalties for misclassifying an independent contractor?
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In an LLC, a family council created in the operating agreement is designed to assist decision making on important issues for the family and the business. This can include unique issues for running the family business. If you watch Brothers &  Sisters (I don’t, but my wife is addicted to the show) you know what I mean.  Each member may have different ideas of what the business should value and the direction the company should take in the future.

Family councils can also serve other functions as well. A common problem for many second generation businesses is sibling rivalries. Some family members may be interested in preserving the family history of the company.  An example of a great family business is the Bacardi & Company Ltd., the spirits company.  The business was formed in the late 19^th Century in Cuba.  The Bacardi’s built a great rum empire with strong roots in its home country.  When Castro came to power, the company was forced to flee.  The Barcardi’s continue to use the company to carry on the family history and Cuban tradition, and, ultimately, an instrument to help build a stronger family.

Many experts agree that open communication and transparency between members of any business is vital for continued success.  Gossip between family members can be toxic.  Even though I am not a huge advocate of meetings, the simple formation of a family council allows for an avenue for all the family members to air their grievances. (Festivus anyone?)

A Limited Liability Company offers an excellent way for establishing a family council with proper rules. Here are some provisions that a family business could include in its  LLC Operating Agreement:

(1) Schedule meetings at a specific time. You can also list the members that must be present;

(2) Create the position of Secretary, who takes the minutes at all meetings.

(3) Create rules which establish:

• Whether only active family members only or inactive members attend the meetings.  Should key employees that are not members of the family attend?
• A meeting place.
• The agenda for the meeting.
• Who leads the meeting.

By establishing a family council in your LLC Operating Agreement, you can keep the focus on the long term goals of your business while keeping the petty disagreements at bay.

If you have any questions regarding using your LLC Operating Agreement to establish a family council, contact me a the Law Office of Frederic R.  Abramson at 212-233-0666

Related posts:

1. 23 Legal Issues for Start-ups and Businesses
2. What you need to know about Supplier Agreements
3. Is a Handshake Agreement Enough to Protect You?
4. New York Tech Community Looks to Repeal LLC Publication Law
5. New York Business Networking Events for the week of January 25, 2010

Crain’s New York Business reports that members of the group of New York Tech Meetup are working to repeal the law that requires companies to pay a publication fee to form a New York Limited Liability Company (LLC).

Publication fees range from $1000 to over $2000 and are a burden on many start-ups. The rates depend on the county where the business is located.

The New York LLC publication law is as follows:

1.  Within 120 days of formation of a New York LLC, the LLC must publish a notice in two (2) newspapers, once a week, for a period of six (6) consecutive weeks, as follows:

(a)  The notice must include the name of the LLC, the date of filing, the county in which the office is located, the full street address of the LLC, the purpose of the LLC, and a statement regarding service of process on the secretary of state. The information must be precise… there’s no room for errors.

(b)  The notice must be published “as though the copy or notice were a notice or advertisement of judicial proceedings.”

(c)  The two (2) newspapers must consist of one (1) weekly paper and one (1) daily paper of general circulation in the county where your LLC was formed. The newspapers must be designated by the county clerk for such publication.

2.  After the LLC publishing is complete, you must obtain affidavits of publication from the newspapers in which the legal publishing was completed.

3. The affidavits of publication must be filed with the state, along with other information contained in a Certificate of Publication. There are fees for this filing.

4. If you fail to comply with the LLC publishing law within 120 days of formation, the authority of your limited liability company to carry on, conduct or transact any business in NY state shall be suspended, effective as of the expiration of such 120 day period.

5. The suspension will be annulled upon the filing of the Certificate of Publication, even if filed late.

The main beneficiary of the publication law is print publications like the New York Law Journal and Crains New York Business.  Hat tip to Crains for disclosing the conflict. With advertising fees in traditional media in a free fall, expect newspapers to fight for this important source of revenue.

The purpose of the publication requirement is to notify members of the public to know who they are doing business with.  I have never heard of anyone who reads the legal notices of any newspaper.  Moreover LLC information can easily be searched for free on the New York State Department of State Corporation and Entity Database.

The time has come to abolish the New York LLC publication requirement is law from an era whose time has passed. What do you think?

The Law Office of Frederic R. Abramson represents businesses in New York.  If you have a question regarding LLC formation contact me at 212-233-0666.

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The New York Times reports today that more struggling borrowers are facing wage garnishment than ever before. Because many credit card borrowers decide not to defend their case in court, creditors can win big judgments in court.

I recently wrote an article outlining what you should legally do if your wages have been garnished. You should go into the court where the judgment has been entered and make a motion to vacate the default.

The New York City courts have a strong policy of having cases decided on its merits.  Generally you have to prove that your were not served properly and show that you have a valid defense.

Let’s say you moved from Forest Hills to the West Village and never received the summons and complaint. In addition, there was an incorrect charge from Le Bernadine for $650.  It looks like someone stole your identity and was having a grand old time dining through the grand palaces of New York haute cuisine.   The judge will likely vacate the judgment and remove the wage garnishment.  Your case will then proceed and will be decided on its merits.

Even if you do owe the money, you should always defend yourself in court. Here’s why:

• You force the credit card company to prove your debts.  When I first started practicing law, I litigated thousands of cases for a large bank. The bank subsequently merged with another bank and the attorney who sent me the cases lost the businesses.  The bank usually did not have the necessary paperwork, such as credit card statements, to prove their case.
• Even if the credit card company has the paperwork to prove the debt, if you defend your case the court in New York requires someone with knowledge to testify as a witness. Since many debts are resold to a third party. These third parties may not have a presence in New York.  As a result, they may not have anyone who can testify regarding the validity of debt.  You may win your case even if you owe the debt.
• Most credit card user agreements allow for huge interest charges, penalties and even attorney fees to be added.  In nearly all cases, in New York the judge will strong arm the credit card company to waive the fees.
• Credit card companies understand that there is a difference between obtaining a judgment and collecting on it.  It also costs the attorney valuable time to litigate the case in court.  As soon as you receive the summons and complaint, a call should be made to the attorney for the credit card company to discuss settlement. It is not unusual to obtain a settlement for a fraction of what you owe.

If you have been sued for a credit card debt, feel free to contact me at the Law Office of Frederic R. Abramson at 212-233-0666.

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5. Wage and Hour Lawsuits are Rising

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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Nearly every lawsuit asks for recovery of attorney fees, costs and expenses for bringing the action.  When potential clients contact my office for the first time for a civil litigation matter, the most common question asked is whether attorney fees are recoverable.

Attorney fees are generally not recoverable.  There are exceptions to this rule, such as when authorized by statute (ie some employment discrimination cases), court rule, or as agreed to by the parties. The case law is rather exhaustive on this subject. I still recall my contract professor in law school engaging my first year contract class on this issue through the use of the socratic method.

Under the English system, the loser of a lawsuit pays for attorney fee’s. However, this was changed in the United States, and under the the American rule, each party has to pay for their own legal costs.  This law was established to protect people and businesses who have small budgets who would not be able to start a lawsuit against a company or individual who has deep pockets.

Following a judgment, your lawyer can include a bill of costs.  This legal document will list the costs and expenses that you can recover in addition to your judgment.  They include the following:

• Filing fee for the summons and complaint
• Jury Fees
• Depositions used at trial
• Service of summons by Officer or Process Server
• Service of subpeona by Officer or Process Server
• Statuatory Witness Fees
• Lay Expert Witness Fees and Expenses. But regular expert witness fees, such as for a medical doctor in a personal injury action or a forensic accountant in a trademark claim, are not recoverable.

If you have a question about what fees and expenses are recoverable in New York State, contact me at the Law Office of Frederic R. Abramson at 212-233-0666.

The above is for informational purposes and does not constitute legal advice.  This is free. Legal advice is something you pay for.

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Wage and Hour lawsuits are rising according to Kiplinger.com. Due to the faltering economy, workers who have been let go are looking to the courts to seek monetary damages.  Usually the lawsuits are based upon allegations that hourly workers are not paid overtime. This is a violation of the Federal Labor Standards Act.

According to the article, New York was one of the states that has seen the most significant growth in Wage and Hour lawsuits.   Among the reasons why there have been an increase in litigation is because these cases are relatively easy to win.  The proof is in the numbers.  If you are a worker, you simply have to prove that you worked overtime.  This is usually evidenced by a time sheet.  Large employers also keep records of employees hours.  If the workers paycheck doesn’t match the hours worked, the worker wins.  Awards can include two to three years of back pay plus benefits.

The Obama administration is also placing a greater emphasis on regulation and enforcement.  As a result, more workers are being notified of Wage and Hour violations.

Here are a few ways that a business can protect itself from Wage and Hour lawsuits:

• All worker classifications should be reviewed. Make sure that you are properly classifying any independent contractors.
• Review all worker wages.  Sit down with an attorney to see if you workers are being properly paid. This could save your company millions of dollars.  Wal-Mart settled a $65 million dollar claim last year.
• Speak to and train all of your supervisors.  Managers often demand workera to work overtime without knowing its implications.
• If there is a problem don’t ignore it.  If an employee complains that she has not been paid overtime, take it seriously. Wage lawsuits can be just as costly as sexual harassment litigation.
• Make sure your employee handbook is up to date and addressses wage and hour issues.
• Be aware of the difference between employees who are paid salaries and hourly workers.

Another tip, as Rush Nugut points out is that a business should consider hiring a lawyer during the auditing process as to keep the attorney-client privledge.

I would also like to thank Craig Roberts for his insights regarding this issue while watching our children slide on giant inflatables at a Pump it Up party in Plaiview, Long Island.

If you have any question regarding Wage and Hour Lawsuits, whether you are an employer or employee, contact the Law Office of Frederic R. Abramson at 212-233-0666.

Related posts:

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2. Misclassification of Independent Contractors Crackdown
3. What are the penalties for misclassifying an independent contractor?
4. Employers with Independent Contract Workers are Targeted by the Government
5. Employer Misclassification May Become a Crime