Free Enterprise - The FindLaw Small Business Law Blog

December 2016 Archives

Despite Silicon Valley's reputation for bringing together angels and unicorns, pitfalls and problems are sometimes unavoidable. This past year has been filled with ups and downs, as well as jaw-dropping scandals that shock even the most jaded of internet news readers.

Below you'll find the top 5 Silicon Valley scandals of this past year.

You might've been thinking shoplifters attacking your store were isolated thieves, acting alone and out of desperation. But that's not always the case. Sophisticated shoplifting rings have learned that pooling your resources can lead to increased profits, and that certain consumer products become very valuable when they hit the street.

Now small businesses have begun seeing coordinated attacks referred to as "organized retail crime," or ORC, that are part of a criminal enterprise that functions "just like a Fortune 500 company."

After the holiday rush is over, small business owners should take advantage of the brief lull to get started on some New Year's resolutions. While personal resolutions are generally focused on improving one's health, home life, or work/life balance, small business owners could benefit from making some resolutions for their businesses.

Just getting the ball rolling on some of the following can help keep you and your small business out of legal trouble in 2017.

Depending on where your business is located, minimum wage laws can be governed by federal law, state law, or even local law. In the absence of local laws, state law will control. If there is no state law, then federal law controls. If there is a difference between the local, state, and federal requirements, the highest wage requirement controls.

Notably, there are only 5 states that do not have their own minimum wage laws, and therefore rely on the federal mandate. Those states are Alabama, Louisiana, Mississippi, South Carolina, and Tennessee. Additionally, Arkansas, Georgia, Minnesota, and Wyoming's state minimum wages are below the federal mandated rate, which means that federal law controls in those states.

There's a reason it's called a "startup" and not a "wait and see." You've got your vision and you want to take it to market as soon as possible. But before you launch, there may be one or two legal considerations to take into account.

So if you're looking to launch the next unicorn, here are some tips to get your ducks in a row first:

A wrongful termination lawsuit by an ex-employee of Uber exposed some intimate details of Uber's customer tracking capabilities. In the declaration, filed in October, the former employee explains that Uber employees were able to track politicians, celebrities, ex-boyfriends/girlfriends/spouses, and anyone else using the app. The declaration also alleges Uber committed many other privacy and labor violations, and may have just flat out violated other laws regarding the preservation of evidence.

The lawsuit alleges that the employee was terminated after objecting to many different privacy concerns, including those that dealt with monitoring users, as well as complying with authorities requesting information and data preservation. Additionally, the lawsuit claims that the plaintiff was discriminated against based on his age.

We've heard of running a tight ship in the office, and it's only natural to want to protect your company secrets. But an internal "spying program" that encourages employees to snitch on possible leakers? Prohibitions on writing about potentially illegal activities, even to in-house counsel? And a ban on writing "a novel about someone working at a tech company in Silicon Valley" without prior approval? That might be taking office secrecy a bit too far, Google.

While it's not too surprising the tech giant wants to keep a firm grasp on its proprietary information, what may be a shock is that much of what Google was doing violated labor laws.

A damning lawsuit claims Uber had an Incident Response team with a very specific plan in place should law enforcement would raid its offices: shut down all the computers and encrypt them remotely. A former employee says he was charged with protecting the ride-sharing company's data from the prying eyes of the police:

"I would be called when governmental agencies raided Uber's offices due to concerns regarding noncompliance with governmental regulations," his lawsuit claims. "In those instances, Uber would lock down the office and immediately cut all connectivity so that law enforcement could not access Uber's information."

If your business is engaged in retail sales, then it is a smart business practice to have a clear return policy. Customers appreciate clarity, and having a clear return policy might even lead to an increase in consumer confidence and thus an increase in sales. However, deciding on what the policy actually provides requires careful thought as returns can be rather detrimental to some businesses' bottom lines. Also, making sure your policy complies with the law is important.

Generally though, you need to make sure that your return policy is crafted with your business's customers in mind. If you choose to not allow any returns, then you may scare off some potential customers, or worse, anger former customers that have encountered a problem with a product they purchased from your business.

If all sales are going to be "final" sales, then this policy should be explicitly made clear before purchase, as customers do not generally expect items to be nonreturnable. But be wary, if you create too liberal of a return policy, you risk losing money due to customers taking advantage of the policy, or trying to scam your business. Striking the right balance may require some trial and error, but the key is being clear with your customers.

Not all businesses are accustomed to having transgender employees. Still, there are better and worse ways to treat your transgender staff. The best way is to respect their gender identity and treat them just like the rest of your employees. The worst way is to drag a transgender man into an office and force him to sign a document acknowledging that his "preference to act and dress as a male, despite having been born a female" violates your company's policies.

Not only would that be morally reprehensible, but it will get you sued. And, like First Tower Loan LLC, you'd likely lose that lawsuit.

While being first to market may be the key ingredient to success for some of today's biggest tech names, if a startup rushes to launch, they could be facing legal trouble down the road. Although it might be helpful to gauge demand and test a product to do a soft launch, or try to launch early, if your startup isn't ready, there's no end to the types of problems that can pop up.

Among the primary concerns that attorneys tend to have when a startup is rushing to open for business are legal liabilities, legal compliance, and potential legal challenges.

If your startup's projections are starting to look bleak, or a re-organization is in order, you may be considering laying off some employees. In a startup environment, conducting layoffs can often be more difficult due to the close knit team environment enigmatic to startups. However, if you are in a larger startup with over 100 employees, you may need to WARN your employees.

If you are concerned over legal liability for a wrongful termination claim, get help from an experienced business attorney before starting the termination or layoff process. Below, you'll find some tips on how to make sure your layoffs don't lead to legal trouble.

When you're focused on bringing your new idea to market and securing venture capital, hiring a lawyer might be the furthest thing from your mind. After all, you're new product (probably) isn't illegal, so what do you need legal counsel for?

But between city, state, and federal regulatory agencies and a slew of legal documents your startup is going to need, it's probably a good idea to invest some time and money on legal advice. But how much? And should it be in-house?

Embezzlement happens when an employee, or someone with authorization to possess something of value, misappropriates (aka steals) that something for themselves. Most commonly, embezzlement occurs in an employment setting where an employee has access to cash, or other resources or valuable items, and sees that there is a way to steal without getting caught. It can be something as small as not punching out during a lunch break to large thefts of thousands of dollars or more. Embezzlement is pretty much the epitome of a crime of opportunity. Employers are encouraged to head the warning signs.

What surprises many small business owners though is that embezzlement is more common at small businesses than large ones. This is largely due to the lack of oversight that is commonly found in smaller businesses leading to more opportunity for employees to steal unnoticed. While an employee may have the legal right to access the resources or cash, when they misappropriate it for personal use or benefit, it becomes theft.

Below, you'll find three tips that small business owners need to know about embezzlement.

The Mall of America's decision to hire a black Santa Claus for this holiday season made a big impact across the country. Even though there have been countless black Santas before, the prominent placement in America's largest shopping mall sparked some unexpected controversy.

As a business owner, if you are considering hiring a Santa Claus for your business, you need to be aware that race, gender, and other protected statuses, cannot be considered as factors in hiring.

It's not uncommon to hear shoppers blame retailers for marking up prices before starting sales. A recently-filed lawsuit in the Los Angeles Superior Court against Macy's, Kohl's, JCPenny, and Sears gives some credibility to those outlandish claims. The lawsuit couldn't have been filed at a worse time for the retailers as the negative publicity could impact their holiday shopping season.

The lawsuit claims that the retail behemoths all misled consumers by listing fake original prices when displaying and advertising sale prices. The Los Angeles City Attorney's Office explained in their lawsuit that each of the four retailers used false reference pricing to mislead customers into thinking sale prices were better deals.

The office holiday party has become so ubiquitous (and tales of some parties so outrageous) that Hollywood has now honored them with the aptly named "Office Christmas Party." As fun as the movie looks, any boss will tell you they'd rather sacrifice a little fun to avoid embarrassing behavior and potential lawsuits.

So with office holiday party season in full swing, here are a few pointers on keeping your celebration fun, safe, and legal.

The Americans with Disabilities Act seems to consistently face criticism from the business community and public at large. Despite being a 26-year-old law, businesses new and old are frequently found to not be in compliance with the ADA's requirement that all businesses be wheelchair and disability accessible. Rather than apologetically coming into compliance, businesses all too frequently try to blame the disabled people and their attorneys that are out there enforcing the civil rights law.

A recent episode of 60 Minutes featured a segment about how the ADA's technical requirements, and private enforcement mechanism, impact small businesses. There are a couple important points that were made during the segment that small business owners should understand. Unfortunately, curiously missing from the segment was the information needed for business owners to learn how to come into compliance for free.

When the holidays roll around, many companies that aren't in retail or consumer services face a major slowdown in business. For companies that are not overrun with holiday shoppers, the holidays are a great time to consider doing some marketing. One popular marketing tool is the customer a gift.

While businesses may be loathe to spend money on gifts for customers, doing so can actually serve an additional purpose besides just marketing. For businesses, customers gifts are tax deductible (only to an extent, of course).

Crime can happen anywhere, anytime. If you own or run a business, preventing crime at your business should not be a trivial concern. Criminals can not only steal from your business, but they can harm your customers and employees. Also, criminals aren't always unknown third parties, frequently criminals are upset customers, or former or current employees.

While crime may be an unpredictable threat, the following five tips can help your business prevent crime before it even happens.

Donald Trump, billionaire, was a fan of professional wrestling. And Donald Trump, President-elect, remains a fan of one of professional wrestling's biggest magnates. Trump has tapped Linda McMahon, former President and CEO of World Wrestling Entertainment and wife of Trump's wrestling nemesis Vince McMahon, as the future head of the Small Business Administration.

Does this mean cage matches for everyone? Will you have to beat Stone Cold Steve Austin up a ladder to get your small business loan? And if you default, will The Miz come to your office to collect?

Legal Risks of Holiday Hires

Employers big and small are gearing up for the holiday rush, and for many that means bringing on additional staff to handle the workload. And while bosses may think there's less risk in hiring an employee for a few weeks rather than a few years, temporary and seasonal employees can carry long-term legal consequences if not handled properly.

Here are some of the legal considerations you'll want to be aware of if you're hiring holiday staff.

In a move that is being applauded, Ikea has announced that all US employees will now be eligible for paid parental leave after one year with the company. Ikea employees at every level, from entry level hourly store employees to those in the US corporate offices, will now receive paid maternity/paternity leave for up to three months, with the first half at full pay and second half at 50 percent of their pay. If an employee has been with the company for over three years, it increases to four months, with full pay for two months and half pay for two months. Ikea employs nearly 14,000 people in the US.

This replaced their prior policy that only provided 5 days off, and then allowed the mother to take an additional 8 weeks of disability. Under federal law, the FMLA (Family Medical Leave Act) only requires employers to provide unpaid time off. Certain states also have laws that require employers provide maternity leave.

The Human Resources software company, Zenefits, known for providing free HR software to small and medium sized businesses, will be prohibited from giving away free software in Washington State come January 1, 2017. The Washington Insurance Commission has ordered Zenefits to stop distributing their software in the state for free as doing so violates state laws against inducements. On top of a $100,000 fine, Zenefits has agreed to start charging its Washington state customers $5 per employee per month.

Zenefits offers business customers an extremely helpful piece of software to assist with HR management, and in exchange, Zenefits gets to act as the customer's insurance broker, and thus gets to collect a commission off the business customer's insurance purchases. Zenefits' business model may sound simple, but the company has been facing difficulty from regulators.

You may have thought that buying into an existing franchise, with its business plan, name recognition, and even supply chain all sorted, would be a less risky way to own your own business. But even less risky doesn't mean risk-free and not all franchisees avoid failure, as one Iowa-based McDonald's franchisee recently learned.

As it turns out, declaring bankruptcy as a franchisee has some different quirks than shuttering a business you own outright. For instance, what happens to your franchise license? Can a franchisor just take back your contract once you file for bankruptcy? Here's a look.

As pop-up shops continue to increase in popularity, the variety of pop-ups continues to increase. Apart from the practical considerations surrounding pop-up shops, there are numerous legal issues that owners need to consider.

While a pop-up shop owner's legal exposure will largely depend on the way the shop is set up, there are no shortage of common long-term legal issues pop-up shops of all sizes face. In addition to the common contract issues, pop-up shop owners can face unexpected liabilities, too.

For small business owners, when a customer threatens to sue, the threat needs to be evaluated before any actions are taken as a result of the threat. The majority of threats are not carried out, as the majority of people are too lazy to actually file a lawsuit after their initial anger passes. However, from time to time, a threat of litigation might actually be serious.

Fortunately for business owners, insurance can be purchased that covers nearly every kind of legal liability a business can face. If your business carries liability insurance, you should familiarize yourself with the terms of the policy, particularly as it relates to reporting potential legal claims. Even bogus threats might require reporting.

Starting and running a business is ripe with risks, both to the individual and the business. However, when an individual elects to run their business as a sole proprietorship, they are personally taking on the business's legal risks. The most frequently raised concern of sole proprietors involves their personal liability for business debts.

For example, if a customer is injured, a sole proprietor could be personally sued, and his personal assets seized in a judgment, whereas if the business were structured as a separate entity, the business owner could potentially avoid personal liability. For a sole proprietor, liability is a complex topic and, surprisingly, it can actually cut both ways.