Business Law Articles

If you are thinking about purchasing or already own rental or other investment property, you should consider transferring it to a Limited Liability Company (LLC). This can be a great way to protect your assets, while at the same time you may be able to reap some tax advantages.

Suppose someone slips and falls on your rental property and sues you. If you own the property as an individual, all your assets would be at risk – your home, your investments, your savings accounts, etc. But if the property is owned by an LLC, in most cases the risk would be limited to the amount of your investment in the LLC. Your personal assets should be safe.  The same is true for other types of claims involving a property, such as fire-related claims or problems with environmental contamination. [Read more...]

Medical offices and other businesses that are subject to the federal HIPAA medical-privacy law will have to comply with some new rules from Congress.

The changes include:

► If a breach of privacy occurs, you must now notify the affected individuals within 60 days. (Before, you only had to try to limit the negative effects of a breach.) If the breach affects more than 500 people, you must report the incident to the U.S. Department of Health and Human Services and the media. If 10 or more affected people can’t be contacted directly, you must post the information conspicuously on your website. [Read more...]

If you’re thinking of using a text-message advertising campaign for your company, be aware of the possible legal hurdles. Recently, a company called Nextones began giving away free ringtones. In order to get one, customers had to agree to receive text messages from Nextones affiliates.

Nextones then licensed its list of customers to publisher Simon & Schuster, which used it to blast text ads for a Stephen King novel. The problem? According to a federal court in San Francisco, Simon & Schuster might have violated the “Telephone Consumer Protection Act,” a 1991 law that says you can’t make automated calls to a cell phone unless you have the owner’s consent. [Read more...]

Employers who use tests to hire or promote employees now face a tough dilemma if those tests end up significantly disfavoring minority workers.  If the employer uses the test results, it could be sued by the minority workers on the grounds that the test had an unfair impact on them.

On the other hand, if the employer throws out the test results, it could be sued by the non-minority workers on the grounds that they did better on the test and were discriminated against based on race. That’s the result of the Supreme Court’s recent decision in a case involving Connecticut firefighters. [Read more...]

If a customer owes you money but is going under, who does it have to pay first: you…or its owners? This is a significant issue in a recession. A key test case in Wisconsin was supposed to provide a clearer answer, but the Wisconsin Supreme Court split 3-3 and couldn’t make a decision.

The case involved a company that made stereo speaker parts. The company (the largest employer in the county) defaulted on its loans and went into receivership owing more than $1 million to suppliers and banks. The receiver then filed a lawsuit against the two owners of the company. The lawsuit claimed that the owners bled the company of $10 million over the years through a variety of techniques including high salaries, management fees, bonuses, dividends, and charging excessive rates to lease equipment from other entities they controlled. [Read more...]

More than a million people suffer a slip-and-fall injury each year, and some 16,000 die as a result. Slip-and-fall injuries often result in significant legal awards against a business, so it’s wise to take precautions.

A recent study by the insurance company CNA makes the following recommendations for commercial property owners: [Read more...]

Increased paperwork audits could lead to fines; are you in compliance?

The Obama administration has announced that it intends to focus its immigration enforcement efforts on companies that hire illegal workers, by stepping up its audits of I-9 forms – the employment eligibility documents that businesses must fill out for every employee.

This is a change from the Bush administration, which had placed more emphasis on arresting illegal workers as opposed to levying penalties on employers. On July 1, Immigration officials kicked off the new effort by serving “Notices of Inspection” on 652 businesses around the country, announcing pending I-9 audits. That compares to 503 such notices issued by the U.S. during all of 2008. [Read more...]

A new federal “identity theft” law prohibits merchants from printing more than the last five digits of a credit or debit card number on a customer’s receipt. The law is triggering a lot of class-action lawsuits against companies that haven’t updated their receipt systems. For instance, many companies still print credit card expiration dates on receipts, which is prohibited by the law and can easily lead to a lawsuit.

These suits are dangerous – the law provides damages of between $100 and $1,000 per willful violation. Multiply $100 or $1,000 by the number of receipts that most merchants provide, and you can quickly have a very large number. [Read more...]

A company can’t refuse to hire people because they are genetically disposed to develop a particular disease or condition, even if this would cause the company’s health care costs to skyrocket.

That’s the result of the federal Genetic Information Nondiscrimination Act, which was recently signed into law by President Bush.

The law also prohibits insurance companies from using genetic information to deny coverage or increase premiums. [Read more...]

For 10 years, a U.S. Postal Service letter carrier in Ohio was allowed to avoid working on Saturdays to accommodate his Jewish faith. But when budget constraints forced the Post Office to reduce staffing levels and require more carriers to work on Saturdays, other employees became unhappy with the man’s arrangement. The accommodation was eliminated after union members voted to recommend its termination.

The postmaster suggested to the man that he reserve some of his vacation time for Saturday absences, and that he use leave time and exchange days with other carriers. The man sued for religious discrimination under federal law. He claimed that being forced to take days off from work without pay reduced his compensation and his eventual pension. [Read more...]

If employees get together for a recreational activity and someone gets hurt, is that covered by workers’ compensation? It depends. It can be, but there are usually many factors involved, including whether the recreation occurred during company time; whether the company encouraged, sponsored or required the activity; and whether the company benefited from the activity.

In one case in Hawaii, an employee was injured at an after-work bowling tournament. The tournament was intended to thank employees, and the employer encouraged everyone to attend. However, the Hawaii Court of Appeals said the injury wasn’t covered by workers’ comp because participation in the tournament was voluntary, it didn’t occur during paid time, and the employer got no particular benefit from the activity beyond improved morale. [Read more...]

A contract that an executive quickly scrawled on two pieces of notebook paper was not only binding, but was the basis for a $10.5 million jury verdict. This case goes to show that just because a business agreement isn’t contained in a formal document doesn’t mean you can’t be held to it.

The chairman of a telecom company met at his office with a former employee who was considering starting a new venture. Unexpectedly, the chairman suggested that he start the venture within the company. He took out two pieces of notebook paper and sketched out an employment agreement that would pay the employee $200,000 a year for five years plus a hefty cash bonus and shares of stock. [Read more...]

Employees don’t have to be disabled to sue under the Americans With Disabilities Act – they merely have to be regarded as disabled by their employer. That’s why it’s essential, whenever you have an employee with any sort of impairment, to fully understand the nature of the impairment and not leap to conclusions about what the employee can and cannot do.

A recent case illustrates the potential problems. An electrician at an aluminum can factory suffered a stroke. The stroke left him with vertigo and some problems with balance, and his doctor ordered him not to work high up on ladders or catwalks. Otherwise, though, he was cleared for work. [Read more...]

A company can’t refuse to hire people because they are genetically disposed to develop a particular disease or condition, even if this would cause the company’s health care costs to skyrocket. That’s the result of the federal Genetic Information Nondiscrimination Act, which was recently signed into law by President Bush. The law also prohibits insurance companies from using genetic information to deny coverage or increase premiums.

A new ruling from the U.S. Supreme Court is good tax news for companies that operate in multiple states. The case involved a packaging company that was based in Ohio and did business in Illinois. The company had a separate Ohio-based subsidiary with an unrelated information-technology business. When the company sold the subsidiary, it had a significant capital gain.

Illinois wanted to impose a tax on a part of the capital gain. It said it should be able to do so because the parent company did business in Illinois, and the subsidiary was part of its operations. But the Supreme Court unanimously sided with the company. It said the subsidiary was a separate entity that was unconnected with the larger packaging business. The subsidiary had its own separate management, was not functionally integrated with the parent business, and provided no economies of scale. Therefore, Illinois had no right to tax it.

If you own a business and you plan to leave it to one of your children when you die, be aware that taking out a business loan or line of credit could affect your estate plan. The reason: Many wills that provide that a child will inherit business assets don’t specify whether the child will inherit the assets subject to any debts, or whether the child will inherit the assets free and clear and any debts must be paid off by the other heirs.

In the past, unless the will was clear, the assumption was that the other heirs had to pay off any loans. But recently many states have changed their laws, and now say that the child who inherits the business also inherits the debt. You can change these assumptions if you want, but you have to be very specific about it in your will. In any event, it’s wise to consider the effect of business loans on your estate plan, and make sure your will specifies exactly how you want your property to be divided.

A recent $100 million verdict against Starbucks for the way it required employees to participate in “tip pools” should jolt employers with all the force of a Venti extra-shot Caramel Macchiato. Tip-pool lawsuits have been filed recently not only against restaurants, but also against hotels, transportation companies, delivery services, casinos and sports facilities.

Recently, many companies have been tempted to expand the number of employees who participate in tip pools. This can seem like a good way to save money, because the employer gets a tip credit against the minimum-wage requirements. But there is a complex set of legal rules for who can participate in a tip pool. There are both federal and state laws, and often multiple laws overlap so the requirements are hard to follow. These rules cover who can participate (hosts and hostesses, greeters, drink servers, kitchen staff, shift supervisors, etc.) as well as how much can be pooled. [Read more...]

A new ruling from the U.S. Supreme Court is good tax news for companies that operate in multiple states.

The case involved a packaging company that was based in Ohio and did business in Illinois. The company had a separate Ohio-based subsidiary with an unrelated information-technology business. When the company sold the subsidiary, it had a significant capital gain.

Illinois wanted to impose a tax on a part of the capital gain. It said it should be able to do so because the parent company did business in Illinois, and the subsidiary was part of its operations. [Read more...]

If you own a business and you plan to leave it to one of your children when you die, be aware that taking out a business loan or line of credit could affect your estate plan.

The reason: Many wills that provide that a child will inherit business assets don’t specify whether the child will inherit the assets subject to any debts, or whether the child will inherit the assets free and clear and any debts must be paid off by the other heirs. [Read more...]

A recent $100 million verdict against Starbucks for the way it required employees to participate in “tip pools” should jolt employers with all the force of a Venti extra-shot Caramel Macchiato.

Tip-pool lawsuits have been filed recently not only against restaurants, but also against hotels, transportation companies, delivery services, casinos and sports facilities.

Recently, many companies have been tempted to expand the number of employees who participate in tip pools. This can seem like a good way to save money, because the employer gets a tip credit against the minimum-wage requirements. [Read more...]

A new federal “identity theft” law prohibits merchants from printing more than the last five digits of a credit or debit card number on a customer’s receipt.

The law is triggering a lot of class-action lawsuits against companies that haven’t updated their receipt systems. For instance, many companies still print credit card expiration dates on receipts, which is prohibited by the law and can easily lead to a lawsuit. [Read more...]