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CVS Lawsuit could Pose Major Changes to Tight Severance Contracts



March 29th, 2014

When companies downsize, they rely on severance agreements to shield themselves from the threat of lawsuits.  Among other legal components, severance contracts typically include a general release of claims, a non disparagement clause, and a covenant not to sue.  By agreeing not to sue their former employer, the departing individual receives money and/or other benefits.

However, some argue that these contracts are too tight; more specifically, the Equal Employment Opportunity Commission is pointing the finger at CVS, the country’s second-largest drugstore chain.  The EEOC, which is a federal agency mandated to enforce laws against bias in the workplace, is suing CVS for having an “overly broad” and “misleading” severance agreement, which according to the EEOC could impede workers from exercising their rights under job discrimination laws.

Regardless of whether or not an employee has signed a separation agreement, he or she still has the right to file a complaint with the EEOC if discrimination or wrongful termination occurred.  Further, a severance agreement cannot prevent a former employee from participating in an EEOC investigation.  The point of issue in this case arises where the EEOC believes that the misleading language contained in CVS’s severance contract discourages departing employees from exercising these rights, and that agreements of this nature can be very confusing to individuals who are stressed about job loss.  For many, there exists a conflict between a non disparagement clause, and the desire to bring charges with the EEOC.

If the Equal Employment Opportunity Commission wins this case, companies will undoubtedly be forced to take another look at the language within their severance contracts.

If you have questions regarding your rights as an employee, please contact HoganWillig at (716) 636-7600.

Choices in starting or running a business

Author: Leonard London


March 7th, 2014

When starting a business you will face many choices, one of which is the form of entity to be used. Choosing the best entity involves many considerations including limited liability, partnership issues, public perceptions and tax considerations. The considerations for each business are different and must be evaluated in order to reach the best decision. What might be best for a lemonade stand probably would not be best for a machine shop. The possibilities include:

  • Sole proprietorship using owner’s name
  • Sole proprietorship using assumed name
  • Partnership using owners’ names
  • Partnership using assumed name
  • Limited Partnership
  • Limited Liability Partnership
  • C corporation
  • S corporation
  • Limited Liability Company-disregarded entity
  • Limited Liability Company-partnership
  • Limited Liability Company electing to be classified as a C corporation
  • Limited Liability Company electing to be classified as an S corporation.

The attorneys at HoganWillig are prepared to help you sort through the choices in order to determine which type of entity is best for your business.

Applying for a New York State Liquor License

Author: Carol Farrar


February 7th, 2014

The licensing process in New York State is time-consuming, complex and paper intensive.  While you may be able to maneuver through the process on your own, an experienced and knowledgeable attorney can ensure the application is complete, and in certain cases, provide a certification that may help expedite the process.  More importantly, however, retaining an experienced attorney frees you up to handle the other details of getting your establishment up and running.

There are several different types of liquor licenses depending on the type of alcohol you wish to sell, the nature of your establishment, and whether the alcohol will be consumed on or off the licensed premises.  The New York State Liquor Authority (“Authority”) and its Division of Alcoholic Beverage Control (“ABC”) is the agency responsible for, among other things, reviewing and issuing or denying liquor licenses in New York State.  The SLA strictly enforces the law, imposing substantial fines and/or revoking licenses, and/or lodging of criminal charges against those who violate the law.

Some requirements, if not promptly attended to, may delay the application.  For example, on premises liquor licenses require at least 30 days’ advance notice to the relevant local municipality that you intend to apply for a liquor license.  While under some limited circumstances the municipality may waive the 30-day requirement, the 30-day period should be included in calculating your anticipated opening date.  In addition, if your establishment will be located within 500 feet of three or more businesses that presently hold a liquor license, a hearing may be necessary, where a determination will be made regarding whether an additional licensed premises will benefit the relevant community.  Also, you want to ensure that the individuals involved in the venture are capable of being licensed – do they or their spouse have any criminal history? Did they previously hold a liquor license that was revoked or suspended?  While such history may not necessarily prevent an individual from being licensed, it could delay the processing of the application.

Preparation of the application and all of the accompanying documents is a significant undertaking.  Each individual identified in the application must provide a personal questionnaire, photo identification, proof of residence and employment for the last 10 years and citizenship, as well as undergo fingerprinting, usually at their local police station.  In addition, financial documents and information showing the source of all funds that will be used for the business venture, detailed diagrams and photographs of the inside, outside and surrounding areas of the premises, menus (if applicable), leases and/or mortgages entitling the applicant to use of the premises, a $1,000 bond, proof of publications in the local newspaper, proof of disability and workers’ compensation insurance, and a certificate of occupancy are just some of the many documents which must accompany an application.

HoganWillig’s attorneys and staff have the knowledge and experience to assist you with this complex and time-consuming process.  More importantly, HoganWillig will work hard to ensure that your liquor license is approved by the time you are ready to open your doors for business!

The Affordable Care Act and Employers

Author: Amanda Kelly


December 3rd, 2013

The Affordable Care Act, often referred to as “Obamacare,” has caused a great deal of confusion since enacted on March 23, 2010. We have put together the following information in an effort to relieve some of the uncertainty surrounding this health care reform, and to hopefully ease the inevitable anxiety many of our clients will face in the coming months.

What is the purpose of the Affordable Care Act?

The main objective of the Affordable Care Act was to expand health insurance coverage to over 30 million more American citizens by the year 2022, as well as increase benefits and lower overall costs for all consumers, provide new funding for public health and prevention, strengthen the country’s health care and public health workforce and infrastructure, foster innovation and quality in our system and standardize available insurance, amongst other objectives.

Who is required to participate?

“Large Employers” or employers with fifty (50) or more full time equivalent employees are required to participate and offer affordable coverage to their full time employees.

I own two different businesses with a combined total of over 50 employees, am I required to provide affordable coverage to my full-time employees?

Yes, common ownership of companies may trigger the need for compliance and you would be considered a large employer. Please note, related employers are also combined.  There are no exceptions for non-profit, church or government employers.

How is a full time employee defined?

An employee is considered fill time when employed for an average of at least 30 hours per week (this includes paid time off).  40 hours a week is assumed for salaried employees.

Full time equivalent employees are calculated pro-rata (calculated by taking the total hours worked by part time employees in a given month and dividing by 120)

How do you calculate the total number of employees for your business?

The number of full time employees is not necessarily based on how many employees are on your payroll but is based upon how many hours are worked across the board, including full time and full time equivalent employees, during the proceeding calendar year or at least six (6) month consecutive period for 2013:

  • Full time employees counted as one employee, based upon a 30 hour work week or more.
  • Part time employees are pro-rated (calculated by taking the total hours worked by part time employees and dividing by 120)

*Please note that seasonal employees do not count if they work less than 120 days per year.

Add the number of all full time and full time equivalent employees together for each month in the year and divide by twelve (12).  If this number is larger than fifty (50) employees, you are considered a large employer.

What is required for compliant participation?

Large employers are required to provide a minimum quality of coverage to its full time employees or risk paying a penalty.  Employers are not required to provide health care coverage to part-time or seasonal employees.

How do you calculate affordable coverage?

Employer’s coverage is considered unaffordable if greater than 9.5% of income (W-2 income) or not of minimum value (covers less than 60% of the cost of benefits). In other words, an employer must offer at least one option where an employee’s contribution for single coverage does not exceed 9.5% of the employee’s household income.

The safe harbor options to determine employee’s household income is based upon either W-2 income, rate of pay or the federal poverty line.

What are the penalties?

Employers that fail to offer coverage to all full time employees will be penalized at a rate of $2,000.00 per full-time employee, excluding the first thirty (30) employees.

  • Penalty will only be imposed if your employee seeks coverage in the exchange and qualifies for premium tax credit or cost sharing subsidy.

Employers that offer unaffordable coverage can still be penalized at a rate of $3,000.00 per employee that receives subsidized coverage through an exchange, accepts a premium tax credit or cost-sharing reduction, but this amount will be capped at an amount equal to $2,000.00 per full-time employee, excluding the first 30 employees.

I am an employer with over 50 employees, what are my options?

  • Provide coverage as you do now;
  • Do not offer coverage, employees can go to the exchange but you may be charged a penalty;
  • Use a private exchange.

S-Corporation or Limited Liability Company

Author: Stacy Bechakas


April 1st, 2013

In the course of my practice, when clients are starting a business or changing their current business structure, they ask which entity is better for their needs, an S-Corporation or an LLC. While both entities share similar qualities, they also have distinct differences. A client should review the pros and cons of each entity prior to deciding.

Pros and Cons of an LLC

The most attractive feature of an LLC is its operational ease. There are fewer initial registration requirements and no requirement to have formal meetings or maintain minutes.

LLC’s have fewer restrictions on sharing profits. Members may have contributed more money than others or worked more hours; the profit allocation may be altered to reflect this.

A negative aspect of an LLC is it has a limited life. A specific date is chosen when it terminates upon filing with the state. Additionally, when Member dies or goes bankrupt, the LLC will be dissolved.

The biggest drawback of an LLC is that the owner(s) of an LLC are considered to be self employed and must pay the self employment tax contributions towards social security and Medicare. The entire net income of an LLC is subject to this tax.

Pros and Cons of an S-Corporation

The most attractive feature of an S-Corporation is the tax savings. Only the wages of a shareholder are subject to employment tax. The remaining distribution is taxed at a lower rate, if at all. Compensation to shareholder must be reasonable or the IRS may reclassify. This is a red flag and you do not want this attention from the IRS.
An S-Corporation has independent life separate from its shareholders. If a shareholder dies or leaves, the S-Corporation can continue doing business.

The biggest drawback of an S-Corporation is that it has structural requirements such as director and shareholder meetings, minutes from those meetings, adoption and updates to by-laws, stock transfers and records maintenance.

Typically with both entities, owners are not personally responsible for business debts and liabilities. Both entities have pass-through taxation (taxed at the individual level). Both are subject to state-mandated formalities and fees. I personally prefer the flexibility and lack of formal requirements of an LLC.

Protecting Your Business Trademark

Author: Leonard London


March 18th, 2013

The name of your company and the slogans and logos you use with your products or services are called trademarks or servicemarks and are used by consumers to identify the source of the products or services. If your business would suffer if someone else used your name, slogan or logo, then you should proactively take steps to protect these. Although a “common law” right in your trademark is acquired by use, it is very difficult to enforce common law trademark rights unless the mark is registered.

A mark that is used in more than one state or country is eligible for federal registration, while a mark that is only used within a single state (no out of state sales) may only be registered in that state. Federal registration is much stronger and more desirable; it provides nationwide protection and will become incontestable after five (5) years. A cease and desist letter to demand that someone stop using your mark will carry much more weight and you will have greater rights in court if your mark is registered.

If you are developing a new mark, it is important to search in advance to see if that mark is in use. Although registration of a mark is based on actual use, it is possible to apply for registration of the mark before sales commence on an intent to use basis.

Each trademark registration application is examined by an attorney in the Trademark Office and in many instances an Office Action refusing registration is issued. The advance work in anticipating and dealing with objections that may be raised and in responding to trademark office actions requires experience and knowledge.

At HoganWillig we can help you evaluate the marks you use or would like to develop and take them through the registration process.

Commercial Lease Agreements: 3 Things Every Landlord Should Include

Author: Hogan Willig


November 29th, 2012

Many commercial landlords often find themselves litigating the terms of a lease agreement to obtain a recovery against a tenant that has defaulted. To increase the likelihood of succeeding against a tenant that has defaulted, the following three provisions should be included in the lease agreement:

  1. Acceleration Clauses – these clauses are very important especially for long-term lease agreements. Acceleration clauses allow a landlord, upon default of the tenant, to accelerate and immediately demand payment in full of the tenant’s rental obligation under the lease for the remaining term of the lease following the default. Without an acceleration clause, a cause of action to recover unpaid rent will have to be brought periodically as payments would become due or at the end of the lease term.
  2. Personal Guarantees – in connection with renting a commercial space to a corporation, partnership or limited liability company, a unconditional guarantee by the principal of the tenant-entity is a must have. A guarantee by the principal allows the landlord to recover rent due from the owner of the company generally without having to proceed against the company first. If your tenant is a business entity with no assets, and a default occurs, without a personal guaranty, any judgment obtained for rent, costs, etc. will not be recoverable. The personal guarantee provides additional security for payment to the landlord.
  3. Attorneys’ Fees – to ensure that you can recover the attorneys’ fees you incur in connection with litigation or curing a default by a tenant, the lease agreement must specifically provide the right to recover attorneys’ fees and costs. To the extent that the tenant will agree to a clause that allows a landlord to recover fees and costs, without a right of reciprocal recovery to the tenant, this is a more favorable position for the landlord. Otherwise, the clause should provide for the right of the prevailing party to recover attorneys’ fees and costs. Without this clause, New York State Courts disfavor awarding them to any party.

We have several attorneys on staff that can review your commercial lease agreement to provide you with suggestions on improving and/or updating the provisions contained therein.

HoganWillig

We Practice Law for Your Peace of Mind