President Barack Obama’s re-election means health care reform is certain, and businesses need to plan to meet Patient Protection and Affordable Care Act (PPACA) mandates, most of which will be effective on Jan. 1, 2014.

There are ways companies can structure themselves to avoid any type of penalty and maintain their employees’ benefits, says Stefan Thomas, an associate with Kegler, Brown, Hill & Ritter.

“Because of the ambiguity of the law, it’s a difficult subject matter for companies to understand. Some are opting in or opting out of insurance plans, some are self-insured and some are privately insured. It’s really specific and handled on a case-by-case basis.”

Smart Business spoke with Thomas about steps that companies should take in order to meet PPACA mandates.

What steps do companies need to take in order to be prepared for the PPACA requirements?

First,companies need to determine if the law will affect them. Depending on the size of the company, it might not. They would have to be an applicable large employer, which means having 50 or more employees, including full time, full-time equivalent and seasonal workers.

There are other things to consider, such as whether the seasonal exception is applicable or whether full-time-equivalent workers (2-to-1) or seasonal employees, defined as those who work four or more months, have caused them to become large employers.

If a company is subject to PPACA mandates, what is their logical next step?

The next thing for a company to do is to figure out whether or not they’re providing any insurance and, if they are, whether it’s adequate. If it’s not adequate, it needs to be, meaning that they’re paying a certain percentage of the premium, which should be 60 percent.

If they’re large and have insurance that meets the 60 percent threshold, then they don’t have to worry about anything. But if they fail to provide the adequate amount, they have to pay a tax penalty, which is based on a ratio and can be $2,000 or $3,000 per employee. On top of that, they have to determine whether an employee has opted into an exchange. However, if the employee hasn’t gone through the exchange, the company still might not be penalized.

Some businesses are trying to limit hours employees are working or they’re changing the way they are providing health insurance in order to avoid penalties.

Is there anything smaller companies need to know about the PPACA?

Small employers could be eligible for a tax credit if they have 25 or fewer employees, with salaries averaging $50,000 or less and they provide insurance. They also have to fill out tax form 990T to determine whether they qualify for credits.

Have all the regulations of the PPACA been determined now or are provisions still subject to change?

There is still quite a lot of ambiguity regarding the new law and that is just how it is going to be for the next few years. For example, it has recently been discovered that the Medicaid expansion is mandated.

If states fail to expand coverage to people up to 138 percent of poverty level, those states will not be able to receive full funding from the federal government. That is a big issue because Medicaid is one of the largest items in state budgets.

The health care reform law is evolving every day, so companies are advised to pay close attention to the regulations as they are rolled out. Consider dedicating staff to monitoring the act’s developments, otherwise your company could be missing tax credits or penalties that could be incurred because of lack of knowledge.

Stefan Thomas is an associate at Kegler, Brown, Hill & Ritter. Reach him at (614) 462-5484 or sthomas@keglerbrown.com.

Insights Legal Affairs is brought to you by Kegler, Brown, Hill & Ritter

Published in Columbus

The cornerstone rule of discovery in civil litigation is that parties to a lawsuit must preserve, gather and produce relevant documents.

However, “it is becoming increasingly difficult and expensive to carry out this basic obligation, given the staggeringly high volume and informal nature of our electronic communications in the workplace,” says John Shonkwiler, a partner at Novack and Macey LLP.

Smart Business spoke with Shonkwiler about the importance of forming better emailing habits.

What are some ways to improve emailing habits?

Stop ‘reflex’ emailing. Too often, we respond to email immediately. This is the texting culture invading the workplace, which is an environment that demands better judgment and discretion.

It is not inconsiderate or unprofessional to deliberate before responding to email.  Sometimes just waiting 10 to 15 minutes can make a big difference. Except in those rare instances where an urgent response is called for and cannot be made by phone, people should not fire off immediate responses.

Why is ‘reflex’ emailing problematic from a litigator’s perspective?

As the volume increases, so does the cost of electronic discovery. Reflex emailing exacerbates the problem by creating more email unnecessarily and so often it can be inconsequential. For example, a response of, ‘I’ll check on this and get back to you,’ is often unnecessary. And you don’t have to be a physicist to understand the laws of ‘e-gravity’: When you send more email, you receive more email. So, consider whether each email you compose has a purpose.

Also, emails that are carelessly or informally prepared are more likely to reflect poor judgment, convey inaccurate information, or contain sarcastic or flippant remarks on serious topics that don’t translate well on paper. These things make for bad documents in litigation. You want to think of every email like a potential trial exhibit. Ask yourself, if you were on the witness stand, would you like to be confronted with this? Often the worst documents that we see as lawyers as we’re gathering documents in discovery are careless emails.

How should employers teach employees about using better discretion?

Just ask employees to place a higher value on their email correspondence. Apply the same care and consideration when you’re sending an email that you would if you were sending a letter on your company’s letterhead. And remember to consider that your message might be better delivered in person or over the phone.

How does organizing help reduce exposure and litigation costs?

Email can be organized like paper correspondence. This means deleting the emails you don’t need and organizing the messages that you keep into folders.

This helps in at least two ways. First, it makes it far easier and cheaper to find and gather relevant email in response to discovery requests. Second, when every email must be accounted for and filed, or deleted, the sender tends to place a higher value on each email, give greater care to the contents and more carefully consider whether a message needs to be sent in the first place.

For people who have never organized their email, how can they get started?

If the task of sorting through every email in your inbox is too imposing, just move the entire contents of your Inbox into a folder titled ‘My Inbox as of [date].’ You can do the same with your sent items. This way, you can start clean and use your new habits going forward, and still have easy access to your old emails if you need them.

Have there been any recent developments in the law concerning email discovery?

Electronic discovery is probably the single hottest topic in continuing legal education courses, and has been for years. It is interesting, however, that for all the attention given to the issue, there has been relatively little discussion about addressing the root of the problem, our emailing habits. This is going to change as employers continue to learn about the significant costs of housing massive amounts of unorganized email.

John Shonkwiler is a partner at Novack and Macey LLP. Reach him at (312) 419-6900 or jshonkwiler@novackmacey.com.Insights Legal Affairs is brought to you by Novack and Macey LLP

Published in Chicago

Most small business owners believe running their businesses through a corporation protects them from personal liability. Generally, this is true. However, courts can “pierce the corporate veil,” holding shareholders accountable for the liabilities of a company when it’s found to be the “alter ego” of the shareholders.

“When shareholders use a company as their personal piggy bank, ignore formalities when operating the business and leave no assets in the corporation, courts will not let them be shielded from liability,” says Matthew Montgomery, an attorney at Stradling Yocca Carlson & Rauth.

Smart Business spoke with Montgomery about responsibly maintaining the corporate form.

What protections does incorporating provide?

Corporations provide protection from liability at a level you can’t get as an individual operating as such in the market. It’s a good way of limiting liabilities for shareholders of a company doing legitimate business and following proper procedures.

For example, if a small incorporated business owner has a delivery fleet and a driver has an accident, the company would be liable, and not the owner or shareholder. Also, loans can be taken out through the corporation without the shareholder having personal responsibility for repayment. Further, incorporation shields a shareholder from being held personally responsible for any regulatory or non-criminal violations made by the company.

Are corporate protections limitless?

No. There are rules that guide how a corporation should be run. When they’re not followed, liability for the company’s actions falls back on the shareholder, whether he or she is a startup inventor or running a large corporation with hundreds of subsidiaries. Corporate business formalities need to be followed and a level of capital needs to be maintained to handle liabilities. In instances where the corporation is found to be the ‘alter ego’ of its shareholder, then direct liability can fall on the shareholder.

What happens if someone is using a corporation as his or her alter ego?

Should the company be sued and the shareholder has been incorrectly using the corporate form, even if not explicitly named in the suit, the shareholder will be held personally liable for the damages inflicted.

A company often generates much higher liability than an individual. Without the legal protections of a corporation, facing charges can be catastrophic.

What’s considered an abuse of a company’s corporate status?

Generally, courts look to see if you’re observing corporate formalities, which means they want to see that you’re holding board meetings and important company decisions are being made by a board, so board minutes must be kept.

It’s also common for individuals to loan themselves money from the business or treat it like it’s their own piggy bank. Owners often think they put money into the company and they deserve it back, which is true; but the corporate form has to be respected, so a salary must be approved and paid and loans generated from the company must be proper business loans that bear interest.

How can companies ensure their corporate veil will not be pierced?

Research what your state requires through its department of commerce, such as the necessary officers, records you must have and taxes you must pay. And seek the guidance of limited corporate counsel to ensure you’re following all corporate formalities. This step is often skipped because people think it’s too expensive, but if you have to hire a defense attorney, it’ll cost much more.

Take the time to understand how a corporation protects you. Otherwise, you may unwittingly unravel those protections and become the alter ego of the corporation you’ve created. Dealing with this issue before it becomes a problem will save you countless dollars and a lot of headaches.

Matthew Montgomery is an attorney with Stradling Yocca Carlson & Rauth. Reach him at (949) 725-4285 or mmontgomery@sycr.com. Connect with him on LinkedIn at www.linkedin.com/in/mtmontgomery.

Insights Legal Affairs is brought to you by Stradling Yocca Carlson & Rauth

Published in National

The costs of litigation can quickly escalate, especially if you’re facing a motivated and well-funded plaintiff who seems intent on aggressively pursuing litigation. Dealing with litigation can create a big burden upon management to respond, collect documents and be available to give a deposition, testimony or consultation.

“If you have experience with lawsuits, then you understand the cost and time pressures associated with them,” says Stephen L. Ram, Attorney with Stradling Yocca Carlson & Rauth. “That’s why attempting to come to a resolution with the other party ahead of reaching the courts makes sense for both parties.”

Smart Business spoke with Ram about resolving disputes without litigation and the legal protections that exist around conversations undertaken to come to an agreement outside the courts.

What are kinds of disputes do companies become aware of before a lawsuit is filed?

There are a number of common disputes that can come from vendors, contractors and shareholders that stem from some dissatisfaction with your business relationship. Most often, a company is made aware of them through a demand letter sent from counsel, or, as with many vendor disputes, a sales representative will be aware that some looming frustration is becoming more than a trifle and should be a concern for the company.

How do you approach a solution when one or both parties are emotionally charged?

It’s common to have a powerful initial emotional response to a dispute when it arises, particularly when a party makes substantial or possibly outlandish monetary demands. Understand that emotional reactions are natural, but consider what is best for the company and its shareholders and find a suitable resolution. Recognize that the other side has different pressures and emotions to which it’s reacting. Step back and be dispassionate and objective because a measured, discerning approach makes it easier for you to facilitate a resolution. Also consider the applicability of any insurance coverage and notify the broker or carrier after receiving a demand.

What needs to be considered when unequal information is causing or adding to the dispute?

Disputes generally arise because one party speculates the other has done them wrong or has done something suspicious. While there may be a grain of truth to the gripe, the other party’s speculation is usually accompanied by a lack of information or a misunderstanding regarding what actually transpired. Naturally, you will undertake your own formal or informal investigation into the basis for the dispute. There is an opportunity before this dispute boils over into a lawsuit to be open to what the other side needs and wants from you, and you can consider your willingness to share information from your own internal inquiry. Being open to this type of dialogue makes it easier to work toward a resolution.

When should a representative begin talking with the other side?

The decision of when or how to open a dialogue is unique to each situation. Most times, the initial dialogue should be between counsel to ensure confidentiality protections and avoid a blindsided attack. The first step is to gauge and engage the other party, which involves acknowledging the other party’s monetary or other demands. However, you also need to be clear that you do not intend to cave to those demands to manage their expectations, but state your willingness to work with them to reach a fair resolution.

Next, establish parameters for future dialogue. If the other side is requesting information or you would like to voluntarily provide information to correct misunderstandings, legal counsel can assist in determining what documents to provide, what level of detail to share, or perhaps to make a company employee available to tell the story of what happened or answer questions.

If you are going to make a member of management or another company employee available, the third step is preparation. Preparation involves understanding the parameters for the dialogue, understanding of the relevant facts and your story, and that person’s ability to bring back conversations that go astray, or refrain from going beyond the scope of the conversation. This conversation can be as simple as a phone call or as structured as mediation.

Are you putting yourself at risk by engaging in this type of dialogue?

There are legal protections for communications that are undertaken for the purpose of reaching a settlement of a dispute. These protections, available under state and federal law, dictate that what you say during these resolution conversations is not admissible in court to prove liability. This means you can share information that might legally amount to admitting to a breach of a contract, for example, in an effort to reach a compromise.

To invoke the protections of these statutes, you just need to tell the other side you are having the conversation in order to resolve the dispute. But for added protection, talk with outside counsel about what you’re planning, that you’re serious about reaching a resolution, and ask for a confidentiality or nondisclosure agreement. Convince the other side to put this protected dialogue in place, as well. The confidentiality under these statutes and a binding agreement offer comfort to both parties and help facilitate conversations. Still, there may be situations where it’s not advisable to share or only share limited information.

If a resolution cannot be reached, how should  you proceed with management of a lawsuit?

Keep an open dialogue and don’t entrench yourself in an emotional reaction or overly rigid position. Allow the other side to see that you’re serious about defending or prosecuting, but hopefully cooler heads can prevail and a resolution is reached, especially if there is an ongoing relationship. An early resolution is usually far less costly and disruptive than one reached after protracted litigation.

Stephen L. Ram is an Attorney with Stradling Yocca Carlson & Rauth. Reach him at (949) 725-4102 or sram@sycr.com.

Insights Legal Affairs is brought to you by Stradling Yocca Carlson & Rauth

Published in National

When business owners run into a potential legal issue, too often, they call an attorney, get an answer and move on. But developing a closer, long-term relationship with outside counsel can put a client in a stronger position when the need for services arises, says Michael P. Wippler, recently appointed managing member for Dykema Gossett LLP’s Los Angeles office.

“Too often, businesses and individuals view lawyers like the dentist — they wait until their tooth hurts before they seek advice,” says Wippler. “There’s a complacency. Nine times out of 10, you’re not going to have a problem, but there is that one time when getting early advice can prevent you from making a really big mistake.”

Smart Business spoke with Wippler about what to look for in outside counsel to ensure you receive high-quality service at a fair price.

How can you find the right attorney to meet your needs?

Referrals are the best way to find the right person for your needs. Who do you know and respect in business that has had success with an attorney they like?

Once you’ve identified potential counsel, start asking questions. First, make sure they have the experience and expertise to properly handle your matter. If someone is a jack-of-all-trades, you have to wonder about his or her expertise for your specific area.

Then, ask the lawyer about the level of service you can expect. How quickly do they respond to requests and phone calls? In the past, it was OK to respond within 24 hours. But today, if you call or e-mail your attorney, you should receive a response right away. You should never have to call twice.

Ask the lawyer how they will keep you informed of matters pertaining to your case or transaction. Too often, outside counsel will know about an important issue for weeks or months but not notify the client until the last minute.

As part of these conversations, determine if you personally like and trust the attorney. Is the attorney someone you can work with? The relationship between an attorney and client is fundamentally one of trust. Without trust, it’s very difficult to obtain what the client really needs from their attorney.

How can a client get a good price and create predictability in billing?

You should expect quality legal services at a fair price.

Ask what the rates are, what the billing procedures are and what you can expect to pay for a given matter. A client should never be surprised by the bill.

Ask what the attorney can do to give you certainty and some control over expenses. Today’s consumers of legal services can be more aggressive and ask for pricing models beyond the typical hourly rate. Asking for — and getting — pricing models such as flat fees, blended rates and volume discounts can provide increased predictability.

For matters such as a real estate lease or a patent application, an attorney may agree to a flat fee. If you have a mix of timekeepers from a senior partner to a paralegal working on a matter, you can request a blended rate in which you would be charged the same hourly rate for all people working on the matter. And with certain hybrid models, the attorney’s compensation varies depending on whether there is a successful outcome.

Other models include contingencies and partial contingencies. Clients can also request volume discounts and early payment discounts.

Should every business have outside counsel?

In today’s legal environment it is important to have a good lawyer that you can call on short notice. Anyone dealing with employees, contracts, financing and/or products will eventually have legal issues.

Before you have a problem, it’s a good idea to retain a lawyer you can trust. It is typically less expensive to pay for advice and guidance up front than for litigation or some other problem later on.

You may only need an attorney once in a while, but it’s good to know that attorney before you need him or her, and for the attorney to know you and your business.

Every business has issues that are particular and important to it.  If the attorney knows what is important to your business, it’s easier for the attorney to give you advice that benefits you. However, this type of knowledge about you and your business can only be learned over time by working together on different matters.

Always consider your potential exposure on the downside. Not everything goes as planned.

Michael P. Wippler is managing member for Dykema Gossett LLP’s Los Angeles office. Reach him at (213) 457-1717 or MWippler@dykema.com.

Insights Legal Affairs is brought to you by Dykema Gossett LLP

Published in Los Angeles

The changes occurring with the implementation of the America Invents Act (AIA) are important for the United States and for anyone thinking about filing a patent application. The AIA puts the U.S. on the same first-to-file patent system as the rest of the world. This means that the first person to file a patent application is the first to invent. However, because of the changes, companies need to be more vigilant about their inventions and act quickly when they have something patentable, especially in industries that are highly competitive.

“There needs to be a plan of action,” says Sarah S. Brooks, an Attorney at Stradling Yocca Carlson & Rauth. “Have a patent attorney lined up and have someone monitoring the technical department so your company can file right away. This might involve restructuring the company’s reporting chain.”

Not adapting to the new rules could mean someone else claims your invention first.

“If you don’t file and you’ve got something on the market that you’re selling, there’s nothing stopping another company from taking that and filing their own patent application and they’ll be the presumptive owner. So there are serious consequences for not filing right away,” she says. “If this occurs, there is a process called a derivation proceeding that could help you if you can show that the patent applicant derived its invention from you, but you will have an uphill battle because you have to prove this by substantial evidence and it may be difficult to get this evidence.”

Smart Business spoke with Brooks about the AIA and what companies should do to prepare for the changes it brings.

What is the AIA?

The AIA, passed in 2011, is the biggest change to U.S. patent law since the 1950s. The U.S. Patent and Trademark Office (USPTO) has a backlog of patent applications, and the new law is an effort to streamline the patent system.

The major change coming through the AIA is to move to a first-to-file system, which aligns the U.S. system with what the rest of the world uses. Previously, the U. S. was on a first-to-invent system, which meant that even though you didn’t submit your application first, you could prove you were the inventor by going through an interference proceeding to determine the proper inventor. However, interference proceedings were contributing to the backlog in the USPTO. Therefore, the AIA attempts to streamline the process with the derivation proceedings previously

mentioned.

What are the key changes in the act that companies should know about?

In addition to the first-to-file provision, which takes effect March 16, 2013, there will be a significant change affecting the grace period for public uses, patents, publications and sales. Previously, you had one year from a prior patent, publication, public use or sale in which to file your patent application. Now, that grace period has been eliminated with just a few exceptions. The one-year grace period now only applies to prior sales and publications of the inventor, not to prior sales and publications of others. In addition, the AIA also bars someone from getting a patent if his or her invention is sold anywhere in the world by anyone other than the inventor before a patent application was filed.

One more change, meant to streamline litigation, is a new proceeding called a post-grant review. Through this, a third-party can claim your patent is invalid on any grounds within nine months of the patent being issued. Post-grant reviews will offer a cheaper solution than standard litigation in the courts and may be used instead of re-examinations, which are similar but don’t operate within the same time frame.

Finally, the AIA allows a company to file a patent in its own name if the invention has already been assigned to the company or if the inventor is obligated to assign the patent to the company. This eliminates the need to file assignments with the USPTO.

How does the AIA change the way companies should conduct business going forward?

You can’t sit on your invention, especially with the rush to the patent office seen in certain industries, like the smartphone industry. Previously, you could go through an interference proceeding to prove you were the first to invent, but that’s been eliminated and replaced with the derivation proceeding in which it will be harder to prove you are the true inventor.

Filing for a patent quickly won’t be a problem for big companies that have the infrastructure already in place. It will be problematic for smaller companies and independent inventors because they don’t have their own in-house legal department and the process is expensive. Therefore, you’ll likely need to line up a patent attorney.

You also have to be careful of another bar to your patent. If someone other than the inventor is making, using or selling an invention or publishing information about it, there is no one-year grace period for this type of prior art. Prior art is all public information disclosed about an invention before a given date.

Will the AIA simplify or make the patent system more complex?

It will likely do both. It will simplify and streamline the process in some ways, such as possibly increasing the speed with which applications are granted. But while people and companies are getting accustomed to the new rules and what they mean, there might be an increase in litigation. Further, although there has been lots of publicity about the AIA, most of the news is about the change to the first-to-file system, not the other changes coming that are just as important and have to be dealt with.

Sarah S. Brooks is an Attorney at Stradling Yocca Carlson & Rauth. Reach her at (424) 214-7025 or sbrooks@sycr.com.

Insights Legal Affairs is brought to you by Stradling Yocca Carlson & Rauth

Published in Orange County