Lisa Murton Beets
It’s a reality of business today: many of the products sold in the U.S. are part of a global supply chain. There is even a debate surrounding what percentage of a product has to come from the United States in order to be labeled “Made in the U.S.A.”
“Unless they are very small, most manufacturing and distribution companies in the U.S. are involved with at least one other country,” says Debra F. Scalice, vice president, Millennium Corporate Solutions.
“Importing from China alone has increased from $109 billion in 2001 to $365 billion today — that’s huge; almost a 300 percent increase. Obviously the removal of U.S. manufacturing jobs has had multiple impacts, and among these is increased international risk,” Scalice adds.
Unfortunately, she says, many U.S. companies are not fully cognizant of the consequences that may occur if they are not covered properly while conducting business with and in other nations.
Smart Business asked Scalice about some of the exposures businesses face and what they can do to minimize them.
Why is international risk such an important topic right now?
Many U.S. manufacturers are fighting to stay alive and they are often resorting to smaller, niche markets, leaving their old product skews behind and innovating new products or parts, which are imports. They must change or face extinction via lack of competitive price points. Nearly all U.S. companies are involved to some degree with importing or exporting. All too often, U.S. companies think they are protected from various liabilities when in reality they are not. It is easy to misinterpret your coverage. Countries have very specific mandates about the types of coverage you need to have and who is legally able to provide that coverage — Mexico is a good example. If you don’t have a Mexican insurance company and something goes wrong, you’re going to jail.
What are some of the risks involved with property exposure?
Typically, international property exposures are similar to domestic exposures. You need to know where the property is located, whether there are any nationally mandated coverages, availability of coverage subject to increased hazards, if the property is adequately covered while in transit, and if you are using the shipper’s coverage or purchasing your own.
Are there any time constraints regarding the arrival of your property? What if the goods arrive at the harbor and half of the product isn’t there? Or, has the product been substituted using trickery? What level of risk are you prepared to take on yourself? On the other hand, if you are exporting, what happens if the companies you are exporting to owe you money and disappear? Can you handle the financial loss or will you need credit insurance?
What key factors about liability exposure do companies need to be aware of?
If you’re manufacturing in the U.S. and your policy says you have worldwide coverage and protection, don’t let that lull you into a false sense of security. It probably means you’re only covered for lawsuits initiated in the U.S. Let’s say you sell something in Europe and someone gets hurt. You think you have worldwide coverage, but if you don’t have proper international liability in place, there could be terrible financial consequences.
Liability exposure for importers is another consideration. There are many domestic carriers who are not interested in covering imported products. So if you’re an importer and something goes wrong with the product you imported, you will be held accountable, as there is no domestic manufacturer to seek financial restitution from. It is very difficult to sue in other countries, which are often ‘developing.’ Who will you sue in that country? Are they even liable according to their laws? What if the products you’re bringing in and selling to your clients start to fail? This is a nuance of international business you can’t insure for, but you have to contemplate the risk.
What are some considerations for traveling overseas for business?
In today’s world, you do not want to be walking around a foreign country without proper risk assessment and coverage. Let’s say you’re a salesperson who travels to London for your boss; you and your boss decide you should live there temporarily. The employer needs to cover you for workers’ compensation in that country — it’s a human resource issue. Or let’s say you’re the CEO of your own business and you’ve excluded yourself from workers’ compensation insurance. You go to Europe and something happens to you — you have a car accident or a health event, or a political act takes place. Who will pay to bring you back to the U.S.? Kidnap and ransom are also real concerns. If you are an American traveling abroad, you are a target. There are hotter spots than others in terms of exposure, but it’s actually quite common and happens all over the world. For any executives who are traveling, you need to ensure that risk management techniques have been employed to help assure your safety and that the right coverage is in place.
How can companies ensure that they are protected properly?
Talk with your international attorney and a diligent insurance broker who will show you how to protect your interests. They will help you determine your own risk tolerance, where you are exposed, and what needs to be covered. Seek a broker familiar with international risk who will know the insurance vehicles available to cover international risk. Equally important, the broker will help you understand what is not covered. This is a very dynamic and fluid area so it’s important to keep in touch with your broker on a regular basis to ensure you are properly covered at all times.
DEBRA F. SCALICE is vice president, Millennium Corporate Solutions. Reach her at (949) 679-7139 or email@example.com.
Spending on unemployment compensation is at an all-time high, jumping from approximately $31 billion in 2008 to $120 billion in 2009, $160 billion in 2010 and a projected $120 billion for 2011. Numerous states, including Ohio, have depleted their unemployment compensation trust funds and have had to borrow from the federal government.
“Ohio employers have seen modest increases in their state unemployment taxes over the last few years as automatic triggers kicked in to try to keep the fund solvent. However, the increases just haven’t been enough to stay ahead of the benefits paid out,” says Anthonio C. Fiore, an attorney with Kegler, Brown, Hill & Ritter.
Eventually, the federal government will look to Ohio employers to replenish their fund through higher contributions or taxes. To keep the costs to employers from growing ever higher, Fiore says the state and its employers must work to reform the unemployment compensation system in Ohio and get people re-employed.
Smart Business spoke with Fiore about the tasks at hand.
What is the status of Ohio’s unemployment compensation (UC) trust fund?
Employers pay into both the state and federal unemployment compensation trust funds. Solvency of the state’s UC trust fund had been a growing concern for a number of years, but it finally moved into the red in January 2009. Ohio currently owes the federal government over $2.6 billion for loans from the Federal Unemployment Account (FUA) — commonly referred to as Title XII loans.
How does the situation in Ohio compare to that in other states?
Ohio is in the same boat as many other states. The highest unemployment in nearly three decades is spread across the U.S. and very few counties and states have been immune. State unemployment taxes increased as a percent of total wages on average by 34 percent from 2009 to 2010 and are expected to increase even more for 2011 and 2012.
As of Sept. 1, 2011, 27 states and the Virgin Islands have outstanding federal loans of over $36 billion. The United States Department of Labor (USDOL) projects a peak in 2013 of up to 40 states and $65.2 billion in outstanding loans. Interest on loans is charged at the rate of just over 4 percent for 2011. Approximately $1.7 billion will need to be paid from sources other than the state unemployment insurance (UI) tax — employers in 19 states (not including Ohio) will pay a special assessment to cover this cost. The first interest payment from states is due September 30, 2011, and interest will continue to accrue as long as loans are outstanding.
State and federal unemployment taxes will continue to increase over the next three years and remain at higher rates for at least 10 years on average. Average UI taxes will more than double with some employers experiencing much higher tax increases as a percentage of total wages. Increased taxes will increase the cost of hiring. Increased duration of unemployment compensation will continue to be a disincentive to individuals deciding whether to actively seek and accept work available in the labor market. Relief from automatic Title XII interest and Federal Unemployment Tax Act (FUTA) offset credit penalties is possible only if states, businesses and workers push for them. States with no debt may be less supportive of relief, arguing that they have already addressed solvency and did not get relief.
How long will it take Ohio to get its fund solvent once again?
The goal is not simply to pay back the $2.6 billion to the federal government. The goal is to replenish the fund to what is called ‘minimum safe level’ in order for it to weather future economic downturns. The minimum safe level is around $2.5 billion; therefore the state UI fund is approximately $5 billion away from where it needs to be in the future. It could take three to five years to get the fund back to this level.
How can Ohio get the fund back to solvency?
Obviously, the best case scenario is finding a way to get more individuals employed, so fewer individuals are collecting unemployment. That would help Ohio rebuild the fund the fastest, versus raising employer taxes. In terms of direct costs to companies, businesses can work with third-party claims administrators and/or an attorney to more aggressively manage their claims to eradicate fraudulent claims and overpayments. The state itself is taking numerous proactive efforts and is focusing on ways to reform Ohio’s unemployment compensation system, keep businesses in Ohio, attract new companies to Ohio, and get Ohioans re-employed.
How will developments at the federal level impact Ohio?
Pending legislation (H.R. 1745, also known as the Jobs Act) would reform aspects of the unemployment system. Ohio would benefit from some of the reforms that are being advocated by a broad coalition of national and state business associations. One of these is a requirement that would strengthen job search requirements for those receiving unemployment. In addition, President Obama recently released the ‘American JOBS Act’ with several provisions affecting unemployment compensation. While some provisions of the proposal have merit there is still uncertainty surrounding what price tag will be levied on those who fully fund the system — employers. The current system was developed in the 1930s and was not set up for the situation the country is currently in. Reforms would focus on getting people re-employed faster and into the jobs that are available.
ANTHONIO C. FIORE is an attorney with Kegler, Brown, Hill & Ritter. Reach him at (614) 462-5428 or firstname.lastname@example.org.
It was announced recently that the Utica Shale formation in Ohio is not only a source of natural gas, but oil as well. New technological advancements — especially in horizontal drilling techniques and the hydraulic fracturing of the shale (“fracking”) — along with the fact that the oil appears to be of high quality, is bringing drilling to Ohio a lot faster than originally thought.
“Drilling has been taking place in the Marcellus Shale in Pennsylvania and West Virginia for a while now,” says Jeffrey R. Huntsberger, a member of the Business Department and the Real Estate Practice Group at McDonald Hopkins LLC. “Geologists knew there was natural gas in Ohio’s Marcellus formations, but figured Ohio wouldn’t be as rich a source as Pennsylvania. All of that has changed now with the discoveries in the deeper Utica Shale formation. For example, the CEO of Chesapeake Energy Corp. recently said that his company expects to invest $10 billion per year in Ohio for the next couple of decades.”
Smart Business asked Huntsberger what Utica Shale drilling means for Ohio.
Why does the Utica Shale hold so much promise for Ohio?
The Utica Shale formation appears to hold significant amounts of ‘wet’ gas and oil. The wet gas has elements in it that are sought after by gas companies, including propane, ethane, butane, and other large molecule hydrocarbons and, in addition, there’s oil, which appears to be of high quality. Companies like Chesapeake Energy and others are excited about the wet gas and oil in Ohio.
How will drilling impact Ohio businesses?
Drilling in the Utica Shale is a game changing industrial event taking place right in our own back yard. Drilling is already taking place in southeastern and mideastern Ohio counties and promises to spread northward through the entire eastern part of Ohio. Manufacturers of tubular steel, pumps, valves, and fittings are already seeing substantial demand for their products as a result of drilling. If everything works out, we’ll have a cheap source of energy on our doorstep, which will give us an advantage in manufacturing. In addition, the byproducts of oil can be used for hundreds of industrial applications, and having a source of those byproducts right here in Ohio will be beneficial for a variety of industries. In the long-term, the drilling should stir growth.
What are the potential environmental impacts?
The major issue is water. Rural areas rely on well water (drawn from about 50 to 250 ft. deep). The shale layers are found at 5,000 feet and deeper below the surface but, in order to get there, the wells must be drilled through the water table. If the well is not drilled and cased properly, there’s a good chance that someone’s well water will be contaminated.
Fracking itself requires up to three million gallons of water per well. The crew has to drill down vertically several thousand feet and then sideways for as much as a mile. The fracking fluid, which is then inserted into the well and forced into the shale layers, is 98 percent water and sand with the remaining two percent made up of ‘nasty stuff’ — chemicals intended to help ease the hydrocarbons out of the shale. Huge pressure is created to break the shale, release the gas, and bring it back up. What comes up is contaminated with the chemicals as well as other environmentally damaging materials from the ground, such as heavy metals, which must be dealt with properly.
What kind of regulatory oversight is in place?
Almost all regulation in Ohio is through the Ohio Department of Natural Resources (ODNR). A number of years ago, the legislature took away the rights of local communities to regulate drilling. A new law (Senate Bill 165), enacted about a year ago, adds to the ODNR’s power to regulate the industry. Included in the many new provisions are restrictions on how close companies can drill to occupied dwellings and property lines; increased liability insurance required for drillers; tighter construction standards; and the requirement that fracking must not be done in a manner that creates any danger to the water or the environment.
At the federal level, the U.S. EPA is looking into the fracking process and studying the potential impact on the environment. The EPA expects that it will be well into 2012 before any preliminary comments are made, and then another two years for any regulations to be put in place. As a side note, as of September 30th, Ohio House Bill 133 authorized drilling in Ohio’s state parks.
How can landowners maximize their benefits if approached about leasing rights?
Some of the simple things you can negotiate with the companies leasing your land include the size and timing of the bonus payment; the amount of the royalty (the standard is usually around 12.5 percent of what gets produced from the well; however, this can often be negotiated to 15 or 18 percent, or even higher); and the time period for the company to hold the lease until drilling takes place. More complex negotiations involve placing restrictions on unitization (the right of the lessee to combine your property with that of other land owner lessors); prohibiting the storage of gas or the permanent disposal of toxic liquids on the property; obtaining mutual agreement on the placement of roads, wells and pipelines; and having the ground water tested before and after drilling.
Educate yourself through easily accessible materials such as those found on the Ohio Department of Natural Resources’ website. Hire an attorney who really knows this area. Don’t be quick to sign a standard lease presented to you, because these companies will negotiate.
JEFFREY R. HUNTSBERGER is a member of the Business Department and Real Estate Practice Group at McDonald Hopkins LLC. He focuses on real estate, business counseling and energy. Reach him at (216) 348-5405 or email@example.com.
Trademarks help consumers identify and distinguish your products and services in the marketplace. If you don’t protect your trademarks, your rights can be weakened, which may allow for competitive products/services using similar markings, ultimately diminishing the value of your trademarks.
“If you’re a new business or are launching a new product — especially one that’s innovative — it’s important to choose your trademarks wisely,” says Jim Dimitrijevs, a member at McDonald Hopkins LLC, whose practice focuses on Intellectual Property.
“It’s important to consider the inherent strength of a proposed trademark,” adds Grant Monachino, also a member specializing in Intellectual Property at McDonald Hopkins LLC. “It’s equally important that you enforce your trademark rights as the years go by, or you risk losing them.”
Smart Business asked Dimitrijevs and Monachino how companies can best select and protect trademarks.
How does a company go about selecting a trademark?
First you need to consider the product or service itself, as well as its life expectancy. If it’s going to be long lived, an inherently strong trademark will likely be more beneficial over the life of the product or service. If it’s going to be a fleeting fad and you want to ensure quick catch-on, you might select a more basic descriptive name that fits that purpose, but is not necessarily an inherently strong trademark. You also need to consider whether the product is going to be sold outside of the U.S. If so, you’ll need to assess 1) how those markets will perceive the trademark, and 2) whether the trademark is available for use in all the jurisdictions you’re considering.
How can you evaluate the inherent strength of a trademark?
In the initial marketing phases for a new product, it can be beneficial to use a basic, descriptive term, but it won’t be as easy to protect. It is easier to protect words and marks that are more distinctive when used in association with the company’s product or service.
When selecting a trademark, we look at the ‘spectrum of distinctiveness’ in the context in which a proposed trademark will be used. On the weakest end, we have generic terms that are essentially the common name for the product or service (e.g., ‘DVD’ for digital video/versatile discs). Next we have descriptive terms (e.g., Web Analytics Experts for services regarding the analysis of Internet-based statistics), followed by suggestive terms (e.g., Sure for a deodorant). At the stronger end, we have arbitrary terms (e.g., Apple for a computer) and fanciful (invented) terms (e.g., Kodak for film).
In practice, most trademarks are somewhere in the middle range between descriptive and suggestive. However, there can be a lot of long-term benefit in selecting an arbitrary or fanciful mark if you’re introducing something completely new to the market and/or the product/service being introduced will have a long shelf life.
What happens after the company agrees on a proposed trademark?
You check on availability and assess risk. Counsel will evaluate the marks you want to use and consider them against the goods and services you want to link them to, and then have a trademark search conducted. The search will uncover whether any other companies or individuals are already using the same or similar marks for similar goods and services. Counsel will analyze the search results to determine if there are conflicts that could cause consumer confusion, and prepare a legal assessment of risk.
How can a company protect its trademark?
In the U.S., trademark rights accrue with use (i.e., ‘common-law’ rights). You will obtain your best rights, however, by registering your trademark at the federal level. In the U.S., this gives you protection in all 50 states (among other benefits). In most jurisdictions outside the U.S., trademark rights are only protected if a registration is obtained. Thus, you should register your trademarks not only where you sell, but also where you manufacture, especially if you sell or manufacture products abroad.
Trademark rights are somewhat unique in that you need to police them. Although theoretically, you can maintain a trademark registration and the related rights for as long as you use the mark, if you let others use your trademark or something similar without trying to stop them or enforce your rights, you allow your rights to be eroded.
How do you proceed if you think another company is infringing upon your rights?
First, conduct sufficient due diligence to confirm you have superior rights, as well as the nature and scope of your rights.
Once sufficient due diligence has been conducted, consider who the infringer is in crafting your approach to try to resolve the issue. One typical approach is sending a cease and desist letter. Another is filing a court action (in lieu of or in connection with a C&D letter). While sending a letter may achieve a quicker, less expensive result, it may also give the infringer the opportunity to select the forum where the dispute will be resolved (i.e., by filing a declaratory judgment action in a jurisdiction more favorable or convenient to the infringer).
Claims available may include one or more of the following: federal trademark infringement, state trademark infringement, federal or state unfair competition, and/or an action in court or the Trademark Office to challenge the trademark application or registration of the infringer.
If both parties have viable rights, or want to avoid the cost and unpredictability of an action in court or in the Trademark Office, they may decide to resolve the dispute by a coexistence agreement that allows both parties to use their marks in ways that avoid consumer confusion.
JIM DIMITRIJEVS and GRANT MONACHINO are members at McDonald Hopkins LLC, both specializing in Intellectual Property. Reach Dimitrijevs at (216) 348-5774. Reach Monachino at (216) 430-2003.
Ohio will soon get four casinos — one in Columbus, Cleveland, Cincinnati, and Toledo. Since the time that Issue 3 passed in 2009 until the present, most of the major hurdles have been removed and the Ohio Casino Commission is beginning to work on regulations.
A dispute that threatened to stall progress in Columbus — about where Penn National Gaming would build its casino — was settled on July 22, 2011.
“There were some in the Columbus business community who felt that a casino in the Arena District, which was the original site where the casino was going to be built, would threaten residential development and business in that area,” says Michael E. Zatezalo, managing director and chair, Gaming Law practice, Kegler, Brown, Hill & Ritter.
Smart Business asked Zatezalo about the outcome of that situation and what it means for Columbus and the state in general.
Where will the Columbus casino be located?
Penn National will annex an old GM plant site on Columbus’ west side near I-270 and Broad Street, about 20 minutes from the Arena District. Nationwide Realty Investors will buy the Arena District property that Penn National had intended to build the casino on from Penn National for $11 million. Penn will receive $15 million in incentives from the city to help clean up the site where the casino will be built.
How soon will the casino open?
Between regulation and construction issues, it looks like late 2012. Because of the controversy in Columbus about where the casino would be built, it might be one of the later of the four Ohio casinos to come online.
Will the Ohio casinos be subject to the Commercial Activity Tax?
Having to pay the Commercial Activity Tax would have meant the operators would have to pay an additional $10 million to $12 million to the state per year, which gave the investment bankers financing the casinos a concern. A compromise was reached so that instead of having to pay the Commercial Activity Tax, the casinos will pay the state $115 million over 10 years.
History shows that casinos located in the lowest tax jurisdictions (Nevada, Mississippi and New Jersey) invest more money into their facilities and produce more jobs. So there are tradeoffs. It remains to be seen what will happen in Ohio. Yes, the state ‘could’ have gotten more money, but a high tax rate is not necessarily the best way to create jobs. There are people who feel that the payment over 10 years is a fair break.
How will the casinos impact Ohio’s race tracks and charities?
Gov. John Kasich has signed into law an amendment that will permit relocation of Ohio’s horse race tracks. Penn National Gaming has indicated it would like to move its Beulah Park race track out of Columbus and into Dayton, and its Raceway Park track out of Toledo and into Youngstown, so the race tracks won’t compete with the casinos. In addition, the state has authorized video lottery terminals (VLTs) at race tracks, but the Ohio Lottery Commission will have to develop the regulations — it could take about a year, but we can’t say for sure. It’s a very fluid situation.
Charities are already negatively impacted and will continue to be. They are under siege by casinos, VLTs and sweepstakes parlors, which are not regulated. A bill has been introduced at the request of the Attorney General’s office that would license and regulate sweepstakes parlors and skill games. Veterans’ organizations are also trying to get VLTs into their posts, but that would open the door for bar owners to argue for them as well.
How can businesses that want to work with casinos best prepare?
Anyone who wants to serve as a vendor will have to be thoroughly familiar and compliant with all the rules, regulations and licensing requirements. The Ohio Casino Commission is just beginning the process of developing the regulations. At present, they have given priority to determining how the casino operators themselves will be regulated.
The gaming industry is probably the most regulated industry in America. There are many protections in place to ensure the integrity of the games and that the gamblers are getting a fair shot at winning. That said, you don’t want the regulations to be so tight that they restrict the ability to do business. So we are hoping for a regulatory scheme that recognizes the need for flexibility — one that is set up in a way that will maximize revenue for Ohio.
Will the casinos have a positive impact on the local and state economies?
I think that they will. But there will be tradeoffs. The casinos might create problem gambling issues for some people and may take entertainment dollars away from local businesses, but then again, they will also create jobs and draw people to Ohio who otherwise would not travel here. And once people are in town, they might start looking for other things to do as well, such as go to a baseball game or visit a museum.
In Biloxi, Miss., for instance, there are now 32 golf courses surrounding the local casinos. The net bottom line is that the new casinos will keep money and jobs in Ohio.
MICHAEL E. ZATEZALO is managing director and chair, Gaming Law practice, Kegler, Brown, Hill & Ritter. Reach him at (614) 462-5497 or firstname.lastname@example.org.
Workplace retaliation claims are an ever-increasing litigation concern for employers. In 2010 there were more charges of retaliation filed with the U.S. Equal Employment Opportunity Commission (EEOC) than any other type of charge.
“We are certainly seeing an uptick in retaliation claims filed by current and former employees,” says Nicole Gray, an attorney in the Labor and Employment Practice Group at McDonald Hopkins. “Recent decisions by the U.S. Supreme Court that have expanded the rights of employees who complain about retaliation, energetic enforcement by federal agencies, and increased public awareness are all factors that could explain why retaliation claims are becoming more frequent.”
In addition, almost every worker can relate to a story of disagreeing with a boss and falling into disfavor as a result.
“Courts and juries are more willing to accept an employee’s claim that he or she was treated differently after voicing complaints,” Gray adds.
Smart Business asked Gray how companies can proactively manage their work forces to defend against retaliation claims.
What does it mean that an employer ‘retaliated’ against an employee?
Put simply, retaliation law prohibits employers from ‘getting even’ with an employee who 1) engages in ‘protected conduct’ (e.g., files a lawsuit or administrative charge, testifies or participates in an investigation or hearing, promotes better working conditions), and/or 2) opposes an unlawful practice. This protection is not codified in any one statute, but is found in varying forms in laws that create workplace rights, such as employment discrimination laws, wage and hour laws, and leave and benefits laws — even the bankruptcy code and state wage garnishment laws include anti-retaliation provisions.
How does an employee establish a claim of retaliation?
There are three essential elements of a retaliation case: the employee engaged in protected activity of which the employer had knowledge; the employer took an adverse action against the employee; and a causal connection exists between the protected activity and the adverse action. An employee must only have a reasonable, good faith belief that the employer’s conduct is unlawful.
For example, an employee who believes in good faith that her employer was paying women less than their male counterparts may file a charge with an administrative agency. If the agency investigates and determines that discrimination did not occur, that employee still has the right to be free from reprisal for raising her complaint.
What types of ‘adverse actions’ give rise to a claim of retaliation?
While many claims are based on an employee termination, less severe actions against an employee may also give rise to a claim (e.g., a demotion, a disciplinary suspension, or denial of a promotion). Although trivial annoyances are not actionable, more significant retaliatory treatment that is reasonably likely to deter protected activity is unlawful.
Are only current employees able to allege workplace retaliation?
No. Adverse actions undertaken after the employee’s employment has ended, such as negative job references, can form the basis of a retaliation claim. In addition, third parties within the workplace, such as relatives or close associates, who did not complain of unlawful activity may be able to establish a retaliation claim if they suffered harm based on their association with the person who did complain.
If an employee engaged in protected conduct, does that mean he or she cannot be fired?
Employees who engage in protected conduct are not untouchable, nor excused from complying with work rules and/or achieving performance standards. It simply means that their employers cannot fire them (or take other tangible, adverse action against them) for engaging in that protected conduct. A court or investigative agency will review the facts to determine whether there is evidence that retaliation was a motive for the adverse action.
Temporal proximity is also a determinative factor in retaliation claims. Close temporal proximity between the employer’s knowledge of the protected activity and the adverse employment action alone may be significant enough to constitute evidence of a causal connection. While there is no magic time period that necessarily insulates an employer from a retaliation claim, a recent decision out of Ohio’s Eighth District Court of Appeals did hold that a one-year time period between the protected activity and the adverse action, without further evidence of retaliatory treatment, was too remote in time to establish a retaliation claim.
How can employers limit their exposure to a claim of workplace retaliation?
Be aware of employee rights and recognize that employer retaliation against protected employee conduct is unlawful. Likewise, consider whether an employee has engaged in protected activity prior to taking any adverse actions. Seek the assistance of legal counsel to identify potential retaliation issues, provide training to supervisors regarding prohibited activities, and update policies to include anti-retaliation language. Employers can rebut a retaliation claim if they are able to articulate a legitimate, nondiscriminatory reason for taking the adverse action. Therefore, employers should take care to ensure that they can establish an objective reason for the adverse action taken and, whenever possible, have effective documentation that supports that reason.
Nicole Gray is an attorney in the Labor and Employment Practice Group at McDonald Hopkins. Reach her at (216) 348-5418 or email@example.com.
Alot of business owners avoid the topic of business succession planning. They’re happy doing what they’re doing and life is good.
But what if something happens? What if the owner has a significant health event or dies? What if the family takes over when that was not the owner’s intention at all?
There can be a lot of strife and unnecessary financial loss without a plan in place. The owner knows the business better than anyone and should be the one who decides how to maximize its value after he or she is gone.
Many owners reason that they don’t have the time to develop a plan. However, it can be done in manageable steps.
“You can at least get started on defining your goals and then, through regularly scheduled meetings, craft the plan over the course of several years if need be,” says Chuck Kegler, director, Kegler, Brown, Hill & Ritter.
Smart Business asked Kegler for guidance on how owners can best navigate this process.
What is the starting point for business succession planning?
First you must come to the point of acceptance that you’re not going to be around forever, and that developing a plan is in your family’s best interests. Then you need to define your goals. There is no cookie cutter way to develop a plan. Goals, families and finances are all different, so therefore, each plan is different.
Also, there may be conflict among the goals — everyone wants to have their cake and eat it too, but that’s not always going to be the case. Owners can get very overwhelmed with the goal identification process. Anything their adviser can do to simplify the process — such as breaking down the goals into several categories — and keep the owner focused will help move the process along.
What happens after the goals have been identified?
The next step is to have a business valuation conducted by a third-party firm. How much is the business actually worth? Most owners don’t really know. Interview two or three investment bankers (brokers) and ask how they would go about selling your business. What do they think it’s worth? Brokers and investment bankers will often provide valuation estimates for no charge in hopes of being engaged to sell the business. Once you have a sense of a range of values you can work on the exit model — will you sell to an independent party, to family members or employees, or transfer the company to the next generation? How will your decision impact all of your other goals?
What are some of the most common roadblocks the owner will face during this process, and how does he or she overcome them?
The roadblocks will depend on the road taken. Even if you think it’s relatively straightforward (e.g., I’m transferring the business to my son), there are still many decisions to be made. Will this decision create conflict among the other siblings? How much money will they get, even those who don’t work in the business? Will any of this be gifted? Will your son pay you? How will your health care needs be provided for? What if you become disabled? Based on your goals and future needs, how much money will you actually need? Do you still want capital to invest in other opportunities in the future? Do you need some degree of certainty in terms of a guaranteed future income stream, such as an annuity? How would that decision impact your children at the time of your death? The answers to these questions may require you to refine your goals.
Owners who want to sell have other issues to consider. Unless an owner has health problems, is overly stressed, or just wants to get rid of the business, it may be decided that he or she ‘can’t afford’ to sell. Perhaps the proceeds from the sale will not enable the owner to maintain the lifestyle to which he or she is accustomed. On the other hand, if the most important goal is, ‘I need more time for my personal life,’ the owner might come to the conclusion that, ‘yes, this will be a different life than I am used to, but I can do this.’
What are some key considerations for structuring a plan that minimizes exposure to taxation?
There are two primary taxes to think about. First, if you’re selling, how do you minimize the income tax side? The goal is to pay one level of tax at the capital gains tax rate. Next, there are the gift and estate taxes. The $5 million ($10 million for married couples) exemption has been extended through 2011 and 2012, so many owners think the financial pressure involved with making estate planning decisions is off. However, that’s temporary — we don’t know what’s going to happen Jan. 1, 2013. Even the least informed members of Congress understand that we have a significant deficit and that an easy way to reduce some of that deficit is to go back to the $1 million/55 percent exemption. If this happens, it will once again change the estate planning ball game.
Chuck KEgler is a director, as well as chair of the business and tax and estate planning areas, at Kegler, Brown, Hill & Ritter. Reach him at (614) 462-5446 or firstname.lastname@example.org.
When buying or renewing any type of insurance for your business, you have to strike a balance between price and coverage.
“Since the recession, so many buyers are making decisions about insurance based on price alone. They know they need insurance, so they take the lowest-price option, many times sacrificing coverage or service or both,” says Steve Grane, partner, Millennium Corporate Solutions. “The problem comes in, however, if something happens and they’re not covered. Then there can be all kinds of negative consequences to deal with.”
Grane says that the goal of a good broker or agent should always be to get his or her client the best coverage at the best price.
“If the broker or agent doesn’t have your best interests at heart, you could really get burned,” he says.
Smart Business asked Grane for tips on how buyers can get the most bang for their buck when making insurance purchasing decisions.
What should a buyer do if his or her rates have increased to a price that is higher than expected?
The first instinct may be to go price shopping. But you have to think about your risk at the present time. Is it different than it was a year ago? Is it going to become greater over the coming year? Each situation is different.
You then have to weigh the premium increase and total cost against how much it will cost if you have a claim that’s not covered. Talk with your broker or agent. There might be places where you can raise your deductible.
You should also see what other options are available in the market. Get three bids. Make sure the bids are for the same coverage you already have. Request a face-to-face meeting. You can usually determine rather quickly if the person is legitimate. If the person is ethical, he or she will lay out the premium costs and all the coverages in a way that you can easily understand. Ask for the names of people you can call to assess how responsive this person is. You want someone who is accessible — someone who will return your call within a few hours, not a few days.
What else should the buyer look for when comparing bids?
You have to compare apples to apples. Ask your current broker or agent to give you a comparison sheet on the main coverages. Ask him or her to write out what is covered and what the limits are. Then ask others who are bidding to do the same. For example, say you are responsible for homeowner association (HOA) insurance. The total insured value on the declarations page is $10 million. The agents or brokers who are submitting bids should come in and take a square foot inventory and then provide you with a cost analysis of what it would cost to reconstruct the property per square foot. They would use this as a guideline to come up with total insured value. In some cases, it may be determined that you are underinsured.
How can being underinsured cost more in the long run?
Let’s look at the liability that comes from being on the HOA board. There are many different directors’ and officers’ liability policies out there. You can get a very inexpensive policy as part of the main policy, but it’s not going to cover much. For about 10 percent more, say around $1,000, you can get 60-70 percent more coverage to protect board members against things such as wrongful acts, sexual harassment, nonmonetary claims and spousal liability. Board members are volunteers, and if a homeowner decides to sue, even for nonmonetary claims, it can end up costing the volunteers a great deal of money out of their own pockets if they are not adequately insured.
If coverage levels are comparable and it comes down to price, what next?
Service is just as important as price. What would happen if you actually had to file a claim? How professionally will the claim be processed, and how swiftly? Is the insurance company A-rated on AM Best? Is the adjustor easy to reach?
How can the buyer be sure that the claims will be processed quickly?
You can’t know for sure until you have a claim. That is where the importance of the relationship with the broker or agent comes into play. If you find out the hard way that the company with the lowest price is not responsive, it can cost you thousands of dollars of your own money trying to fix problems while you are waiting for a claim to be settled.
How often should insurance needs be reassessed?
Talk with your broker or agent at least four or five times throughout the year, and always at renewal. This way, if there are any changes, or anticipated changes, the broker or agent can ensure that your insurance coverage reflects the changes. You should view your broker or agent as a partner. They are like football officials. At the worst games, there are all kinds of complaints about the calls; at the best games, you don’t even realize they are there.
STEVE GRANE is a partner with Millennium Corporate Solutions. Reach him at (949) 679-7131 or SGrane@mcsins.com.
Convenience, time savings, faster access to cash — all of these are touted as benefits of processing the checks you receive from customers directly in your office. The procedure, known most commonly as remote deposit capture, but also as electronic check service, image depositing and other like terms, has been around for a few years now thanks to “Check 21” legislation implemented in October 2004 that allows banks to clear checks based on images of the original items.
“RDC enables businesses to scan the checks they receive and transfer the image electronically via an Internet connection to the bank for posting and clearing,” says Scott McCallum, senior manager, Cendrowski Corporate Advisors. “While there are different solutions for retail-type businesses that accept mostly cash and credit cards — and while larger companies processing a large volume of checks will often be better served with a lockbox service — RDC can be an attractive solution for small business owners and small to midsized professional service firms, such as law firms, financial advisers, accounting firms, physician and dental offices, insurance agencies, and real estate firms.”
Smart Business spoke to McCallum about how a business could benefit from this technology.
In a nutshell, how does the process work?
This is a relatively new technology that basically places the check-clearing process in the hands of the bank customer. Rather than collect all the checks and take them to the branch, you can process the checks in your office at any time that is convenient, day or night. You still need separation of duties. The person handling and scanning the checks should not be the same person doing the bookkeeping. After you scan the checks and transmit the images to the bank, you hold the checks for a determined amount of time with guidance from the bank, usually 60 days. During that period, you have to retain them in a secure place and, afterward, destroy them.
What are some of the advantages of processing checks yourself?
The main saving is in transportation costs. It saves time by eliminating the need for a person to physically take checks to the bank, either daily or weekly. In that regard, it’s a great control mechanism for arranging the workflow of administrative personnel and eliminates the downtime involved with them having to deliver checks. In some cases, there may be some social sacrifice for the person who goes to the bank and who may enjoy the interaction with bank personnel, but there will be the benefit of the opportunity costs for what else they can be doing with their time. Another benefit is that you will quicken cash flow. By accelerating the clearing process, you speed up the process for when the funds will be available. Also, if an item is returned, you’ll know faster. Ongoing costs should be cheaper since physical transactions tend to cost more than electronic ones. Yes, there is the cost to rent or purchase the machine and/or there may be some per-item costs, but they tend to be lower than when presenting paper. Plus, if you keep enough in balances, the bank may waive the fees. For most businesses, there is a cost savings.
What about downsides?
There is some potential risk for insider fraud, but there are ways to control it. Banks usually provide training on how to use the system and the best practices to reduce fraud. They will also provide you with a contract defining who is responsible for what. During the time frame that you are responsible for the physical checks, make sure you have a policy about where you store them and how you destroy them.
What kind of banks are promoting this?
This is a great equalizer for community banks, which don’t have a lot of branches, as it takes away or neutralizes the convenience factor of the branch. In essence, a bank that sets up an RDC system in your business is putting a deposit center right in your office. Community banks in certain cities are really going after this business. Bigger banks have the technology and offer it, but many don’t promote it as heavily because they are heavily invested in your coming into the branch.
What can a business do to get started?
If your bank hasn’t promoted this technology to you, ask what it offers. You may be able to walk through an online demo or have a representative come to your office to conduct one. Keep in mind that whenever you use an image in lieu of actual paper you will be subject to risk. An image may not clearly reveal things like counterfeiting, physical alteration, or forged or missing information — but you have risk with physical checks, as well. Talk to your bank and your accounting firm about the risks, although usually the cost savings and speeding up of cash flow will outweigh them.
During the course of the last decade, it has become increasingly common for employers to have employees sign arbitration agreements, binding contracts between the two parties in which they agree to refer employment disputes, such as wrongful termination and discrimination claims, to a private arbitrator instead of filing them in court.
“The last decade has provided the legal community with enough time to develop a clearer picture of the advantages and disadvantages of employment arbitration agreements,” says William J. O’Neill, member and chair of the litigation department at McDonald Hopkins LLC. “At first, employers thought they were a cure-all. That’s not the case. However, in many cases, they are effective.”
Smart Business asked O’Neill and his partner, Douglas B. Schnee, member and co-chair of the labor and employment practice, about the pros and cons of employment arbitration agreements.
What are the advantages of resolving claims through arbitration?
The primary advantage is cost. Arbitration is designed to be a streamlined and effective process taking several months versus the court system, which can go on for several years. Arbitration often involves less discovery, the filing of only a few pleadings, and lower attorney fees.
Also, the employer saves time. Many court systems face very clogged dockets. In theory, arbitration can move quickly. Another advantage is privacy. When a case goes to court, it is a matter of public record and the media has the right to be present. Arbitration goes on privately behind closed doors, outside of the public eye, and can help a company avoid unwanted publicity. Another advantage is predictability. Awards tend to be more practical than what a jury might award, as arbitrators are typically attorneys or hired judges.
Are there pitfalls in going to arbitration instead of court?
Arbitration can avoid the risk of a runaway jury award, but at the outset, the employer could spend a lot of money just trying to enforce the arbitration clause. This doesn’t always happen, but it can because employees often will attempt to take the case to court versus arbitration. For example, the employer could end up spending $25,000 to $30,000 to litigate the issue of enforceability of an arbitration clause just to find out that, yes, it is enforceable.
Then you have to consider the costs to file and pay the arbitrator. The typical filing fee to start the process with a service such as the American Arbitration Association can be thousands of dollars, versus the filing fees for what you would spend if the case went to court, which are only a couple hundred dollars. With arbitration, the employer ends up paying the filing fees. If the case goes to court instead, the employee typically pays the filing fees. In court, obviously you don’t have to pay the judge by the hour. In arbitration, the arbitrator gets paid perhaps $200 to $500 per hour, including for all the time spent in prehearing conferences, etc.
The employer must be aware that arbitration agreements do not prevent employees from filing claims with agencies such as the U.S. Equal Employment Opportunity Commission. Also, there is only a limited right to appeal an arbitrator’s decision, but with a jury, there are several avenues of appeal. Another pitfall would be if the agreement were found to be unenforceable.
What should an arbitration agreement contain to be enforceable?
The agreement needs to be very clear. At its heart, it needs to be fair and not one-sided. The court will reject and find it unenforceable if it contains things such as the employee has to bear all the costs or the employer has the exclusive right to select an arbitrator. Something unfair and one-sided could include some language along the lines of ‘the employee has two hours for arbitration and can only be awarded a maximum of $10,000 in damages.’
Everything should be transparent and the document needs to be a separate agreement signed by the employee — not something buried on the employment application or in the employee handbook. It should be very clear and not contain a lot of legalese. If the average person can’t understand it, a court could find that the employee ‘did not make a knowing decision’ in signing it, and this could find the agreement unenforceable.
In spite of the risks, are arbitration agreements advisable?
If you asked employers what they thought of arbitration agreements, you would get mixed responses. At the end of the day, a runaway jury award is what employers fear. If employers are willing to trade higher filing fees and the expense of an arbitrator for potentially lower attorney fees and lower risk of runaway jury awards, these agreements could be effective. Some have been surprised by the initial filing fees for arbitration and the fees for the arbitrators’ services. Arbitration agreements can be less expensive in the long run but are not necessarily inexpensive. The short answer is it depends on the individual circumstances of the employer or business. If the employer recognizes that arbitration agreements are not a cure-all for claims, then they can be a very effective tool in reducing litigation costs, avoiding risks of jury trials, and perhaps streamlining the process of resolving employee-related claims.
WILLIAM J. O’NEILL is a member and chair of the litigation department at McDonald Hopkins LLC. Reach him at (216) 348-5755 or email@example.com. DOUGLAS B. SCHNEE is a member and co-chair of the labor and employment department at McDonald Hopkins LLC. Reach him at (216) 348-5720 or firstname.lastname@example.org.