Physician challenges under Pennsylvania’s medical marijuana law

In April 2016, Gov. Tom Wolf signed into law Act 16, legalizing medical marijuana in Pennsylvania. Since then, the Pennsylvania Department of Health (DOH) has awarded licenses to grow medical marijuana and to operate medical marijuana dispensaries. As of February 12, 2018, more than 150 physicians have been approved by the Pennsylvania Department of Health (DOH) to certify patients to participate in the state’s Medical Marijuana Program in Philadelphia and the surrounding counties of Bucks, Montgomery and Delaware. It is estimated that many more will register in the program.

Physicians registering under the Act face conflict between federal and state marijuana laws, limited education on efficacy and dosage of marijuana to guide recommendations to patients, and large numbers of patients seeking certification for medical marijuana.

Smart Business spoke with Jules S. Henshell, an attorney at Semanoff Ormsby Greenberg & Torchia, LLC, about how this law will affect physicians.

What does it mean to ‘certify’ patients for medical marijuana?

Act 16 does not permit the prescription of medical cannabis products. Instead, physicians are permitted to issue certifications to patients who qualify for medical marijuana treatment. To qualify, a patient must have one of 17 serious medical conditions.

To issue medical marijuana certifications, physicians must register with the DOH and complete a four-hour training course offered by a DOH-approved provider.

Physicians are required to be licensed to practice medicine in Pennsylvania and be qualified, by training or experience, to treat at least one of the serious medical conditions that are identified in Act 16.

Once registered, the DOH places the physician’s name, business address and medical credentials on the physician medical marijuana registry, available on its website. Physicians are not permitted to advertise that they are approved to certify patients for medical marijuana use. Registered physicians should consult counsel about conduct that constitutes advertising.

What must a physician do before providing a certification to a patient?

Registered physicians are required to consult with the patient and review the Prescription Drug Monitoring Program and the patient’s controlled substance history prior to providing a medical marijuana certification to a patient. Physicians must identify the recommendations, requirements and limitations as to the form of cannabis and the dosage. The certification also must state the length of time for which the physician believes medical marijuana will be therapeutic or palliative. Physicians may recommend that a patient consult with a medical professional employed by a medical marijuana dispensary, all of which must have a pharmacist on staff. Certifying physicians may defer to the pharmacist’s expertise.

Importantly, registered physicians must provide continuing care to their patients for the serious medical condition that qualifies under Act 16. During such ongoing care, physicians are required to notify the DOH if the patient no longer has the ‘serious medical condition’ previously certified, medical cannabis would no longer be therapeutic or palliative, or the patient dies.

What are some of the challenges and risks registered physicians face?

Approved physicians may face significant backlogs of patients seeking certification and must balance the demand with the ability to provide ongoing care.

Cannabis products are not a Food and Drug Administration approved treatment. Medical marijuana is illegal under federal law. While various federal appropriation acts have precluded the Department of Justice (DOJ) from spending funds on the prosecution of individuals engaged in compliant conduct permitted by state medical marijuana laws, the continuation of such protections are uncertain. U.S. Attorney General Jeff Sessions has vehemently opposed legalization of marijuana and has rescinded prior DOJ policy that discouraged investigating and prosecuting cannabis operations that are legal under applicable state law.

With the assistance of counsel, physicians can maximize compliance with Act 16 and minimize the risk of changing federal policy and enforcement priorities.

Insights Legal Affairs is brought to you by Semanoff Ormsby Greenberg & Torchia, LLC

Lessons for parents about the risks their children face on social media

Students of all ages are getting into trouble with social media — at school and with the law. It’s media that’s meant to be fast. But what students fail to realize is that a quick post or response can have lasting consequences.

“Today, students as young as 10 years old have smartphones, which gives them access to different messaging services that use a variety of media to make public posts. It’s important that parents recognize and understand the risks this brings,” says Kristina W. Supler, a Principal at McCarthy, Lebit, Crystal & Liffman Co., LPA.

“A student’s improper use of social media can put their educational futures in jeopardy, costing them scholarships and in some cases eliminating them from enrollment consideration as college acceptance becomes more competitive,” says Susan C. Stone, a Principal at McCarthy, Lebit, Crystal & Liffman Co., LPA.

Smart Business spoke with Supler and Stone about the risks students face when using social media, and what parents can do to mitigate those risks.

How might social media misuse put the account holder at risk?
Every school, private and public, has policies that govern the use of students’ social media use. A violation of those policies could get a student suspended or expelled.

Students also face legal consequences. There have been cases of a student’s social media posts leading to charges for inducing panic. In some cases, parents could be liable for as much as $10,000 in penalties if their child’s acts are determined to be malicious and willful.

If a student is found guilty by a Juvenile Court of a first degree misdemeanor, it puts a conviction on record that would need to be disclosed on their college application. That could be life changing for some as colleges tighten enrolment standards and scholarship dollars become scarcer.

What are some of the more serious mistakes students are making through social media?
Students have gotten in trouble for taking naked pictures of themselves and sending them to other students, which could implicate them in child porn laws.

Some have sent photos of themselves with toy guns that get viewed by school officials who worry it’s a threat to public safety, which can bring a charge of inducing panic and lead to the student’s expulsion. And using racist slurs or bragging about sexual exploits will most likely violate their school’s policies on harassment.

In one case, a person posted that there was going to be a bomb set off at school. A student liked the post and was suspended. That act only took a second, but it had serious long-term repercussions.

What are some of the threats students face online and through social media?
Most of what a student does on social media is public. This opens students up to bullying from others, or worse, they become prey for adults who pose as children. Parents should talk about this threat with their children and the importance of being mindful of what they post. They should never say where they are, who they’re with or where they’re going. If a stranger asks to chat privately with your child on another platform, that’s a red flag.

What can parents do to mitigate the risks associated with social media?
There’s no such thing as privacy online. Just because an account is set to private doesn’t mean they can control who looks at its contents. Further, anything posted through social media can live forever. Even if the author removes a post someone could have a screenshot of it.

It’s difficult to keep up with the ways children use social media. There’s always new technology, a new way to speak to each other. Parents can insist on being linked to their child’s accounts as a follower or friend, but they can’t be sure their children don’t have two accounts — one that they can see and another they’re unaware of.

Ideally, parents would know what sites their children visit, possibly block certain sites from being accessed in the house, and keep their account passcodes on hand so they can access and view their activity anytime.
Ultimately, the lesson to students should be: If you wouldn’t show it to your grandmother, don’t post it on the internet.

Insights Legal Affairs is brought to you by McCarthy, Lebit, Crystal & Liffman Co., LPA

How new Department of Labor guidelines will affect unpaid internships

In 2010, the U.S. Department of Labor (DOL) issued guidance limiting for-profit companies’ ability to have unpaid interns. However, courts increasingly rejected that stringent six-part test.

On January 5, 2018, the DOL’s Wage and Hour Division published its decision to adopt the “primary beneficiary” test for determining whether interns and students are employees under the Fair Labor Standards Act (FLSA).

“The Department of Labor is using the primary beneficiary test to conform to four Circuit Courts’ rulings adopting the same standard,” says Joseph Fluehr, an attorney at Semanoff Ormsby Greenberg & Torchia, LLC.

Smart Business spoke with Fluehr about the new FLSA guidelines, how employers will be impacted, and the importance of abiding by the new regulations.

What are the new guidelines for unpaid internships?

The FLSA requires that employees of for-profit employers are paid pursuant to minimum wage and overtime requirements. Previously, the DOL maintained a six-part test for determining whether a worker was properly labeled as an unpaid intern. However, the DOL’s new guidance follows the Second, Sixth, Ninth and Eleventh Circuit Courts’ decisions in providing for the examination of the ‘economic reality’ of the intern-employer relationship to determine which party is the ‘primary beneficiary’ of the relationship.

The seven factors, as stated by the DOL, include:

  1. The extent to which the intern and the employer clearly understand that there is no expectation of compensation. Any promise of compensation, express or implied, suggests that the intern is an employee — and vice versa.
  2. The extent to which the internship provides training that would be similar to that which would be given in an educational environment, including the clinical and other hands-on training provided by educational institutions.
  3. The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit.
  4. The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar.
  5. The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.
  6. The extent to which the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern.
  7. The extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.

How will employers be impacted?

The DOL’s adoption of the ‘primary beneficiary test’ has increased flexibility in determining who is properly labeled an intern. This increased flexibility aids employers in the fight to utilize unpaid interns. However, as no single factor is determinative, the DOL does not provide definitive guidance to for-profit employers, who should still ensure that an unpaid intern is, in fact, the ‘primary beneficiary’ of the relationship.

What should employers do to abide by the new guidelines?

Simply naming someone an unpaid intern will not survive a challenge to the intern’s status. The DOL’s guidelines suggest a balancing of the seven factors in determining whether the intern or the employer is the primary beneficiary of the relationship.

The most important take-away from the change by the DOL is that for-profit employers should ensure that the unpaid intern gets more out of the relationship than the employer. Therefore, employers should consult an attorney familiar with the relevant case law relied upon by the DOL as well as the provisions of the FLSA in reviewing their internship programs.

Insights Legal Affairs is brought to you by Semanoff Ormsby Greenberg & Torchia, LLC

Get outside help to investigate workplace sexual harassment

Sexual harassment in the workplace has recently gotten a lot of attention.

Companies caught in a scandal risk public embarrassment if their knowledge of sexual harassment behavior was handled inappropriately. Worse, there could be liability and punitive damages if nothing is done about the conduct, especially if it escalates.

“A company can’t be willfully blind to sexual harassment accusations made by employees,” says Ann-Marie Ahern, a principal and head of the employment law practice at McCarthy, Lebit, Crystal & Liffman Co., LPA.

“Employers must investigate employees’ claims, but the department responsible for investigating the allegations may not be best suited to effectively handle the situation.”

Smart Business spoke with Ahern about the handling of sexual harassment claims and how outside investigators can help.

What obligations do companies have when a sexual harassment claim is made?
There is no government oversight or mandatory requirement to report any sexual harassment allegations. However, if workplace sexual harassment conduct interferes with a person’s work, it can give rise to a lawsuit.

Where companies face the greatest risk of liability is when claims are made against a person who is near or at the top of the company hierarchy. In these instances, it’s easier for a company to be held responsible because that person may be deemed to be acting with the authority of the company, especially if the company knows or has reason to know of the conduct.

It’s in the best interest of a company that becomes aware of allegations of sexual harassment to investigate the claim. If the alleged conduct is substantiated, the company must take prompt, remedial action.

Failure to investigate promptly or appropriately can lead to liability for further harassment. If the harassment is substantiated, the employer should address it, either through discipline or termination.

What flaws exist in the typical protocols for reporting sexual harassment?
In a small company without an HR department, reporting an incident to management could be very uncomfortable if the manager is the harasser or is a close friend of the harasser.

While it’s unlawful for a company to retaliate against an employee who registers a complaint, practically speaking, a complaint of sexual harassment too often proves to be career-limiting. A complaining employee may be viewed as a troublemaker or not a team player and can be shunned or given little other choice but to quit, especially when the allegations amount to a ‘he said/she said.’

In larger companies, reports are made through the HR department. HR professionals or management, however, often do not conduct an appropriate investigation. Sometimes they are hesitant to substantiate a claim because it would put the company at risk for liability.

Other times, particularly where a high-level employee is the accused, the investigating employee is leery to find guilt. Often, the employee charged with investigating does not have the proper training or background to conduct investigations, or to understand what constitutes sexual harassment conduct under the law.

Who can help companies deal with workplace sexual harassment complaints?
There are employment lawyers who specialize in the investigation of sexual harassment complaints and there are companies that do nothing but investigate these types of concerns. This arrangement can benefit both employees and companies.

The harassed often feel more comfortable talking to an outside investigator because there isn’t a relationship within the company that might affect the outcome.

Companies can point to the outside investigator as neutral and unbiased. If the investigator finds there’s no harassment, it carries more weight and credibility than an employee making the same determination.

Sometimes companies are afraid to bring in an outside investigator because it means giving up control of the process and outcome. The landscape, however, is changing as it relates to sexual harassment in the workplace. Employers should be careful not to underestimate how current events will impact their response to sexual harassment allegations.

Insights Legal Affairs is brought to you by McCarthy, Lebit, Crystal & Liffman Co., LPA

Is your company prepared to respond to claims of sexual harassment?

It used to be when employees made a sexual harassment complaint to human resources, the department would investigate and the matter stayed confidential from the public until it was resolved. Things have changed.

The slew of recent high-profile sexual harassment claims has caused a sense of unease among owners, managers and executives, which has led them to take steps to mitigate their risks, both legal and reputational.

“Review and revise your policy on sexual harassment and discrimination,” says Michael J. Torchia, a managing member at Semanoff Ormsby Greenberg & Torchia, LLC. “Work with an expert, such as an employment attorney, to craft a user-friendly policy that includes specifics about procedures for making a complaint. And equally as important, train upper and middle management on how to respond to claims of sexual harassment and what to do if news of the allegation spreads outside the company’s walls.”

Smart Business spoke with Torchia about sexual harassment policies, how a company should prepare to respond ahead of any allegations, and the role attorneys play in the event of an emergency.

What steps should a company take to prepare for possible sexual harassment allegations?

To ensure a company is in the best position to respond to a claim of sexual harassment, a response team should be identified to handle it. This way, there is no confusion about who should be notified and who will make initial decisions if a complaint is levied against a company official.

It’s important to determine who will be involved in the decision making if a complaint is accompanied by publicity and if this will be handled differently from normal procedures.

Some companies pre-draft statements to the press before a claim is made stating how it has a commitment to keeping employees harassment free, strong anti-harassment policies, how they have never before had a claim, etc. Of course, these drafts need to be amended by the facts of the particular claim, but the basics are prepared so they can act quickly and respond to the press if there is a charge. This is a much better approach than “no comment.”

Upper management should be involved, but the group might also include human resources, risk management, the company’s general counsel and outside counsel.

How often should a harassment policy be updated?

Generally, it should be standard procedure that the anti-discrimination and harassment policy is reviewed every two years or when there has been a change in the law or regulations. In the current environment of high-profile sexual harassment claims, however, employers need to be more conservative. Now is a good time to revisit whatever policies you have in place.

What role should a board of directors play?

News of a sexual harassment claim can travel quickly — sometimes in a matter of hours — especially when allegations are made against an executive at a large or high-profile company, so it’s prudent to be prepared at every level.

The board of directors should be made aware that their involvement could be necessary if a complaint is made. Companies should designate a single member of the board to handle such issues when they arise, or they may prefer to establish a special committee.

For complaints against rank-and-file employees, the board does not usually need to be directly involved.

Why is it important to have your attorney’s cell phone number?

Thankfully, it’s not usually necessary to call your attorney in the middle of the night. However, harassment claims can become public late at night or on weekends, and reach the press or spread through social media before the company is aware of what’s happening. For this reason, it’s a good idea to have both in-house and outside counsel’s cell phone numbers in the case of an emergency. You’ll also need emergency contact numbers for the other members of the response team. It could give a company the time it needs to address the issue before an inaccurate or damaging narrative takes hold.

Insights Legal Affairs is brought to you by Semanoff Ormsby Greenberg & Torchia, LLC

Reducing the impact of personal issues on business

Even more challenging than work-life balance, family discord unintentionally affects employment, says Kaitlyn D. Arthurs, Principal, Attorney and Mediator at McCarthy, Lebit, Crystal & Liffman.

Personal issues, such as divorce and custody disputes, may spill into the workplace and negatively impact daily operations. However, finding the right resources and support can prevent those issues from bleeding over. With the right tools, people entrenched in personal conflict can pivot to succeed in both their personal and professional lives.

Smart Business spoke with Arthurs about strategies to confront difficult family times and still preserve professional success.

How can successful professionals push through difficult family times?
Like a business plan, it is important to have strategy and support. Getting a good result requires the right people and plan.

Nowadays, time is more valuable than money. A family split requires much attention. Finding the right professional to manage the case and keep it on track will curtail wasted time.

When retaining an attorney, it is essential to find a good fit that is aligned with the client’s desired approach and outcome, and is someone who is qualified in that particular subject matter.

The attorney-client relationship is grounded in trust and honesty. A lawyer is not their client’s friend. A good lawyer should tell their client more than what they want to hear. They should be direct, issue-centric and set realistic expectations to prevent disappointment or surprise at the end.

Similarly, the client should ask questions, understand why things are being handled a certain way, be directly involved in the process, provide the attorney with all information requested and understand the consequences of his or her choices.

How can a team make a positive impact?
Just like delegating tasks to the right department, it is valuable to establish a team to manage the matter.
Attorneys are good at one thing: the law. They may not provide guidance on budgets, selling real estate, determining tax consequences, consolidating debts, finding child care or transferring assets.

Third-party providers, such as accountants, financial planners, bankers, insurance agents, mortgage brokers and real estate agents can provide useful services. Hiring those individuals sooner than later will give them the opportunity to answer questions during the process and provide services after. A small expense upfront can prevent unnecessary issues and cost later.

Further, a positive mindset is just as important as professional advice. Breakups are emotional, and counseling can help combat those sensitive issues. While it is necessary to tell an attorney the whole story, the juicy details may not be relevant or appropriate to share, yet may drive the underlying conflict.

It is healthier, and more cost-effective, to hire a counselor at the onset, as an outlet for emotional issues. A counselor may also help relieve stress that could impact work.

How can mediation minimize the detrimental effects of family law matters?
Mediation provides people with control over the outcome. A mediator is jointly hired by the parties to facilitate discussions between them to problem-solve solutions.

The process is confidential and prevents the public display of private matters. It is less expensive, both financially and emotionally, faster and can be arranged around employment schedules. Mediation also provides case finality and results in resolutions that will be less likely to return to court. The parties can find creative solutions that generate lasting agreements.

Mediation also teaches communication skills, which can alleviate reoccurring disputes.

When children are involved, parents must maintain a relationship and open communication until the children emancipate. Mediation provides a hands-on approach where the parties directly deal with the issues, rather than communicate through their advocates. In the end, the parties are better equipped and empowered to address future issues without the need of counsel.

Mediation provides a mechanism to keep personal issues out of court, which can lessen the potential impact on employment.

Insights Legal Affairs is brought to you by McCarthy, Lebit, Crystal & Liffman

Understand the differences between incentive, non-qualified stock options

There are two types of stock options: incentive stock options (ISOs) and non-qualified stock options (NSOs). A company may grant ISOs and NSOs to its employees, but ISOs cannot be granted to non-employees. Options that are granted to non-employee directors, contractors, consultants and advisors can only be NSOs.

“It’s important for a company’s senior management and directors to understand the differences between ISOs and NSOs to avoid unintended tax consequences,” says Jill M. Bellak, a member of Semanoff Ormsby Greenberg & Torchia, LLC.

Smart Business spoke to Bellak about the differences in the two types of options, and how to avoid missteps in granting options to employees and non-employees.

What are the legal requirements to qualify as an ISO?

ISOs must be granted through a written plan approved by a company’s stockholders and the plan must limit the number of option shares. The option exercise price must be no less than the fair market value of the shares on the grant date. If the grantee owns 10 percent or more of the company’s stock, the exercise price must be no less than 110 percent of the fair market value at the date of grant. An ISO must be granted within 10 years of the date the plan is adopted or the date of stockholder approval, whichever is earlier.

An ISO cannot be exercisable for more than 10 years after the grant date. If the option holder owns 10 percent or more of the company stock, the option cannot be exercisable for more than five years after the date of grant. ISOs may be granted only to a company employee who does not own more than 10 percent of the total combined voting power of the company’s stock on the date of grant. The value of vested shares may not exceed $100,000 in any calendar year.

How are ISOs treated for tax purposes?

Unlike NSOs, ISOs receive preferable tax treatment because an option holder will not normally realize any taxable income upon the grant or exercise of an ISO. The tax basis in the stock acquired upon exercise of an ISO equals the exercise price paid for the shares.

In order to qualify for capital gains treatment, the shares acquired upon the ISO being exercised must be held for more than one year from the purchase date and more than two years from grant date. If all conditions are met, the company has no withholding obligations upon exercise of the ISO.

How do NSOs differ from ISOs?

An NSO is any stock option that does not meet all of the requirements to be considered an ISO. NSOs may be granted to any employee, director, contractor, consultant or adviser of a company. There is no limitation on the number of options that may be granted, the exercise price or the term of an option. If the exercise price of an NSO is below the fair market value of the stock on the grant date, the NSO will be subject to section 409A of the Internal Revenue Code of 1986.

How are NSOs treated for tax purposes?

Upon exercise of an NSO, the option holder pays the exercise price and realizes income equal to the difference between the exercise price and the then-current fair market value of the underlying stock. This income is taxed as ordinary income and the company has an equivalent deduction for compensation expense equal to the amount of the spread. If the option holder is a company employee, the company must withhold and remit employee withholding taxes on the income.

When an NSO is exercised, the tax basis in the stock is its fair market value on the date of exercise. Upon a subsequent sale of the stock, the stockholder has a capital gain (or loss) equal to the difference between the tax basis and the subsequent sale price of the stock.

What is the applicability of Section 409A?

Section 409A of the Internal Revenue Code regulates the taxation of nonqualified deferred compensation. It treats ‘discounted’ stock options as deferred compensation subject to section 409A. Specifically, if a stock option is granted with an exercise price that is less than the fair market value of the stock on the grant date, the option will be treated as deferred compensation and will be subject to 409A, including imposition of a 20 percent additional excise tax.

Insights Legal Affairs is brought to you by Semanoff Ormsby Greenberg & Torchia, LLC

Common areas of commercial leases that cost tenants money

There is no such thing as a standard commercial lease. Still, many tenants are content to sign one without much consideration for its provisions and what it means in terms of their responsibilities.

“Don’t go into a leasing situation with the intention of just signing a lease,” says Andrew Perry, Esq., a principal at McCarthy, Lebit, Crystal & Liffman. “It’s important to review the terms, especially clauses related to operations, maintenance and repair. Tenants that don’t scrutinize the terms and negotiate for a better deal could get burned by unexpected expenses.”

Smart Business spoke with Perry about how to get the best terms in a commercial lease.

What are the more costly aspects of commercial leases for tenants?
Tenants should first look at the basic rent amount. It’s common for a lease to stipulate that rent will increase annually on a price-per-square-foot basis. That sometimes goes unnoticed before signing and ends up being a surprise later.

Operating expenses that will be passed through to a tenant are always an issue that should be heavily negotiated by a tenant. Landlords generally pass through expenses to their tenants, such as operations and maintenance costs for a building, shopping center or industrial park.

That can simply mean lawn care, snow removal, security, etc. But often, a landlord will include terms in this section to pass on the cost of capital improvements, such as a new roof, new HVAC, other building systems or the repaving of parking lots. These can be a huge financial backbreaker for tenants that hadn’t preplanned for such costs.

Similarly, the maintenance and repair section should be closely scrutinized. Not knowing upfront what your obligations are for maintaining your space during the term and at surrender can also be extremely expensive.

The maintenance and repair section often requires a tenant to repair and replace anything that affects the premises, including repairs and replacements that are a capital expense. Those can become huge dollar items that can sneak up on a tenant if not negotiated before signing.

What should prospective tenants consider before signing a commercial lease?
Tenants with a growing business need a plan to physically accommodate that growth. The business will run into problems if a tenant signs a five-year lease on a 5,000 square-foot space that it outgrows in the second year.

The opposite is also true. It’s common for certain types of businesses (especially restaurants) to spend a lot of money to develop the look of the premises, only to go out of business because they weren’t able to achieve the level of growth needed to offset the investment. Tenants should tie the location and its expenses into the business plan to ensure it’s affordable and aligns with the company’s trajectory.

Often, it’s a tenant that wants a certain amount of changes to the premises before they move in. That can be handled any number of ways. A landlord could offer a dollar amount, called a tenant improvement allowance, to offset renovations, but require approval before any work is begun.

Similarly, the landlord might do the work on a tenant’s behalf up to the allowance amount. In each instance, it is extremely important that the tenant make sure that the cost to do the renovations is tied down upfront, otherwise they could once again be faced with unplanned expenses if the work exceeds budget.

Who can help prospective tenants negotiate the best commercial lease terms?
It’s best to enter negotiations with a three-person team — the tenant, an experienced broker and a knowledgeable attorney.

It is especially helpful if you can find an attorney and broker who specialize in a certain type of real estate sector. For instance, there are brokers who specialize in finding the best location for retailers, while others focus on office buildings or industrial space. They’ll each have a better idea of the incentives, prices, amenities and locations that are best suited for a tenant’s business.

Similarly, a good attorney will know what is reasonable for a particular real estate sector and which areas of the lease can be fine tuned to the tenant’s benefit.

The landlord generally determines what type of lease will be used. But there is negotiating room for tenants that either have clout or a savvy attorney and a good broker.

Insights Legal Affairs is brought to you by McCarthy, Lebit, Crystal & Liffman

How to create and execute a family business succession plan

The one maxim that holds true for all business owners is that eventually they will be forced to exit their business — either on their own accord or involuntarily. For many, the next best thing to perpetual ownership is having their children assume control.

However, 80 percent of family businesses don’t transition to the second generation. And of the 20 percent that do succeed, 80 percent of those don’t make it to the third generation. Why is it so hard?

“It’s not only a complicated business transaction, but it’s highly emotional,” says Peter J. Smith, a Member at Semanoff Ormsby Greenberg & Torchia, LLC.

Smart Business spoke to Smith about the difficulties of family business succession planning and what steps can be taken to improve the likelihood of a successful transition.

Why are success rates for family business succession so low?

Because it’s family and there are so many emotional layers. You have parents coping with the thought of giving up control of the business they spent their entire lives creating and nurturing. For some, it is their entire identity.

The next generation may or may not see eye-to-eye on the future of the business or their place in it. There may be children who aren’t in the business, which must be addressed. And when it’s all done, mom and dad have to make sure the business survives and thrives so it can provide the cash flow they will need in retirement.

What can parents do to make their family business succession plan more likely to succeed?

Plan ahead. A smart business person might plan two to three years out to sell their business, so as to position the business for maximum value and a quick, smooth sale. The same is true for implementing a business succession plan. If possible, they should start planning the transition well in advance.

They also need to start training the next generation to take over. This takes time. They should approach it like they are developing and running a management training program for their children.

What if there isn’t time to adequately prepare or the next generation isn’t ready to take over?

If there isn’t time to adequately prepare, the owners should consider hiring an outside CEO to run the business for a period of time so they can take a step back and plan a transition in the future when everyone is ready. They might also put a board of directors in place that includes non-family members to help guide the business and provide objective advice.

What can the second generation do to make the transition a success?

Be objective and be patient. They need to realize that mom and dad aren’t as dumb as they think, they’re not as smart as they think and running a business is hard. They also need to openly and objectively evaluate what is in the best interest of the business and not necessarily just for them. The kids must understand that everything doesn’t always have to be equal to be fair. There will be certain things that make sense for the business, but don’t put everyone on equal footing. It’s important to realize that this is okay.

What if mom and dad are concerned about treating each of their children fairly and equally?

There are other ways to equalize the treatment of their children using business or non-business assets — through gifting, estate planning, or perhaps the business real estate or a vacation home, for example. They can also set up a trust or an LLC for family members not in the business to receive distributions from the business and/or hold a capital interest in the event the business is ever sold.

What should a business owner do if he or she is thinking about business succession planning?

Put a team together. Talk to your lawyer, accountant and financial advisor. If they’re not experienced in family business succession planning, then find ones who are. The right professionals can make all the difference in the world.

Insights Legal Affairs is brought to you by Semanoff Ormsby Greenberg & Torchia, LLC

How companies should handle media attention amid criminal allegations

When companies become tied to a criminal investigation, whether or not it or its employees have actually committed a crime, it can be on trial in both the criminal court and the court of public opinion.

Media coverage today is more than just TV, radio and print media. It now includes the internet and is delivered to personal devices through social media, blogs, videos and podcasts moments after news breaks. Also, while many get their news from social media, the accuracy of that source is often questionable. This has changed how companies handle the public relations aspect of a criminal matter.

“Not long ago, the traditional response to media inquiries regarding alleged wrongdoing by a company was ‘no comment,’” says Rob Glickman, Principal and head of the litigation and criminal practice at McCarthy, Lebit, Crystal & Liffman.

“That can no longer be the way most inquiries are handled. Adverse media attention can ruin a business. Even if a company that becomes embroiled in a criminal case is eventually cleared of any wrongdoing, it can still lose in the court of public opinion and be driven out of business.”

Smart Business spoke with Glickman about how companies should handle the media coverage often associated with facing criminal allegations.

What should companies do once they discover they or any of their employees are subject to a criminal investigation?
The moment a company finds out it or one of its employees is the focus of, or is even implicated in, a criminal investigation, a company can’t simply stick its head in the sand and hope it will all go away.

The company should direct its lawyer, if capable, or an outside law firm that has experience to conduct an internal, independent investigation of the charges. That way, if asked, a company can truthfully let the public know that it is confronting the matter head on, which will hopefully keep public confidence in the company.

What’s the best way for companies to handle media attention when they’re tied to real or alleged criminal wrongdoing?
In the absence of media coverage, it could be best to go silent and focus on the defense of the actual investigation and case. When it heats up, however, most often a company should respond to media inquiries. That can happen in a number of ways.

The CEO or defense lawyer doesn’t need to be the person who mounts a public defense. Communications firms are invaluable in these situations, and can be brought in to manage public relations and media statements.

Crisis communication consultants are best equipped to handle adverse media attention, especially if a company is dealing with a government prosecutor who is leveraging the media to generate public pressure. It’s important that the company forms a response that’s ethical and in the best interest of the company. That often requires the tact of a third-party consultant.

Social media during such events can be a shield and a sword. The medium makes it easier to respond to adverse attention, giving the accused a means of fighting back with appropriate force. Still, any public response should be run past the legal and communications teams before being released.

What should companies avoid doing when they’re in this position?
It’s important that the company doesn’t panic and respond hastily or through an employee without obtaining advice from a legal or a crisis communication partner. Companies can go on the offensive to attempt to assuage the adverse media attention, if at all possible, and put the company in a position to defend itself against the allegations. But they should do so carefully and after an appropriate internal investigation into the allegations.

What do companies in this position need most from their legal team?
The attorney managing the case should be an expert in the subject matter of the investigation. He or she needs experience in the minutiae of what’s being investigated.

Adverse media attention doesn’t necessarily mean a company is headed for public disaster. If handled appropriately, it likely won’t be the death knell for the company.

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