News and Articles

Legal Update - January 2018 Newsletter

Yogi Patel - Tuesday, December 26, 2017

Dear valued clients and supporters: Governor Cuomo has signed an emergency Executive Order that will allow New Yorkers to pre-pay next year’s property taxes this year, before the new tax law takes effect.

This is an opportunity for those with liquidity and expect to pay more than $10,000 towards state and local income, sales and property taxes in 2018 to consider, however, time is of the essence as payments have to be made by December 31. The order authorizes localities to issue warrants for the collection of early property tax payments and to accept partial payment — allowing New Yorkers to pay a portion or all of their 2018 property taxes before the end of the year to keep the deductibility. (https://www.governor.ny.gov/news/governor-cuomo-takes-emergency-executive-action-deliver-property-tax-deductibility-new-yorkers). The Governor's office advises contacting the tax collector for your county for additional information.

Over the coming months, as more clearer details emerge regarding the new tax code, we will provide periodic updates that may impact you personally, professionally and your business.

We wish all of our clients and supporters the best in the coming new year and thank you for your continued trust in our counsel. Happy holiday!

Readers are encouraged to follow us on Twitter (@lloydpatelllp) and Facebook to receive updates on these and other issues throughout the month.

 


Legal Update - December 2017 Newsletter

Yogi Patel - Friday, December 01, 2017

Dear valued clients and supporters: This month's newsletter will focus on a new law that impacts NYC employers and employees in the fast food and retail industries. The law went into effect on November 26, 2017.

Under the Fair Workweek Law, fast food employees have the right to:


1. Good Faith Estimate of Schedule:
On or before workers’ first day of work, employers must provide written schedules for the first two weeks of work with hours, dates, start and end times of shifts and written “Good Faith Estimates” (days, times, hours, locations you can expect to work during your employment). Employers must provide an updated estimate if the estimate changes.

2. Advanced Notice of Work Schedules:
Employers must give workers their written work schedule at least 14 days before their first shift in the schedule. Schedules must include at least seven calendar days with dates, shift start and end times, and location(s) of all shifts. If the schedule changes, employers must contact all affected workers within 24 hours, or as soon as possible.

3. Priority to Work Newly Available Shifts:
Before hiring a new employee when new shifts become available, employers must advertise shifts to existing workers in NYC first by: 1) posting information at the worksite where the shifts have become available and by directly providing the information to workers electronically, which may include via text or email; 2) giving priority to work open shifts to workers at the worksite where shifts are available; 3) giving shifts to interested workers from other worksites only when no or not enough workers from the worksite accept. Employers can only hire new workers if no current NYC workers accept the shifts by the posted deadline.

4. Consent Plus $100 for “Clopening” Shifts:

Employers cannot schedule workers to work two shifts over two days when the first shift ends a day and when there are less than 11 hours between shifts (a “clopening”) UNLESS workers consent in writing AND are paid a $100 premium to work the shift.

Under the Fair Workweek Law, retail employees have the right to:

 

1. 72 Hours’ Advance Notice of Work Schedule:
Employers must give workers their written work schedule at least 72 hours before the start of the schedule in the way the employer usually contacts workers, which may include via text and email. They must post the schedule at the workplace where all workers can see it. This schedule must include dates, shift start and end times, and location(s) of all shifts in the work schedule. If the schedule is changed, employers must update and repost the schedule and contact all affected workers.

2. No On-call Shifts:
Employers cannot require workers to be ready and available to work at any time the employer demands, regardless of whether workers actually work or report to work; or to “check in” within 72 hours of a scheduled shift to find out if they should report for the shift.

3. No Shift Additions with Less than 72 Hours’ Notice:

If employers want to add time or shifts to your schedule less than 72 hours before the change, workers have the right to accept or decline the change. If workers accept an additional shift, they must do so in writing.

4. No Shift Cancellations with Less than 72 Hours’ Notice:

Employers cannot cancel a shift less than 72 hours before the start of the shift except under the following circumstances: threats to worker safety or employer property, public utility failure, shutdown of public transportation, fire, flood, or other natural disaster, or a government-declared state of emergency. However, workers may trade shifts voluntarily.

 

Employers are advised to tailor their policies accordingly.


Readers are encouraged to follow us on Twitter (@lloydpatelllp) and Facebook to receive updates on these and other issues throughout the month.

 


Legal Update - November 2017 Newsletter

Yogi Patel - Thursday, November 02, 2017

Dear valued clients and supporters: This month's newsletter will focus on a significant law that impacts most NYC employers and employees that went into effect as of this morning (October 31, 2017).

NYC Salary History Law

Subdivision 25 to the NYC Administrative Code (Section 8-107) went into effect this morning. Under this new law, employers are prohibited from inquiring about or relying on a prospective employee's salary history prior to making an offer. As a practical matter, this new law changes how salaries are typically set and negotiated. The law is complex and broad reaching. Not only does it apply to direct employers, but agents, recruiters and headhunters. The liability flows through to all parties involved in the hiring process.

The law governs compensation broadly, meaning what type of questions an employer may ask about the prospective employees unvested equity, deferred compensation, commission, bonuses or percentage of profit - in connection with their prior employment - before making an offer of their own. The law does not place restrictions on how an employer may utilize prior salary history if it is "volunteered" by the prospective employee, however, the law prohibits the employer from "prompting".

The New York City Human Rights Commission is charged with enforcing the law and the penalties for violating the Act can include a civil penalty of $250,000.00, compensatory damages, attorney fees, hiring or reinstatement, award of back and front pay.

In order to comply with the law, employers should consider focusing questions on an applicants’ salary demands, skills, and qualifications during the hiring process instead of questions about prior compensation; Consider revising job applications and other forms to ensure that the form does not include questions about applicants' salary history (even if such questions are framed as "voluntary"); And finally appropriately train interviewers and modify written polices prohibiting inquiries about applicants' salary history.

For employers that engage headhunters, recruiters or agents - and intend on relying on representations made by headhunters, recruiters or agents that the applicant has consented to the disclosure of the applicant's salary history when engaging in negotiations on behalf of the applicant, employers should consider obtaining written authorization of release of salary history information directly from the prospective employee before relying on the representation of headhunter, recruiters or agents to mitigate their liability.

Employees should consider utilizing this law to their benefit when engaging in salary negotiations. Some employees, specifically executives whose compensation includes stock options and vesting restrictions may voluntarily discuss the impact of their prior employer's policy on their compensation pertaining to options - without "volunteering" other aspects of their compensation (base pay, commission, bonus).

Employees who are faced with impermissible questions about salary history, during the heat of the moment, might consider responding as follows (suggested by NYC Human Rights Commission):

  • In response to a question about what you currently make, you can reframe the issue in terms of your salary expectations or demands and not disclose your salary history.
  • Indicate that you’d like to discuss your compensation based on the requirements and responsibilities of the job for which you’re applying, which may differ from your prior work.
  • Reframe the question to focus on the value you can bring to the job and what you can add to the company, rather than on what you made previously.

Readers are encouraged to follow us on Twitter (@lloydpatelllp) and Facebook to receive updates on these and other issues throughout the month.

Legal Update - October 2017 Newsletter

Yogi Patel - Tuesday, October 10, 2017

Dear valued clients and supporters: This month's newsletter will focus on three significant employment law cases that are expected to be decided by the United States Supreme Court this term. The cases will address: (1) the enforceability of mandatory class-action waivers against employees; (2) the constitutionality of mandatory public-sector union fees; and (3) whether or not car service advisors are exempt employees under federal law.

Mandatory Class Action Waivers

 It has become increasingly common for employers to require employees to sign arbitration agreements as a condition of their employment. Such agreements seek not only to require the employees to seek any redress via arbitration, but also to prohibit the employees from bringing their claims together in a class action. Presently, in three separate but related cases, the Supreme Court will decide whether these employee arbitration agreements are enforceable because they require employees to waive their collective bargaining rights. While similar agreements have been upheld in the consumer context, Circuit Courts across the country have reached different conclusions as to whether employee arbitration agreements are enforceable, thus requiring the Supreme Court to settle the debate. As the Supreme Court's decision will have significant ramifications either on employees' rights to take collective action or on the enforceability of employment agreements, both employers and employees are advised to monitor the outcome of this decision.

Public-Sector Union Fees

 In another case on the current docket, the Supreme Court will address whether requiring public-sector employees to pay certain union fees violates their constitutional rights. Dating back to 1977, in the case Abood v. Detroit Board of Education, the Supreme Court has held that compulsory union dues were not unconstitutional so long as they were used for actions such as collective bargaining and grievance procedures and not for political activity. Recently, the Supreme Court was asked to reconsider the constitutionality of all mandatory union dues for public-sector employees, but Justice Antonin Scalia passed away before a decision was reached, leaving the Court deadlocked at a 4-4 vote. Now, with nine members again presiding, it appears the Court is now poised to issue a decisive ruling on this issue. Unions in particular have a strong interest in this case as it could result in the depletion of a significant source of revenue for them.

Car Service Employee Overtime Exemptions

 Finally, the Supreme Court is expected to resolve the question as to whether or not car dealership service providers are exempt from mandatory overtime requirements. The case is significant not only because of the narrow issue it will resolve regarding the exemption status of certain workers, but also in that it may provide additional guidance as to how much weight courts should give to the statements and opinions of agencies, such as the Department of Labor ("DOL"). The history of the service advisor exemption is essential to appreciating the significance of the current case. In 1966, Congress enacted an overtime exemption for car salesman and related employees, though service advisors were excluded by regulation. Courts later rejected this regulation and the DOL issued an opinion letter agreeing that service advisors could be exempt from mandatory overtime. Then, in 2011, almost 50 years later, the DOL reversed its position and stated that service advisors were not exempt. In 2012, five service advisors from California filed suit against their employer for failing to pay them overtime, a claim which was upheld by the Circuit Court. The Supreme Court then vacated the decision on the basis that the DOL's reversal of its position meant that courts should not rely on it. The case was sent down to the lower courts, made its way back up to the Circuit Court, which again concluded that the workers were nonexempt. Now the Supreme Court will rule again. Most experts expect that the Court will not only rule definitively as to whether or not service providers are exempt from overtime requirements, but also when Courts should rely on agency opinions more broadly.

 

Readers are encouraged to follow us on Twitter (@lloydpatelllp) and Facebook to receive updates on these and other issues throughout the month.


Legal Update - June 2017

Yogi Patel - Thursday, June 08, 2017

Dear valued clients and supporters: This month's newsletter will focus on three significant updates to New York City Law: (1) the Fair Work Week legislation; (2) the Freelance Isn't Free Act; and (3) the ban on asking prospective employees about their salary histories. A more in-depth article on all three of these topics will be posted on our website next month.

Fair Work Week Legislation

At the end of last month, the New York City Counsel passed the comprehensive Fair Work Week legislation into law, which provides additional protections and rights to fast food and retail industry employees. The legislative package consists of five bills that aim to give low-wage fast food and retail workers greater predictability around their schedules and their weekly pay. For example, one of the laws requires fast-food employers to provide at least 2-weeks' notice to employees of any schedule changes and to compensate workers for any last-minute alterations. Additionally, employers must also provide good faith estimates of weekly hours to new employees and offer any shifts that open up to current employees before making any hires. Overall, the new legislation is keeping pace with other major cities, like Seattle and San Francisco, aiming to protect its more vulnerable workers. Employees and employers are advised to fully understand their rights and obligations before the new law goes into effect later this year.

Freelance Isn't Free

On May 15, 2015, the Freelance Ins't Free Act, which provides enhanced protections and rights for freelance workers, went into effect. Specifically, freelancers are now entitled to insist on working pursuant to a written contract, receive additional damages from clients who do not pay, and are better protected from being retaliated against for enforcing their rights. The law allows for freelancers to file a complaint with the Office of Labor Policy Standards or to file private suit against individuals and businesses who violate their rights. Overall, particularly by allowing freelancers to recover attorney's fees if they file in court, the new law creates meaningful remedies for freelancers who might not otherwise have had the resources to pursue claims on their own. Freelancers and businesses that engage freelancers are advised to fully understand their rights and obligations under this new law.

Employee Salary Histories

On May 4, 2017, a bill that prohibits New York City employers from asking prospective employees about their salary histories was signed into law. The law now makes it an unlawful discriminatory practice for an employer to ask about an applicant's prior pay during the hiring process or to consider the prospective employee's salary history at all in determining how much to compensate the employee. The law, titled Intro. 1253, provides for penalties of up to $250,000 against employers in the most malicious instances and for compensation to aggrieved individuals. The law is set to go into effect in October of this year. Employees and employers alike are advised to fully understand the legislation's requirements and impact prior to its effective date.


Readers are encouraged to follow us on Twitter (@lloydpatelllp) and Facebook to receive updates on these and other issues throughout the month.


Legal Update - April 2017 Newsletter

Yogi Patel - Tuesday, April 04, 2017

Dear valued clients and supporters: This month's newsletter will focus on: (1) challenges to digital arbitration agreements; (2) a payroll scam alert; and (3) the Defend Trade Secrets Act of 2016.

Digital Arbitration Agreements

When two parties enter into a contract, they may decide to agree to arbitrate, rather than litigate their claims. Parties do this because arbitration can be faster, cheaper, and private. While this practice has long-been commonplace, it is a somewhat recent phenomenon that companies have been seeking to insert arbitration clauses into contracts with their customers on digital platforms (websites). However, in addition to precluding an aggrieved customers access to the courts, an arbitration agreement can also seek to require that each customer bring his or her complaint individually, thereby eliminating the possibility of a class action suit. Because of these potential consequences and nature of consumer agreements, the majority of which are non-negotiable and go unread by the customer, advocates are now asking courts to place limits on arbitration language when it comes to consumer contracts. In one recent decision, a Federal District Court in New York sided with consumer advocates in finding that the arbitration language contained in Uber's customer agreement was unenforceable. The judge reasoned that because the arbitration clause was not readily apparent within the agreement and was not separately agreed to, that customers presumably were not aware of the rights they were waiving. Uber has now appealed to the U.S. Appeals Court for the Second Circuit.
In light of this decision, employers are cautioned to consider the design of their digital platforms, especially if the agreements relate to consumers and contain arbitration clauses.

Payroll Scam Alert

Employers should be on the lookout for an email scam in which hackers, posing as executives, send messages to payroll and HR professionals requesting personal information about employees. The emails can appear to be quite legitimate and are fooling employers into divulging the social security numbers, birth dates, full names, addresses, and W-2 Forms of employees. The information is then used to file fraudulent tax returns and collect refunds. If your company receives any emails requesting W-2 Forms and other personally identifiable information, do not transmit any such data without first confirming verbally with the requestor. If you do fall victim to one of these W-2 phishing scams, you should contact both the New York State Department of Taxation and Finance and the IRS so that they can identify suspect filings and implement additional measures to prevent paying out improper refunds.

Defend Trade Secrets Act of 2016 ("DTSA")

In May 2016, Congress enacted DTSA, which functionally expands the scope of federal intellectual property law. The DTSA provides for a private cause of action in Federal court by an owner of a trade secret that is misappropriated, provided that the trade secret is related to a product or service used in, or intended for use in, interstate or foreign commerce. Under the DTSA, an owner of a trade secret can recover actual damages suffered by the plaintiff, unjust enrichment by wrongdoer, punitive damages and attorney fees. Punitive damages and attorney fees are only available to employers who are trade secret owners who assert a cause of action under the DTSA if they provide notice of immunity for whistleblowers that is also available under the Act to their employees. Furthermore, an action under DTSA can only be maintained if the owner of the trade secret took measures to protect the information they deem to be trade secrets from disclosure in the first place.

In light of this, employers are advised to update their polices and procedures to include reference to the DTSA whistleblower protections available in order to recover punitive damages and attorney fees and to take necessary measures to identify and protect their trade secrets to the extent they have not already.

Readers are encouraged to follow us on Twitter (@lloydpatelllp) and Facebook to receive updates on these and other issues throughout the month.

Legal Update - March 2017 Newsletter

Yogi Patel - Wednesday, March 01, 2017

Dear valued clients and supporters: This month's newsletter will focus on: (1) changes to New York State wage and overtime laws; (2) an update in Trademark Law; and (3) intellectual property insurance.

New York State Wage and Overtime Update

While the implementation of the changes to the FLSA were stayed by a federal court late last year, Employer's in New York should be advised that the minimum wage and overtime exemption thresholds have increased under New York State law. Across New York, all employees are entitled to be paid at least $9.70 per hour and must be paid overtime if they earn less than $727.50 per week. However, in certain cities and counties, these figures are higher. In New York City, employers with 11 or more employees must pay their workers at least $11.00 per hour and grant overtime to anyone making less than $825 per week. For smaller NYC employers, these figures amount to $10.50 hourly and $787.50 weekly; in Long Island and Westchester they are $10.00 and $750.00, respectively. Employers and employees alike should be further aware that all of these thresholds are scheduled to increase again at the end of 2017.

Trademark Law Update

The United States Patent & Trademark Office (USPTO) will begin randomly auditing approximately ten percent of all "declarations of use" filed in connection with trademarks that are registered in one or more class as of March 21, 2017. A declaration of use is a document filed by the owner of a trademark stating that the that the mark is still being used in commerce as registered. The declaration of use is required to be filed between the 5th and 6th year after a mark is registered. While owners are generally only required to submit one specimen for each class under which their marks are registered, owners whose declarations are subjected to an audit by the USPTO will be required to provide additional evidence. Owners who supply insufficient evidence will find their marks subject to cancellation. As such, all trademark owners are encouraged to maintain records, including photographs, demonstrating a consistent use of their marks for all their registered purposes in order to best secure their rights in the event of an audit.

IP Insurance

Although intellectual property (trademarks, patents, and copyrights) may represent a significant source of value for a company, business owners often fail to property protect themselves in the event they are faced with an infringement lawsuit. Defensive measures, such as obtaining insurance to cover the cost of any such lawsuit, should be seen as a necessary precaution for any business that places significant value on its intellectual property. Generally, policies that are typically carried by businesses (Comprehensive General Liability or Commercial General Liability Insurance) may offer coverage for claims related to infringement, however, businesses are advised to understand whether their existing policies do in fact offer coverage related to IP infringement and are advised to seek explicit endorsements in the absence of clear language.

Readers are encouraged to follow us on Twitter (@lloydpatelllp) and Facebook to receive updates on these and other issues throughout the month.


 

Legal Update - January 2017 Newsletter

Yogi Patel - Friday, January 06, 2017

Dear valued clients and supporters: Happy new year! This month's newsletter will focus on: (1) advertising of short-term rentals on Airbnb; (2) rethinking employment contracts and (3) firm announcements. 

Advertising Short-Term Rentals

Recently, Governor Andrew Cuomo signed legislation that makes it illegal to advertise the rental of an entire apartment for a period of less than 30 days. This legislation comes as part of an effort by lawmakers to crack down on the illegal rental of apartments through online platforms, such as Airbnb. Almost immediately after the bill became law, Airbnb filed suit against the City and the State in protest. While you may have heard that part of that lawsuit has been settled, Airbnb is continuing to press forward with its suit against New York City. A more in-depth article on the new law and contested legislation can be found here on our website

Rethinking Employment Contracts

In our newsletter last month, we briefly suggested reasons why employers should rethink the ways their current employment contracts are structured based on the groundbreaking work of Professor Oliver Hart of Harvard University and Professor Bengt Holmstrom of the Massachusetts Institute of Technology. Now, a more in-depth article on why employers should rethink their employment contracts and some practical suggestions as to how can be found on our website.

Firm announcements

We are pleased to announce the birth of Nigel P. Carraro, who is our associate Kyle Carraro's most recent addition to his growing family. We look forward to Nigel joining the Lloyd Patel roster of attorneys in a couple of decades. Finally, we are pleased to announce that partner Yogi Patel will be returning to his alma mater CUNY School of Law this coming semester as an adjunct professor of law where he will be teaching a course on the Uniform Commercial Code (UCC) and Secured Transactions. 

Readers are encouraged to follow us on Twitter (@lloydpatelllp) and Facebook to receive updates on these and other issues throughout the month.

 

STATE OF NEW YORK PASSES LEGISLATION IMPOSING FINES FOR THE ADVERTISEMENT OF ILLEGAL APARTMENT RENTALS

Erin Lloyd - Friday, December 16, 2016

Recently, the New York state legislature passed a law that imposes significant fines on those who advertise the renting of apartments in ways that violate certain New York City and state laws. Specifically, any print, television, radio, mail, text, or online advertisement, such as one through Airbnb, which solicits an illegal rental of an entire residential apartment, is punishable by up to $1,000 for a first offence, as much as $5,000 for a second offense, and $7,500 for a third and subsequent violations.

Almost immediately, and as previously promised, Airbnb filed a lawsuit to contest the law, which included asking the Southern District of New York to grant a temporary injunction blocking the enforcement of the new law. Both state Attorney General Eric Schneiderman and attorneys for the city agreed not to enforce the law until the request for a preliminary injunction was resolved, but as of the end of November, Airbnb agreed to withdraw its lawsuit against New York State entirely. The company appears poised to continue its battle with New York City, challenging its legal jurisdiction to impose the fines. This battle is sure to come with many more twists and turns in the coming months and we will surely revisit it.

For years now lawmakers and proponents of home sharing, like Airbnb, have been at odds over the legality and regulation of short-term rentals. The combination of rising rents and costs of living, along with the increased convenience of home sharing online through Airbnb has led to a spike in short-term rentals statewide as a means of generating much-needed supplemental income. As the number of short-term rentals has grown exponentially, lawmakers and officials have been scrambling to figure out how to best address the home sharing economy.

On the one hand, many residents feel that they should be allowed to generate extra income through home sharing. Often, monies paid by transient guests is absolutely necessary for tenants to pay their monthly rents. By participating in the home sharing economy, people are able to stay in their homes and make ends meet. Home sharing proponents say that their actions are beneficial overall and claim that the real motivation behind “anti-Airbnb” legislation is to protect the hotel industry, which has been declining with the rise of the share economy.

On the other hand, the government does have an interest in insuring that rentals are safe and properly equipped to handle numerous transient guests. A rotating set of strangers in a residential building can cause a plethora of safety issues and skirts the various tax and other requirements imposed on commercial spaces, such as hotels. When individuals or landlords rent out apartments on a short-term basis with such a frequency that they are essentially operating illegal hotels, this becomes contrary to the residential purpose of the buildings and is more akin to a commercial operation.

Also at issue is the effect that Airbnb and other short-term rental platforms are having on affordable housing as a whole. A 2014 report by the Attorney General’s office revealed that almost three-fourths of local Airbnb advertisements between 2010 and 2014 were illegal hotels that violated state and city laws. What’s more concerning is that even though a small percentage of Airbnb hosts have multiple listings, these hosts account for more than one-third of Airbnb’s business in New York. In effect, this means that at least one-third of all New York listings on Airbnb are being managed not by people renting out part or all of their own homes, but by those who are acting as de facto illegal hotel operators.

Politicians and some tenants’ rights groups argue that this study supports their claims that Airbnb is worsening New York City’s housing crisis by making affordable housing unavailable to its residents. Their argument is that apartments that are occupied entirely or mostly by transient guests by definition reduce the number of apartments available for full-time residents. A reduced housing stock skews the level of demand, which is already out of control, which in turn causes rents to go up. Also, because the amounts transient guests pay per week or per day add up to significantly more than what monthly tenants typically pay, there is a disincentive to lease apartments to permanent residents. The overall effect is skyrocketing rents and fewer affordable apartments for rent for residents.

What makes the most current legislation different is that for the first time, lawmakers are going after the advertisement of an illegal rental as a stand-alone offence – whether or not the apartment is ultimately rented in a manner that violates the law.

We will be following any developments in this case carefully, so check back for updates. Our office can help individuals navigate the laws and regulations specific to your situation. For questions about Airbnb, contact Kyle Carraro (kc@lloydpatel.com) or Erin Lloyd (el@lloydpatel.com).

 

NOBEL PRIZE WINNERS OFFER CRITICAL INSIGHT INTO DRAFTING EMPLOYMENT CONTRACTS

Yogi Patel - Friday, December 16, 2016

The groundbreaking work of Oliver Hart of Harvard University and Bengt Holmstrom of the Massachusetts Institute of Technology, which includes providing invaluable insight into how employment contracts should be structured, recently earned the two professors the 2016 Nobel Memorial Prize in Economic Science. Hart and Holmstrom’s research offers a variety of theoretical models and frameworks through which they analyze the competing interests of employees, managers, CEOs, shareholders, and others, and attempt to reconcile them via contracts.

Over the past few decades, Homstrom and Hart’s findings have been used to evaluate whether particular contracts accurately measure the performance and value of employees and other agents to companies while offering the right amount of incentive. Specific factors that the research contemplates in its assessment of employment contracts include ownership, control, the measurability of an agent’s performance, risk sharing, and the motivations of the parties involved.

Rather than simply pay an individual a fixed salary or reward a manager for the performance of a company in a vacuum, the professors suggest considering alternative compensation structures and contracting terms, including:

Deferred Compensation

In order to ensure that a company’s interests are aligned with those of an employee, it may make sense to tie an individual’s compensation to performance rather than pay her a set amount. By withholding a portion of an employee’s compensation, the company can provide incentives for the individual to earn the full amount by meeting certain goals. Whether or not this type of arrangement makes sense will depend in great part on the measurability of an employee’s performance and the stability of the business environment.

Performance Evaluation based on the Overall Market

Another metric for evaluating an employee’s value, particularly one who is in a decision-making position, is the overall performance of the company. One common mistake businesses make is setting goals or targets based solely on the absolute performance of the company, rather than taking into account the performance of the company as compared to other similarly situated businesses. If a company does well in a thriving market or suffers during a market collapse, the employee should not be rewarded for good luck or punished for misfortune. A company performing well relative to others is a far superior measurement of employee value.

Designation of a Main Decision-Maker

Most contracts cannot contemplate the exact outcome of every situation that may arise in a given relationship. Companies recognize that it is impossible to list specific instructions for every job responsibility, and this in turn may actually be counterproductive. In such cases, the parties should determine who has the power to decide what to do in situations where they cannot reach an agreement. In this manner, the parties are able to avoid having to anticipate every possible future event while entering into a relationship that allows them to move forward with their main, general purpose, i.e. employment.

While Hart and Holmstrom’s work is highly theoretical and informative, it is essential to use their tools in conjunction with a business’s specific needs. Depending on the business type, number of employees, and variety of other factors, businesses may have widely different terms and compensation structures that work best for them. Notwithstanding this, business owners are advised to consider the research finds of Professor Hart and Holstrom’s when making decisions about their own employees and businesses.

This article was prepared with the assistance of Julie Lee, 3L (CUNY School of Law).

 


Recent Posts


Tags

Alter-Ego Doctrine Start-up Ventures I-9 Verification Wage Theft Protection Act Housing Law stocks entrepreneur Fair Work Week Legislation NLRB Joint-Employer Relationship Selling Business Nobel Prize workplace discrimination Credit History Department of Labor Paid Family Leave Non-Qualified Stock Options Pregnancy Federal Contractors Business Law Business Employment Offer/Agreement Public-Sector Union Fees Overtime Rules Trade Secrets Act Womens Rights Corporate Law Firm Announcements Trademark licensing Intellectual Property Browning-Ferris Case $15 Minimum Wage Fair Chance Act Overtime Exemptions AirBnB Internet Law Newsletter Postnup U.S. Department of Labor Fair Workweek Law Payroll Scams Employer Mandate Credit Checks Unions Household Employees Glatt v. Fox Searchlight Pictures, Inc. Attracting Investment Affordable Care Act Ban the Box Web Domains Interview Series Fair Pay and Safe Workplace Executive Order Technology Security Divorce Minimum wage Federal Acquisition Regulatory Council Employment Contracts Glatt v. Fox Searchlight Pictures Independent Contractor commuter benefits Health Care Employee Salary Histories Illegal rentals Transgender protections Credit Negotiating NQSO Employment Law Real Estate Law Worker's Rights ACA Right to Unionize Human Rights Law graduate students National Labor Relations Board Apple vs. FBI Arbitration Agreements Freelance Isn't Free Trade Secrets National Labor Relations Act NYC Salary History Law LinkedIn Interns Trademark Law Executive Severance Executive Negotiation Privacy New Address Interns as Employees Nanny Audit Criminal Record Mandatory Class Action Waivers Unionization Prenup Domain Name

Archive

EDIT - blog-container - This controls the styles for the headings

EDIT - BlogTagCloud - Font style

description

  • EDIT  - post-body - Font style

EDIT - side-panel - This is the colour of the sidebar headings

Snap | BC Module - Blog - Blog Description

Snap | BC Module - Blog - Blog Title

EDIT - Snap | BC Module - Blog - Date - This is the date box style

EDIT - Snap | BC Module - Blog - Post Content - Font style

EDIT - Snap | BC Module - Blog - Post Title - Heading style

EDIT  - Snap | BC Module - Blog - Sidebar Content - Font style

EDIT - Snap | BC Module - Blog - Sidebar Title - Heading style

latest blog title snap text

 

Disclaimer: Nothing on this website is or should be construed as legal advice.
An attorney-client relationship does not exist with our firm unless a signed
retainer agreement is executed, and we do not offer legal advice through
this site or any of the content located on it. For legal advice for your
particular circumstances, please contact us directly.