News and Articles

Legal Update - May 2016 Newsletter

Yogi Patel - Thursday, May 12, 2016

Dear valued clients and supporters: This month's newsletter will focus on: (1) the I-9 employment verification process; (2) the gradual rise in the minimum wage to $15 per hour in NYS; and (3) paid medical leave in New York.

The I-9 Verification Process
The Form I-9 is the primary mechanism that employers are required to use for the purposes of verifying an individual's identity and authorization to work in the United States. Under federal law, employers must have all prospective employees complete an I-9 form, along with other official documents, before they are able to commence their employment. However, as federal law also protects all individuals against immigration-based discrimination, employers cannot simply have job applicants fill out an I-9; they must integrate the I-9 into a hiring process that ensures equal treatment of everyone. For example, if an employer asks an an individual as part of the job application to fill out an I-9, the employer could be found to have committed employment discrimination and/or document abuse. It is only after an employer has decided to hire someone that the individual's authorization to work may be verified. Further, when an employee is completing an I-9, an employer may not insist that the employee provide a specific employment authorization document, such as a passport or green card. Federal law provides a list of acceptable documents an employee may provide, and an employer who attempts to restrict the list will be penalized. The punishment for acts of employment discrimination and/or document abuse can be as much as thousands of dollars per violation, which can quickly add up to tens or hundreds of thousands of dollars depending on how many applicants an employer processes. The financial penalties increase for repeat offenders, and eventually employers can be imprisoned if they engage in a pattern of hiring unauthorized workers. For further information on the proper protocols employers should follow and how to avoid the pitfalls of the I-9 process, please return here to our website next month for a more in-depth article.

$15 Minimum Wage
As part of the 2016-2017 state budget, legislation in New York was passed that gradually will raise the minimum wage state-wide to $15 per hour. The increases will vary based on business size and location according to the following schedule: For New York City businesses with 11 or more employees, the minimum wage will be $11 per hour at the end of 2016, after which it will increase by $2 annually until it reaches $15 on December 31, 2018. For New York City businesses with 10 or fewer employees, the minimum wage will be $10.50 per hour at the end of 2016, then it will rise by $1.50 per year until December 31, 2019, when it reaches $15. For businesses in Nassau, Suffolk, and Westchester Counties, the minimum wage will be $10 per hour by the end of 2016, followed by annual increases of $1 until it reaches $15 on December 31, 2021. Finally, for business elsewhere in the state, the minimum wage will be $9.70 per hour at the end of 2016, and it will grow by 70 cents a year until it reaches $12.50 on December 31, 2020. At that point, the minimum wage will continue to increase until it reaches $15 per hour according to a new schedule to be set by the Division of Budged (DOB). One minor caveat to this legislation is that in 2019, the DOB Director will analyze the regional economies state-wide and will have the authority to freeze any increases deemed necessary. Employers and Employees alike should stay abreast of any and all updates to the minimum wage and the scheduled increases as set by the DOB.


Paid Family Leave
Also as part of the 2016-2017 budget, legislatures passed a program that entitles employees to 12 weeks of paid family leave to care for a newborn or a seriously ill family member. Beginning in 2018, employees who have worked for an employer for six months will be eligible to receive 50 percent of their average weekly wage for up to 12 weeks under the program. The total amount an employee may receive will be capped at 50 percent of the state-wide average weekly wage. By 2021, the figures will increase to 67 percent of an employee's average weekly wage, capped at 67 percent of the state-wide average. The program will be funded through a small payroll deduction, so there will be no costs to businesses. Employers should, however, ensure that their payroll practices are updated as the implementation date for the program approaches.

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

 

The Convention on the International Sale of Goods – Essential Information for Global Businesses

Yogi Patel - Tuesday, April 12, 2016

Since 1980, the Convention on the International Sale of Goods (CISG) has served as the default body of international law that governs most sales of commercial goods between businesses located in Contracting States to the CISG. A Contracting State is a country that has incorporated the CISG’s terms into its law. The United States is one of 84 Contracting Parties to the CISG. 

What many international businesses fail to realize is that absent proper, written agreement to the contrary, the CISG may automatically govern any contract they enter into regarding the sale of commercial goods. While there are certain requirements for the CISG to apply and many exclusions from its coverage, businesses are best served to make sure their contracts meet the necessary legal requirements for ensuring that the CISG does not unexpectedly apply to their transactions.

As a threshold matter, the CISG will only apply if the parties involved have reason to know that at the time of the formation of the contract between them that they have “places of business” in different contracting states. The CISG considers a place of business to be the location that has the closest relationship to the contract and its performance. Even between two parties who have places of business in different Contracting States, the CISG specifically does not apply to the sale of consumer goods, stock or other securities, negotiable instruments, airplanes, ships, vessels, and electricity; mixed contracts where the seller is mostly contributing labor or services; the liability of the seller for the death or injury caused by goods sold; and goods that are sold at auction.

What that leaves are contracts and transactions involving the sale of commercial goods between businesses in different Contracting States. For example, the CISG would apply to a contract between a French cheese producer selling to a buyer in the United States. While the parties involved are free to allow the CISG to apply or to expressly designate it as their choice of law in the contracts between them, if the parties desire that some other jurisdiction govern, it is not as straightforward an election as they might assume. Merely stating that a contract is to be governed and interpreted by a particular jurisdiction, such as the laws of New York State, does not suffice to waive the application of the CISG where it applies by default. In the contract between the parties, it must also expressly state that the CISG is waived, that the parties do not wish for it to apply, and that they elect some other law instead.

One example of how the CISG differs from other laws is that it contains no statute of frauds provision. Statute of frauds refers to the idea that certain contracts or contracts above a threshold amount need to be evidenced by something in writing in order for them to be enforceable. For example, under the Uniform Commercial Code, which governs many sales of goods that the CISG does not, any sale of more than $500 must be evidenced by a writing. If the same contract were governed by the CISG, a court could find an oral agreement was binding.

While there are additional examples of the consequences of having one jurisdiction apply instead of another, the most important idea business owners should retain is that once they know which laws they want to govern a particular contract, they must be extra careful with the language they use in their choice-of-law provisions. Additionally, it is not always clear whether or not the CISG does apply to a particular transaction or contract, so business owners are best advised to seek the advice of counsel and make sure their contracts are intelligently drafted to meet their particular needs.

 

This article is not intended to provide not should be construed as providing legal advice. Before entering into any business transaction, you should consult with an attorney to fully assess your unique situation and ensure that your rights and interests are protected.

 

Apple vs. FBI – Technology and the New Legal Frontier

Yogi Patel - Wednesday, March 09, 2016

Mobile devices in general have arguably taken over as the main portal through which significant portions of people in our society communicate. And with the advancement of technology, the mobile device is now and will continue to become, the main portal through which we engage in every day transactions. We can now use our phones to engage in banking, ordering groceries, booking vacations, researching novel questions, storing our personal information and to do just about anything else we want. The amount of data that can be derived from our mobile devices can reveal just about every aspect of our day-to-day lives. From the websites we visit, to the phrases we search. Our phones, for better or worse, can probably reveal more about us than we could if we tried to provide our own narrative. Think about how naked and vulnerable you felt the last time you left home without your phone. For most of us, it has become a necessity. We truly cannot imagine life without our mobile devices – and this is not going to change anytime soon. We will undoubtedly continue to use our mobile devices to share even more personal information about ourselves. And with this in mind, consider the dispute between Apple and the FBI –which is ultimately between privacy and safety.

The iPhone is known for its nearly impenetrable security features and thus, is one of the many reasons that Apple’s products are considered superior to others in the market place. The latest challenge to privacy comes in the form of the unlocking the iPhone of one of the San Bernardino shooters. The FBI has been unable to unlock and access the device and is now relying on the courts to compel Apple to do so. Apple is not complying because it fears future implications of the government’s ability to access their devices.

While the FBI has only requested that Apple help the government access the gunmen’s iPhone, the broader implications of the request are the true cause of conflict and concern here. The government is essentially asking for Apple to create an encryption system that would provide them access to any Apple device after securing a warrant. The Government’s position appears to be carefully considered and narrowly tailored. Many experts consider this case as the “perfect case” for litigating the issue of privacy concerns against the governments need to access incriminating information in the evolving world where technology controls access. Since the case involves terrorism, the government’s interest in encroaching on privacy concerns is less likely to cause a public outcry and provides sufficient justification for the court’s to reach a decision allowing it to gain access to an encrypted system.

Besides the privacy vs. security considerations implicated here, this case also raises the issue of how far the government can go in requiring a business to perform functions that have no financial value to the Company. In this case, the FBI wants Apple to develop a new version of the iPhone operating system, whereby the new versions would allow the government to bypass the security features on its product. The sole purpose of this software would be to allow the government to have access to the data on such phones when appropriate. Apple’s shareholders do not stand to gain financially by cooperating with the government. In fact, developing this software would arguably weaken Apple’s overall security system and potentially have a negative impact on its market-share and subsequently the value of the Company to its shareholders.

The implication of this dispute also extends to how other privileges could be potentially compromised. Given that smartphones such as the iPhone store so much personal data, it is important to note that if the government were given such access, they would ultimately be able to access emails, photos, and text messages. This access would present challenges to right of privacy amongst privileged relationships. For example, confidential communications between attorney and client, marital communications amongst spouses and patient-psychotherapist relationship may be easily penetrable.

Other technology companies such as Microsoft, Google, Facebook, Twitter and Dell understand the implications of this dispute as well. Most have pledged support for Apple and are expected to submit Amicus positions in the pending litigation. These companies also fear that the government will make similar requests thus compromising their security and intellectual property.

 

This Article was co-authored by Asima Chaudhary, an intern at Lloyd Patel LLP and a second year law student at the City University of New York Law School.

 

New York City Commission on Human Rights Announces Huge Increase in Discrimination Awards in 2015

Erin Lloyd - Wednesday, March 09, 2016

The New York City Human Rights Law applies to most employees working in the five boroughs, and it expands the anti-discrimination protections found in New York State and Federal law. Under Mayor Bill de Blasio, newly appointed Chair Carmelyn P. Malalis, and the current City Council, the New York City Commission on Human Rights—the agency responsible for enforcement and implementation of that law—has stepped up its efforts, and the results are beginning to become clear.

The Commission recently announced that it doubled the average amount collected in damages and civil penalties assessed in employment discrimination claims filed with it, collecting nearly $1.4 million in 2015 alone.

The work of the agency has also increased, with 755 investigations opened in 2015, a 20 percent increase from the prior year. Of those investigations, disability-related complaints comprised the highest proportion of complaints filed, at 31 percent, followed by race-related complaints at 20 percent, and gender-related complaints at 18 percent. National origin discrimination complaints accounted for 15 percent of the complaints filed in 2015.

The New York City Human Rights Law also prohibits discrimination in housing against individuals receiving government assistance with their rent, and complaints of this nature made up 11 percent of the Commission’s cases last year. According to the Commission, their investigations of these types of complaints quadrupled in 2015, from 23 investigations in 2014 to 86 in 2015.

The Commission was able to resolve more than 100 of their cases by settlement or agreement, rather than trial, including both employment and housing complaints, but that leaves a substantial number of investigations that resulted in or are still waiting for trial with the Commission.

Claims that fall under the New York City Human Rights Law can be either filed in court or filed with the Commission, but once a claim is filed in either venue, a plaintiff cannot change his or her mind and file it in the other venue. For that reasons, and many other reasons, consulting with an attorney prior to filing any claims is important. Our attorneys represent employees in a wide variety of employment matters and would be happy to schedule a consultation to discuss your particular situation.

For more information, contact us here

 

Legal Update - February 2016 Newsletter

Yogi Patel - Monday, February 08, 2016

 

Dear valued clients and supporters: This month's newsletter will focus on: (1) Updates and developments under New York State Human Rights Law and guidelines issued by the New York City Commission on Human Rights and (2) recent developments at Lloyd Patel LLP.


New York State Human Rights Law Developments
Employers and employees are advised that several new protections for employees under New York State Human Rights Law passed by the State Assembly last year went into effect on January 19, 2016.

One amendment expands on existing prohibitions against paying women less than their male colleagues for performing similar work and clarified what criteria would be appropriate for differential in pay not based on gender/sex. The same amendment also made it easier for women to find out of they are being paid equally and protects them from retaliation for sharing wage information with other employees. Additionally, New York State Human Rights Law now requires that employers provide reasonable accommodations to pregnant employees in the form of schedule adjustments or alterations in job duties. Other amendments prohibit discrimination against employees based on their familial status (specifically against single mothers); allow victims of employment and/or credit discrimination based on sex/gender to recover attorney's fees when they file claims; and expand protections to all employees, including those previously exempt, against sexual harassment.

The Assembly also made two amendments to New York State Human Rights Law unrelated to employment. One such amendment protects individuals against discrimination and eviction based on their status as domestic violence victims. Another amendment augmented the state's human trafficking laws by increasing the penalties for traffickers, providing training to law enforcement officers, and allowing trafficking victims to sue for damages, including attorney's fees. Individuals and employees should familiarize themselves with these new developments to ensure that they know their rights and that all parties are in compliance with New York State Human Rights Law.

New York City Commission on Human Rights
Employers and Employees are advised that the New York City Commission on Human Rights issued legal enforcement guidelines on the protections against discrimination, harassment, and retaliation based on gender identity and expression under New York City Human Rights Law. The guidelines rebuke acts and omissions that intentionally refuse to use an individual's preferred pronoun or title; require that individuals be allowed to use whatever bathroom is consistent with their expressed gender; and prohibit the imposition of uniforms or grooming standards based on sex or gender. The Commission's mandate includes other protections, including health care-related protections for transgendered people, it makes clear that the guidelines are a floor, not a ceiling, and that there is an overall intent to prohibit any form of gender identity-based discrimination.

Employers are advised to analyze and implement their policies and procedures accordingly.

Development at Lloyd Patel LLP
We are pleased to announce the re-location of our main office to 65 Broadway, 7th Floor. New York, NY 10006.
And we are also excited to announce expansion plans and the opening of a satellite office in Long Island City, which we anticipate to be operational by March 1, 2016. Additional details will be forthcoming on Facebook, here on our website and next months's newsletter.

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

 

When a Trademark Licensor Goes Bankrupt

Yogi Patel - Tuesday, January 05, 2016

Businesses often enter into licensing agreements to use a trademark belonging to someone else. One of the most essential circumstances to consider before expending any resources on a trademark license is what happens in the event that the owner of the trademark declares bankruptcy. Businesses who develop products, perform research, and make sales revolving around a trademark license, savvy planning in advance is essential for protecting their interests. Poor planning or a failure to do so can result in the license being revoked, even if paid for in advance, resulting in the licensee's business potential failure. A more in-depth article on this issue is now available on our website.

In general, courts have found trademark licensing agreements to be executory, meaning the parties to the agreement still have duties remaining to be performed. When a licensor declares bankruptcy, it has the option of assuming or rejecting the agreement. If the agreement is accepted and certain conditions are met, everything continues as normal. However, if the agreement is rejected, there is the very real risk that the licensee will lose all rights to use the trademark, leaving the owner free to re-license the trademark to someone else. While Bankruptcy laws offer some protections for intellectual property, such as patents, copyrights, and trade secrets, courts have split on whether trademarks are included. Because Bankruptcy Courts have the authority to resolve trademark issues, licensees must take steps to minimize the risk of an unfavorable decision.

One possibility is to structure the licensing agreement as a sale or assignment of the trademark. This minimizes or reduces the risks to the licensee as it transfers ownership in the trademark and creates a non-executory contract. However, when this is not possible, another option is to require that the trademark be owned by a limited liability company with the single purpose of holding the trademark. The LLC can also be prevented from incurring debt, which greatly reduces the risk of a bankruptcy filing. One last alternative is for the licensee to take a security interest in the trademark, but this is not commonly used as it creates disincentives for both parties. While there are additional drafting techniques one should adopt, such as explicitly referencing Bankruptcy Law protections, combining trademarks in the same agreement as other protected intellectual property, and paying royalties over time, anyone considering entering into a trademark licensing agreement should enlist the services of an attorney to make sure their rights are protected.

Legal Update - January 2016 Newsletter

David Lloyd - Tuesday, January 05, 2016

Dear valued clients and supporters: Happy New Year. This month's newsletter will focus on: (1) The effect bankruptcy of a trademark licensor has on a licensee; (2) The limits on non-compete clauses; and (3) The emergence of "The Internet of Things" and its legal impact.

When a Trademark Licensor Goes Bankrupt
Businesses sometimes enter into licensing agreements to use a trademark belonging to someone else. One of the most essential circumstances to consider before expending any resources on a trademark license is what happens in the event that the owner of the trademark declares bankruptcy. For businesses that develop products, perform research, and make sales revolving around a trademark license, savvy planning in advance is essential for protecting their interests. Poor planning or a failure to do so can result in the license being revoked, even if paid for in advance, resulting in the potential failure of licensee's business. A more in-depth article on this issue is now available here on our website.

 

Grounds for Refusing to Enforce a Non-Compete
In New York, non-compete clauses must be necessary to protect a legitimate interest of an employer, and must be reasonable in scope, duration, and location. Non-compete clauses are generally disfavored as restraints on trade and will only be enforced if signed for adequate consideration - i.e. in exchange for something. In a recent commercial court case involving three former executives of a Suffolk County-based vitamin distributor, NBTY, the judge addressed the validity of a non-compete clause signed after the executives were already employed. Years after being hired, the executives signed a stock option agreement containing a clause prohibiting them from working for any competitor in North America, Europe, or China for one year. The executives all then resigned and began working for a competitor without exercising the stock options.

The court held that the non-compete clause was not supported by new consideration and therefore unenforceable because the executives had chosen resigning over exercising their options. By forfeiting their right to any benefit under the stock option agreement, they rendered the non-compete clause invalid. Additionally, the court found that the geographic scope was unreasonable, noting that such a global restriction was only generally appropriate when a business is sold. Finally, the court rejected the argument that the executives would inevitably misappropriate confidential information, requiring more than hypothetical speculation to form the basis of such a claim.

This case highlights how employers who wish to hold their employees to non-compete clauses must be careful in tailoring their restrictions not only so that they are reasonable and necessary, but also so that they are in exchange for adequate consideration.

 

The "Internet of Things"
The Internet of Things refers to the everyday objects people use - smart phones, smart watches, smart cars, and even smart homes - that are digitally interconnected and function through a computer network that transmits and analyzes high levels of data. These "things" can be typically controlled and/or accessed remotely, and the new digitized "ecosystem" of which they are a part allows for automation, constant monitoring, and instant access to seemingly endless information. Any single device can be composed of parts made by multiple manufacturers, require a local "gateway" through which it connects to a greater network and other devices, and function through a cloud computing platform. While consumers and businesses alike enjoy the increased functionality the Internet of Things provides, the ever-expanding network of devices, systems, subsystems, clouds, and people has created a whole universe of legal considerations.

 

For one, with such vast access to and exchanges of data, participants in the Internet of Things must take steps to protect the privacy of personally identifiable information. Additionally, other data, such as sensitive or secret information, and control over a computer network, must also be heavily protected, making cybersecurity paramount. Other potential sources of intense litigation will be over the ownership of the various data generated by the Internet of Things, the ownership of the underlying technology/processes on which it all functions, and as well as accusations of anti-trust violations. Finally, when things go wrong and devices malfunction, break, and/or injure a user, with all the potential parties involved, determining whom to hold liable will be a complicated matter. All of this inevitably will result in an increase of rules, laws, and regulations governing the Internet of Things as it develops, and any supplier, manufacturer, or participant should consult with an attorney about potential liabilities before injecting a product into this emerging ecosystem.

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

 

Business Owners May Be Liable for Business Debts and Transactions Through the Alter-Ego Doctrine

Erin Lloyd - Thursday, December 03, 2015

The chief purpose of forming a corporate entity is to protect the business owner’s personal assets. Incorporation protects these individuals from being held personally liable for their company’s debts and obligations. However, the use of corporate form is a privilege, and abuse of its protections can have serious consequences.

For example, when a corporate entity is so dominated by an individual that it primarily transacts the individual’s business instead of its own, it will be called the individual’s alter-ego and the corporate form will be disregarded to achieve an equitable result, Rohmer Associates v. Rohmer, 36 A.D.3d 990 (3rd Dept. 2007).

In order to prevail on an alter-ego claim, a plaintiff must establish that there was such a “unity of interest and control” between the individual defendant and the entity, or between two entities, that they cannot really be said to be separate. See Rohmer Assoc. Inc. v. Rohmer, 830 N.Y.S.2d 356, at *1 (App. Div. 2007). An alter-ego determination by a court does not technically make one entity vicariously liable for the debts of another. Rather, it results in disregarding the separateness of the entities as a legal fiction and treats them as one in the same entity for all purposes. This is applied to limited liability companies as well as traditional corporations.

“Alter-Ego” Liability Does Not Require a Showing of Fraud

It is not necessary to allege or prove fraud in order to pierce the corporate veil under the alter-ego theory. What is required is proof that a corporation is being used by an individual to accomplish his own and not the corporation’s business, and that the business owner’s control is being used to perpetrate a wrongful or unjust act. The question is whether the corporation is being used as a “shell” by the individual business owner to advance his own purely personal interests at the expense of another party, typically a judgment creditor, Port Chester Electrical Construction Corp. v. Atlas, 40 N.Y.2d 652 (1976). In making an alter-ego determination, a court is concerned with reality and not form. Wajilam Exports v. ATL Shipping, 475 F.Supp.2d 275 (S.D.N.Y. 2006). The focus is on the actual conduct of the dominating business owner and the impact of that conduct on innocent parties such as judgment creditors.

New York Courts Evaluate a Number of Different Factors

The factors relied upon by New York’s courts in applying the alter-ego theory include the use of alleged corporate funds for personal purposes, commingling corporate and personal funds, shuttling funds between personal and corporate accounts, the use of common telephone numbers and office space, using the corporation as a “shell” to advance personal rather than corporate interests, and otherwise abusing the corporate form.

When the use of an incorporation entity privilege of is abused, business owners may be held liable through the alter-ego doctrine in the State of New York. As with any legal transaction matter, individuals are encouraged to consult with an attorney before taking any official action, as every situation is unique and should be independently analyzed.

For more information, business owners can contact us here

December 2015 Newsletter

Yogi Patel - Wednesday, December 02, 2015

Dear valued clients and supporters: This month's newsletter will focus on: (1) The nation-wide increase in the usage of arbitration clauses in employment agreements; (2) Negotiating a more favorable employment offer/agreement; (3) The "Alter Ego" doctrine; and (4) New York City's Fair Chance Act.

 

Arbitration Agreements
In recent years, there has been a nation-wide spike in the usage of arbitration clauses by employers in their employment agreements. The motivation for employers to include such clauses is that they typically require employees to settle any grievances through arbitration, effectively preventing them from bringing an action in court. The clauses also usually require that all disputes be brought individually, which can have the effect of prohibiting employees from bringing class action suits. In the wake of United States Supreme Court decisions upholding the validity of arbitration clauses that prevent employees from bringing a collective suit, many employers are now requiring that all employees agree to arbitration as a term of employment. Employers and employees are advised to consider the implication of this trend, as employers may seek to include arbitration clauses while employees may seek to negotiate the removal of this term when possible.


Negotiating A More Favorable Employment Offer/Agreement
Many employees may not be aware that when they are offered a new position, they often have significant leverage at their disposal to negotiate for better terms of employment. Prospective employees who bring years of experience or unique skills and knowledge should not sell themselves short at the bargaining table, especially prior to accepting an offer of employment. From increases in salary, stock options and other benefits, to more favorable terms of severance, grounds for termination, and restrictive covenants, employees should consider what they can gain through such negotiations. An in-depth article addressing terms that an employee should consider negotiating as well as how to negotiate effectively so that an employer is not "put-off" by your ask is now available here on our website.


"Alter Ego" Liability
The number one reason why business owners form corporate entities is to insulate their personal assets from the liabilities of the company--if the business has an issue that causes it to owe money, the owner's house, bank account, and other personal property cannot be used to pay the company's debt. However, when a business owner abuses this protection and primarily uses the entity for her own personal gain rather than to transact the corporation's business, a court may find that the business is actually the "alter ego" of the owner. Upon such a finding, the owner and the business are treated as one and the owner's personal assets become at risk. To find out more about the factors New York courts look at under an "alter ego" analysis and the consequences of a determination stripping a business owner of the protections of her corporation, please read a more in-depth article posted here on our website.


New York City's Fair Chance Act
On October 27, 2015, the New York City Fair Chance Act went into effect. The law makes it illegal for employers to ask applicants about a criminal record before making a job offer. The Act bans reference to criminal histories or background checks in employment ads, job applications and during interviews. An in-depth article analyzing the Act and an employers obligations under the new law are now available here on our website.


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

Negotiating a Better Employment Offer/Agreement

Yogi Patel - Tuesday, December 01, 2015

Introduction

Many employees, especially executive level employees, approach an offer of employment as a “take it or leave it” proposition. The reality, however, is that unless you negotiate, you will end up with terms that are generally skewed and favorable to the employer. As with executives negotiating more favorable severance packages, executives negotiating employment agreements should consult with an attorney prior to negotiating or signing any such document. Once you sign on the dotted line, the executive has effectively given up any leverage in negotiating terms that will directly impact his or her role, compensation, future obligations to the employer, including who and where else they can work next. This article will address some of the terms that we recommend an employee should consider negotiating as well as how to negotiate effectively so that an employer is not “put-off” by your ask.

Will My Future Employer Negotiate?

An executive with an employment agreement in hand is in a strong position to negotiate with the employer for better terms of employment. The employment agreement is the last step of an employer’s long recruitment process, which plays largely into the employer’s willingness to negotiate at this point. On the surface it seems the negotiating dynamic is skewed much in favor of the employer, who holds the desired position. However, the employer does not want to lose the person they want most and then have to repeat the arduous recruitment process if all it takes is revising the existing agreement to provide the executive with better terms. Executives who come to their employers with reasonable requests might be surprised by the employer’s willingness to negotiate. This is especially so when the employer has actively recruited the executive from her current employment at another company. This is the first moment where the executive and employer’s interests may clash; and the employer, having pursued the executive, will want to show that it is responsive to the executive’s needs and willing to give them serious thought.

How Does Negotiation Work?

The first step is to understand the terms that are being offered and the future implications of those terms. By reviewing the agreement with the help of employment counsel, the executive will get a full understanding of the agreement’s terms and the risks associated with signing off on those terms—especially restrictive covenants that might inhibit the executive’s growth in the profession should he or she leave the company for a position elsewhere. The goal is to isolate the terms that are important to the executive and that need to be refined with a plan for how the executive will negotiate those terms when he or she next meets with the employer or its representative. For example, an executive who wants to protect themselves from subjective termination would prioritize negotiating a pro-employee “cause” termination clause and a severance package that stipulates the executive will receive earned, unvested compensation if terminated. For an executive whose compensation is primarily based on bonus, equity pay or stock options, the priority will lie with negotiating better vesting options and non-dilution terms.

Once counsel and the executive have worked through the priority of the terms that need to be revised, it is often advisable to have the executive provide an annotated agreement with the revisions built-in to the employer for consideration. The executive must assert their position boldly while being careful not to alienate the future employer with coaching from counsel on presentation of issues. If the executive and the employer fail to compromise, the executive should then consider having his or her attorney engage in direct negotiations with the employer’s General Counsel on behalf of the executive.


So What Exactly Will I Be Negotiating?

Depending on the industry and the executive’s priorities, an employer may seek revisions on any of the following terms of employment.

  • Remunerative terms, such as:
  • • Salary
  • • Bonus
  • • Commission
  • • Stock options
  • • Medical benefits
  • • Retirement benefits
  • • Deferred compensation
  • • Vacation and leave

  • Restrictive covenants, such as:
  • • Non-compete
  • • Non-solicitation
  • • Confidentiality
  • • Preserving trade secrets
  • • Dispute resolution

  • Terms of severance, such as:
  • • Grounds for termination, i.e., for cause, not for cause, mutual agreement, notice requirement, opportunity to cure
  • • Severance pay
  • • Continued medical coverage
  • • Buy-back of equity
  • • Bonus payouts and vesting periods
  • • Dispute resolution (arbitration vs. litigation).

Conclusion

The bottom line is that an executive with an offer of employment and an unsigned employment agreement should always consider negotiating for better terms. If you do not ask, you will never get – but you have to do it with tact and strategy. This article is not intended to be nor should it be construed as providing legal advice. As with any matter, the particular details of each executive’s situation require careful consideration and should be reviewed individually with an attorney.


Yogi Patel, Esq. is an employment and business lawyer and partner at Lloyd Patel LLP, a general practice law firm. He can be reached directly at yp@lloydpatel.com.

Whitney McCann is a second year law student at City University of New York School of Law, interning at Lloyd Patel LLP, and expects to graduate in May 2017.


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