News and Articles

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.

 

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.

 

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.

November 2015 NEWSLETTER

David Lloyd - Tuesday, November 03, 2015

Dear valued clients and supporters: This month's newsletter will focus on: (1) New York City legislation, effective January 2016, expanding the right to pre-tax transit benefits for certain employees; (2) Governor Cuomo’s recently introduced statewide regulations prohibiting harassment and discrimination against transgender people; and (3) The first article in a two-part series focusing on executive severance packages and negotiations.

Pre-Tax Benefits a Boost for Commuters
Beginning January 1, 2016, New York City companies with 20 or more full-time employees will be required to offer their employees pre-tax transit benefits. This legislation encourages employers to take advantage of an existing federal tax benefit that allows companies to offer workers $130 as pre-tax income for transportation costs. As a result of this law, the City anticipates employees will save $400 per year on MetroCard expenses and employers will annually save $100 per employee in tax liability. The Department of Consumer Affairs will enforce the law, which imposes fines on covered business who do not offer the required benefits. However, companies that fail to comply will be given a 90-day grace period to fix their violation before being subject to civil penalty. To allow businesses adequate time to adjust their practices, employers will not be subject to penalty before July 1, 2016.


Expanded Protections for Transgender New Yorkers
Governor Cuomo recently introduced regulations by Executive Order that provide broad protections for transgender New Yorkers from unlawful discrimination. The statewide regulations prohibit harassment and discrimination against transgender people by all public and private employers, housing providers, businesses, creditors, and others. Cuomo’s order, to be enforced by the New York State Division of Human Rights, will be subject to a 45-day notice and comment period before being fully implemented. The regulations will provide the full force and protections of the existing New York Human Rights Law, which includes extensive compensation and other legal remedies for victims of discrimination and harassment, as well as stiff penalties for those who violate the law.


Executive Severance Negotiation
Executives who have been recently terminated and more importantly those that are considering leaving their current positions, including those that believe they are about to be terminated are urged to think more pro-actively about their severance packages. Rather than settle for what an employer may initially offer, if anything at all, executives should consider the benefits of developing a negotiation strategy that results in a package that makes their transition to the next phase of their lives and careers more manageable and equitable. The legal issues that generally determine what leverage, if any, an employee may have depends in large part on the rights under their specific executive employment agreements, any legal claims they may have against their employer, and other non-legal factors. To find out more about how to negotiate a better severance package from your employer, please read a more in-depth article posted here on our website.

 

Next month's newsletter will focus on the flip-side of the issues - Executive Compensation strategy.


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

October 2015 NEWSLETTER

Yogi Patel - Monday, October 05, 2015

Dear valued clients and supporters: This month's newsletter will focus on: (1) the current and upcoming obligations for employers under the Affordable Care Act; (2) the differences between employees and independent contractors; and (3) Non-Qualified Stock Options as a tool for entrepreneurs to attract expert advisors/consultants/employees.

The Affordable Care Act Employer Mandate
Under the Affordable Care Act ("ACA"), employers with over 50 full-time employees are required to provide health insurance. The insurance must meet certain minimal standards and must be offered to the vast majority of employees in large businesses. Employers who fail to meet the ACA's requirements face penalties that could total in the tens or hundreds of thousands of dollars. While the ACA's rules for 2014 and 2015 have been more flexible, beginning in 2016, employer obligations and penalties will be in full effect. For smaller employers who are not required to provide insurance, the ACA offers tax incentives for doing so. All employers are encouraged to consult with counsel to make sure they are in compliance and can read more about this issue in our article available here.

Employees vs. Independent Contractors
Understanding what makes a worker an employee or an independent contractor under the law is one of the most important distinctions a business owner should be able to make. Depending on the classification, employers are required to make specific tax withholdings and carry workers compensation and unemployment insurance policies. Additionally, employees (as opposed to independent contractors) are protected by minimum wage, overtime, and other labor laws both under City, State and Federal Laws. Employers who misclassify workers and then fail to meet their obligations and/or violate the law can be held liable for penalties and damages that are as much as triple what they owe. Additionally, employers may be subject to investigation by government agencies. Recently, the U.S. Department of Labor issued an interpretation that clarified the standard used for determining a worker's status and the extent to which State and Federal agencies are auditing employee classification. For more information, including the test used for determining whether a worker is an independent contractor or an employee, see our article here.


Non-Qualified Stock Options
For entrepreneurs and business owners who might not have substantial cash on hand, offering equity in exchange for services is a commonly utilized option. One way in which this can be done is through Non-Qualified Stock Options ("NQSOs"), which grants an individual the right to purchase shares in a company at a low, fixed rate, in exchange for providing expert advise or other services. If the price of the company's stock goes up, the option holder will be able to purchase the shares at the lower, fixed rate and enjoy the increased stock price as profit. NQSOs come with built-in limitations that are designed to protect the interests of the business and allow the parties to establish their relationship first. Most commonly, the option holder does not gain the right to purchase shares until he or she has provided services to the company for a certain period of time. Understanding how to use NSQOs can be a powerful tool for business owners and is something all entrepreneurs should have at their disposal. For more information and in-depth discussion on NQSOs, see our article here.


Readers are encouraged to peruse the more in-depth articles on our website and to follow us on Twitter (@lloydpatelllp) and Facebook to receive updates on this and other legal developments throughout the month.

August 2015 Newsletter

Yogi Patel - Tuesday, August 04, 2015

Dear valued clients and supporters: This month's newsletter will focus on: (1) the EEOC’s declaration that workplace discrimination based on sexual orientation is illegal; (2) the New York State Wage Board's unanimous vote to raise the minimum wage for restaurant workers in the fast food industry to $15 an hour; and (3) the Second Circuit's decision in Glatt v. Fox Searchlight Pictures, Inc., providing valuable clarity on the question of whether interns are "employees" -- and therefore entitled to minimum wage and overtime pay under the Federal Fair Labor Standards Act and New York Labor Law.

 

Sexual Orientation and the Workplace
Title VII of the Civil Rights Act of 1964 is at the heart of Federal anti-discrimination law. It prohibits employers with at least fifteen employees from discriminating on the basis of race, color, religion, sex, or national origin. Sexual orientation discrimination is not expressly included on the list and several federal courts, both at the district court and appellate level, have previously held that the statute’s ban on sex discrimination did not encompass sexual orientation discrimination. But on July 15, 2015, the Equal Employment Opportunity Commission (EEOC) issued a ruling finding that sexual orientation discrimination is “associational discrimination on the basis of sex.” Thus, adverse actions taken by employer on account of an employees sexual orientation will now be considered illegal by the EEOC and LGBT employees will have an independent, stand-alone basis to lodge a discrimination complaint before the EEOC under Title VII. It is too early to know how courts will view this new development, and of course most employers are also governed by State and local laws that may already prohibit discrimination on the basis of sexual orientation.


Minimum Wage and Fast Food Industry Workers
The New York State Wage Board recently recommended raising the minimum wage for restaurant workers in the fast food industry to $15 an hour. In the event the Wage Order is accepted by the Commissioner in its current recommended form, the mandate would apply to all workers in fast-food restaurants that are part of chains with at least 30 outlets. More specifically, the change will apply to workers who cook, clean, serve customers, make deliveries, or perform routine maintenance work as part of their day-to-day duties. The proposed Wage Order, if implemented as is, will apply to all fast food restaurants associated with a chain of 30 or more outlets, irrespective of how many restaurants the individual employer owns. The proposal, once officially published, will then be followed by a 15-day public comment period. Comments will be accepted online and by mail. Based on those comments, the Commissioner may accept, reject or modify the Board's recommendations and file a Wage Order. The Wage Order must be filed within 45 days once the report is filed. The Order is then subject to an additional regulatory process thereafter. We will continue to monitor the situation and provide updates as the process progresses, but if you have specific questions about how this may affect you as an employee or an employer, please contact us.


Interns v. Employees
In Glatt v. Fox Searchlight Pictures, Inc., the action was brought by former production interns who worked on the Oscar-winning movie Black Swan, as well as a publicity intern at the company’s New York corporate office, all of whom were unpaid. The interns argued they should have been classified as employees and, thus, should have been compensated for their efforts. The law surrounding this issue has been unclear for several decades due to the guidance offered by the U.S. Department of Labor and conflicting interpretations by courts across the country, making it difficult for an employer to know how to comply. The Second Circuit, which covers New York, observed in Glatt that the question of an intern’s employment status is a highly individualized inquiry and not subject to a bright line rule. To assess whether interns are “trainees” under the Fair Labor Standards Act (“FLSA”) (and therefore “exempt” from overtime and minimum wage rules) or “employees" (and therefore entitled to the laws’ protections), the court adopted what it calls the “primary beneficiary” approach. Under the "primary beneficiary" test, there are at least seven independent factors that should be analyzed under the new approach to determine whether the position is truly an internship or an employment situation. Employers are advised to fully understand their obligations under Glatt prior to hiring an intern.


A more in-depth article on this issue, including the seven factors under the primary beneficiary approach will be posted here on our website shortly and readers are encouraged to follow us on Twitter (@lloydpatelllp) and Facebook to receive updates on this and other issues throughout the month.

APRIL 2015 NEWSLETTER

Yogi Patel - Wednesday, April 01, 2015

Dear valued clients and supporters.  This month's newsletter will focus on: (1) recent changes to the law in New York State that impacts every employer and all newly hired employees as of January 1, 2015; (2) recent U.S. Supreme Court ruling impacting an employers obligation to provide workplace accommodations to pregnant employees and (3) legal considerations when using the internet to engage in commerce.

Wage Theft Protection Act of 2010  ("WTPA")


Effective January 1, 2015, the WTPA requires all employers in New York State to provide all newly hired employees with a wage notice in English and, if applicable, the primary language of the employee as identified by the employee, within ten (10) day of hiring.  A civil lawsuit against an employer for failure to provide these wage notices may be brought by either the employee or the commissioner of the Department of Labor (on behalf of the employee), and could result in a judgment against the employer for up to $250 per workday (per employee) in which the violation occurs or continues, up to $5,000 (in addition to costs and reasonable attorney fees).  More information about the amended law, including what information needs to be included in the wage notice is available here.  

Workplace Accommodations for Pregnant Employees


The U.S. Supreme Court, in the case Young vs. United States Parcel Service was expected to determine whether and to what extent an employer is required to provide work place accommodations to pregnant employees. Both Federal, State and City law currently make it unlawful for an employer to terminate or treat an employee unequally simple because of the pregnancy.  But what the laws did not make clear is what type of accommodations must employers make for pregnant workers. The decision, which was issued on March 25, 2015, held that a plaintiff may be able to prove unlawful failure to accommodate a pregnancy-related condition through evidence that other non-pregnant employees were provided with the requested accommodation.  The decision lowers the burden for plaintiffs and raises the burden for employers to overcome. And employer policies that tend to negatively impact pregnant employees – particularly where there is evidence that the requested accommodations have been provided to non-pregnant employees – are likely to be scrutinized and may well be deemed to be unlawful.  We recommend employers to review their policies and practices with this ruling in mind, and to make whatever changes necessary to ensure appropriate accommodation of, and no adverse effect with respect to, pregnant employees.   Internet and Commerce There is no denying the impact of the Internet on commerce. Many businesses utilize websites, social media, and other web-based platforms to promote their products and services. In fact, an entire industry has emerged comprised of what are now commonly known as “e-commerce” based business – entities that rely solely on the Internet as their means of engaging in commerce. Various Federal and State laws govern businesses’ ability to advertise on the web. These restrictions depend in large part on the company’s location, where their customers live, and the industry in which they operate. Special consideration should be taken by businesses that actually engage in e-commerce (selling goods or services over the Internet), since their activities may involve more legal issues than a website that merely uses the web for advertising purposes. However, even websites that are only created for advertising purposes should be mindful of best business practices to protect themselves from liability.  An in-depth article exploring these issues is now available here


Internet and Commerce


There is no denying the impact of the Internet on commerce. Many businesses utilize websites, social media, and other web-based platforms to promote their products and services. In fact, an entire industry has emerged comprised of what are now commonly known as “e-commerce” based business – entities that rely solely on the Internet as their means of engaging in commerce. Various Federal and State laws govern businesses’ ability to advertise on the web. These restrictions depend in large part on the company’s location, where their customers live, and the industry in which they operate. Special consideration should be taken by businesses that actually engage in e-commerce (selling goods or services over the Internet), since their activities may involve more legal issues than a website that merely uses the web for advertising purposes. However, even websites that are only created for advertising purposes should be mindful of best business practices to protect themselves from liability.  An in-depth article exploring these issues is now available here.   



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