Holiday Safety: A Short Checklist

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The holiday season, really from Halloween through the twelfth day of Christmas, is this Austin Business Attorney’s favorite time of year. I love just about everything about the holidays. But, with the good comes the thieves.

Old fashioned thieves and high tech thieves come out of the woodwork during the holidays. From stealing packages off the porch to stealing your identity online, thieves are hard at work during the holiday season.

Here’s a short checklist to help you stay safe.

Personal Safety While Shopping:

  • Be alert to your surroundings.
  • Always lock your vehicle, and don’t leave anything valuable in sight.
  • Take your electronics with you!
  • Don’t leave cell phone, tablet, or laptop in a car.
  • Make sure your devices are locked so you have to use a password to use them.
  • Encrypt your hard drives!
  • Use find my phone or a similar location app.
  • Use an app that will remotely wipe your device if it is stolen.
  • Password protect important documents.
  • Even if the car is locked, Thieves now have devices that ping an electronic device if it’s on so they can easily locate which vehicles to smash and grab. True story: I was at lunch with a friend. As we walked to our cars, we saw two police cars blocking a pickup truck in the parking lot. There were legs sticking out of the driver’s side window. The police had caught a thief red-handed. He and a buddy were driving through parking lots locating vehicles that had laptops in them. They were smashing windows, grabbing laptops, and driving on to the next victim’s vehicle.
  • Carry bags across your body not just over your shoulder and clutch your clutch tightly.
  • Be alert to someone who is standing too close to you in line, they may have a card reader in their pocket – or they may be an old fashioned pickpocket.
  • Give yourself enough time. People make safety mistakes when they are in a hurry.

Safety at Home:

  • Package thieves are following mail and UPS trucks around Travis and Williamson County and are stealing mail and packages before the homeowner knows it’s arrived.
  • Have packages delivered to your work address
  • Ask a neighbor to collect your mail/packages while you are at work
  • Require a signature for package delivery.
  • If your mailbox locks, bravo! If not, make sure you know when the mail usually arrives and try to get it as soon as possible so thieves cannot rummage through your mailbox looking for gift cards and checks.
  • There is a ring of thieves in the Austin area that target neighborhoods and rummage through vehicles in driveways at night. Take everything out of your car at night, and lock it.
  • Lock your door during the holidays both when you’re not at home and at night.

Safety Online:

  • Look for HTTPS or the lock icon or symbol next to the web address before buying online. Thieves could be phishing for your credit card info! The lock icon ensures it’s protected. 
  • Use strong passwords that are a combination of numbers, letters, and symbols and that are at least 8 characters long.
  • Tip: pick a word or phrase that is at least 8 characters long and means something to you, e.g., if you love Christmas, you could choose it.
  • Change at least one letter to a capital (best not the first letter, use one in the middle), change at least one letter to a number, and change at least one letter to a symbol. Done!
  • Example: Christmas as a password might be chr9st#As.
  • Use multi factor authentication when it is offered. That’s a username and password combination plus at least one other piece of information, e.g., a security question.
  • Choose oddball security questions, and use something you make up as an answer. Example, do you remember who your fifth grade math teacher was? Use the question and make up an answer you can remember. Maybe you really wished Batman was your fith grade teacher. So, use Batman. Don’t use your father’s middle name or your mother’s maiden name and the like. Many ID thieves know their victims and know the answers to easy questions.
  • Be careful. Don’t click on anything suspicious. If you receive an email saying your bank account is overdrawn, don’t open it. Call your bank. Never use a phone number you receive in an email. Call the number on a statement, or look up the number.
  • Don’t keep a document on your computer called “Passwords.” I get it, we have too many accounts with user names and passwords. We have to keep them somewhere. Get creative! 
  • One option is to use a password keeping app like One Pass.
  • Another is to keep such a document but name it something that doesn’t alert a thief to the fact that it’s a password doc. Name it something unappealing like colonoscopy or foot fungus, and password protect it.
  • Do NOT under any circumstances keep a hand written list of passwords at your desk or in your bag!

Most of these tips are common sense. Learn to trust yourself.

If you think someone is standing too close, they probably are. Just move away. Go look at something else and get back in line later.

If it’s dark, don’t hesitate to ask a security guard to walk you to your car.

And, if you see an email from someone you don’t know, or if an email seems suspicious, just delete it.

Here’s to a safe and happy holiday season!

$47,476 – The Magic Number ARE YOU READY?

On December 1,

new overtime rules take effect.

Is your business ready?

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Starting in December, administrative employees making less than the magic number, $47,476 per year, will no longer be exempt from the overtime provisions of the Fair Labor Standards Act. These administrative employees will earn overtime pay if they work more than 40 hours in a week.

 Overtime pay is 1.5 times the employee’s hourly pay rate. The change is huge because it more than doubles the threshold for the exemption. Previously, administrative employees making more than $23,660 a year have been exempt from overtime.

Salary alone is not the only factor for determining whether a salaried employee is entitled to overtime or is exempt. There is actually a three part test:

  • The employee is paid a salary as opposed to an hourly wage;
  • The salary must be at least $47,476 annually for a full time worker to be exempt; and
  • The employee’s primary job must be executive, administrative, or professional, e.g., management, exercise of discretion and independent judgment, or work that requires advanced knowledge.

Otherwise, the employee is entitled to overtime pay at time and a half the employee’s hourly equivalent rate for each hour worked beyond a 40 hour work week.

The Department of Labor has identified four options for employers to comply with the new rule:

  • Raise salaries to maintain the exemption;
  • Keep current salaries, and plan to pay overtime;
  • Adjust workloads and schedules so that employees are not working overtime; or
  • Adjust wages by converting salaried employees to hourly.

What are businesses doing to prepare?

Raising salaries and paying overtime is simply not financially feasible for many businesses. Employees may negatively view adjustments in workloads and schedules or converting them from salary to hourly pay.

There is another way to comply with the new rule without undertaking additional financial burdens: adopt a workplace policy mandating that non-exempt employees cannot work overtime without prior written approval from a supervisor.

Enforce the policy consistently. This will help the business be able to predict and control labor costs while encouraging healthy work-life balance for employees.

Small businesses may have a tough adjustment period ahead.

Adopting a policy regarding overtime, educating employees about the policy, and enforcing the policy will provide some predictability and enable the business to manage workloads in a way that minimizes financial strain and possible cash flow problems. We can help craft company policies that comply with the new rule while providing the ability to manage overtime.

Break Room Art A Quick List of Required Postings for Texas Employers

Ah, the employee break room – the smell of stale coffee, long-forgotten leftovers lingering in the fridge,

and… a panoply of informational posters decorating the walls?

Yesterday, the EEOC raised the penalties for failing to post required notices of employee rights under several federal laws.

At issue are the notices covered in the “Equal Opportunity is the Law” poster.

The maximum fine increased from $210 to a whopping $525 per violation.

This begs the question, “What notices are required?”

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All employers must post information regarding:

Additionally, federal law requires federal contractors and employers with 15 or more employees to post the “Equal Opportunity is the Law” poster.

There are plenty of vendors who sell the required posters; however, all required posters can be downloaded free of charge through the Texas Workforce Commission and EEOC websites.

Happy decorating!

Taking A Cue From Business: Using Technology to Help More People With Less Resources

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It’s become ubiquitous on customer service web pages: the chat box.

Searching through a site’s FAQs, a box pops up with an avatar of a person who looks eager to help encouraging you to type your question in the box.

Years ago, legal aid lawyers began wondering if we could use a chat box to help people who lived far away from the nearest legal aid office or who didn’t have transportation to their local legal aid office.

Nationally, several groups started working on the idea.

What if we could leverage internet chat to allow lawyers to help low income people from their desk?

Enter Texas Legal Services Center (TLSC) and the Texas Access to Justice Foundation. TLSC proposed and received a grant from the Foundation to start a chat service. We call it Live Help, and it’s still up and running on the Texas Law Help website, www.texaslawhelp.org.

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The site and Live Help are geared to legal issues faced by low income Texans; however, the site contains a plethora of useful information about Texas law. It’s well worth a visit.

The first chat lawyer, Elliott Fontenette, is now the project manager leading a team of paid and volunteer attorneys. I consider him to be a visionary. When we started Live Help in 2010, Elliott and I were swimming in uncharted water. Now, legal aid groups around the world are using chat to help people access legal information, and the service has proved popular here in Texas with nearly 28,000 Texans having used the service.

I was reminded of my time at TLSC and working on Texas Law Help when Elliott and I were interviewed for a recent ABA Journal article about legal aid agencies that use web chat: http://www.abajournal.com/magazine/article/legal_aid_agencies_are_using_webchat_to_answer_queries/?utm_source=maestro&utm_medium=email&utm_campaign=tech_monthly

Thanks, Elliott, TLSC and Texas Access to Justice Foundation for continuing to bring quality legal services to those who cannot afford it. Well done!

 

New Federal Law Protects Business Trade Secrets

Pres Obama Signs

On May 11, President Obama signed the Defend Trade Secrets Act of 2016 into law. The Act protects businesses from misappropriation of trade secrets and gives businesses the ability to litigate trade secret cases in the federal courts. The text of the new law can be found here:

https://www.congress.gov/bill/114th-congress/senate-bill/1890/text.

Texas adopted the Uniform Trade Secrets Act in 2013. The Texas law is codified in Chapter 134A of the Texas Civil Practice and Remedies Code. The text of the Texas statute may be found here:

http://www.statutes.legis.state.tx.us/Docs/CP/htm/CP.134A.htm.

There are a few differences between the Texas law and the new federal law. The definition of a trade secret is essentially the same under both the federal and state statutes. A trade secret is information that is valuable because it is specific to the business and that the business reasonably tries to protect. Trade secrets typically include a company’s financial data, policies and procedures, customer lists, supplier lists, intellectual property, and other proprietary information such as formulas, techniques, processes, drawings, and the like

The new law allows a business to file a federal lawsuit to protect trade secrets “related to a  product or service used in, or intended for use in, interstate or foreign commerce.” 18 U.S.C. § 1836(b)(1). Courts traditionally interpret interstate commerce broadly, so many businesses will be able to litigate in federal court. One of the most interesting provisions of the new law is a pre-emptive strike: the law allows a party to obtain a court order for seizure of property to prevent the dissemination of trade secrets in “extraordinary circumstances.” The seizure order can be obtained without notice to the opposing party. A prevailing party may get an injunction to prevent dissemination of trade secrets, an order requiring the opposing party to pay a royalty, damages for actual business losses, damages for unjust enrichment, and attorneys fees. The law also allows an award of up to two times the amount of damages if the misappropriation was willful and malicious.

Protecting trade secrets is of paramount concern when a competitor hires a former employee. The Defend Trade Secrets Act allows a court to place conditions on the former employee’s employment when there is a threat of misappropriation.

There are some circumstances when employees or former employees have immunity from disclosing trade secrets. For example, an individual is immune from liability for disclosing a trade secret in confidence to a government official or attorney solely for the purpose of reporting or investigating a violation of law. If trade secrets are disclosed in documents filed in a court, the statute requires the filing to be sealed to prevent public disclosure.

Important: The Defend Trade Secrets Act requires employers to notify employees of the immunity provisions in the law. If your business has incorporated non-disclosure language in your employee handbook, or if you require employees to sign non-disclosure agreements, you will need to revise your handbook or agreements to properly notify employees that they are protected from liability when disclosures of trade secrets are made to government agencies or attorneys solely for the purpose of reporting or investigation violations of the law. An employer that fails to provide the required notice loses the right to recover attorneys fees and exemplary damages.

The availability of both state and federal court actions to protect businesses from misappropriation of trade secrets is a welcome development; however, most businesses need to revise their non-disclosure agreements, handbooks, or policies and procedure manuals as soon as possible to avoid losing valuable rights under the new law.

8 Reasons Why Your LLC Needs a Company Agreement

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Jane, Mary, and Alice have a thriving business. They decided to operate as an LLC and handled the formation themselves by filing a certificate of formation with the Texas Secretary of State.

Everything was fine until Alice got divorced, and her ex was assigned half her membership shares.

Who’d have known their company shares were community property!

Now, the ex is making life miserable by demanding to see the books, demanding distributions, and threatening to sue. What a mess: a mess that was avoidable. Had they adopted a company agreement, the owners could have managed what happened to the company shares in divorce.

A company agreement, also called an operating agreement, describes the way a limited liability company will do business. The company agreement governs the relations among members, managers, officers, and the company. Even a sole member LLC can, and should, adopt a company agreement. Here are a few reasons why.

 

  1. Retaining control. A company agreement allows the members to determine how the company is governed and what happens to membership shares if a member dies, divorces, files for bankruptcy, or just wants out. These kinds of events can erode members’ control over the business. It is best to deal with these contingencies before they happen. A company agreement does that.
  2. If you don’t have a company agreement, the State of Texas will set the operating rules for your company through Chapter 101 of the Texas Business Organizations Code. Many of the Code provisions can be waived or modified to better suit your company.
  3. With a company agreement, you can establish different classes of ownership. For example, a you may want to retain control of the company but give others a share in ownership. This can be accomplished by having two classes of membership: voting members and non-voting members. Without a company agreement, an LLC is limited to one class of membership.
  4. A member of an LLC cannot withdraw or be expelled from the company unless you have a company agreement that describes a process for a member to withdraw or be expelled. In other words, if one member wants to leave, or if members want to kick out a non-performing member, you can’t do it unless you have a company agreement.
  5. A company agreement can limit assignment of interests. What if a member gets into financial trouble and wants to pledge membership shares as collateral for a loan? If the member defaults on loan payments, you may up with a business partner you never intended to have.
  6. A company agreement can describe the relationship between members and managers. While the certificate of formation states whether an LLC is managed by its members or managers, there is no guidance or restrictions on managers without a company agreement.
  7. A company agreement can expand or limit the duties, responsibilities, and liability of members, managers, and officers. Many members are shocked that Texas law does not impose a fiduciary duty between them. A fiduciary duty is a duty of loyalty to act in the best interest of another. If you want members to owe a heightened duty to one another or to the company, you must have a company agreement.
  8. Having a well-drafted company agreement saves money in the long run. By fully describing expectations in a company agreement, members have a means of resolving disputes without resorting to litigation. The initial investment in legal fees for drafting a solid company agreement is tiny compared to the cost of arbitration or litigation.

 

A company agreement is a valuable tool that allows LLC owners to control the destiny of their company and to manage relationships between themselves, their managers, and their officers.

They can expand or limit responsibilities and liability as they see fit.

Adopting a company agreement early can be a cost saving strategy that staves off expensive problems later, and the agreement can be modified as the company grows. It is critical to use an attorney to draft a company agreement, but it is money well spent.

Hijacking on the Information Highway: Ransomware and How to Avoid it

Ransomeware scams have been around for several years.

However, they are on the rise.

Every business needs to train staff who have access to computers how to avoid this kind of scam. Ransomware is one of the many kinds of malware — that is, malicious code that can infect a computer.

Ransomware enters a network, computer, or other device in the same way as other malware. Usually, a user clicks something they shouldn’t —  like an icon, a link, or a file attachment in an email or text message. Increasingly, criminals are inserting malware links in social media posts as traps for the unwary.

Click and thieves are in the door.

Once ransomware finds its way into a device or network, the device will freeze or appear to crash. Initially, ransomware scams were perpetrated by cybergangs who encrypted the infected device. The only way for the victim to regain control was to pay the required ransom. Now, less skilled copycats generate a pop-up message on the infected device that says the device is frozen or encrypted, but the warning may be a ruse.

Some scammers generate a pop-up warning that purports to be from law enforcement. The warning states the victim has broken a law and that the agency has locked the victim’s device pending payment of a fine.

Other versions of the scam simply notify the victim that the device has been encrypted, and a ransom must be paid to regain control of the device. Either way, the criminal’s endgame is the same: to force the victim to pay to remove the malware. The size of the ransom plus the damage to a business if the situation lingers prompts most victims to pay up.

The FBI has just released a public warning that includes a helpful list of steps to take to avoid ransomeware scams. You can find the full press release here: https://www.fbi.gov/sanjuan/press-releases/2016/fbi-warns-the-public-about-ransomware-internet-scam.

In a nutshell, the FBI suggests:

  • Keep your data backed up, and store the backup file in a remote location.
  • In addition, we suggest using at least a two-step backup system. Use a backup service that stores a copy of your files in a remote location either in the cloud or in a remote server, and perform regular backups on a portable storage device such as an external hard drive. Keep the external hard drive in a safe place.
  • Update your settings to show hidden file extensions. The FBI warns that malware may contain double file extensions, e.g., *.pdf.exe.
  • Don’t open *.exe files attached to emails.
  • Use antivirus and firewall protection, keep it up-to-date, and make sure you install operating system updates and security patches as they become available.
  • Use strong passwords, and avoid using the same password for everything.
  • We suggest changing passwords regularly as well.
  • Use a pop-up blocker.
  • Download software only from trustworthy sources. Be especially careful when downloading freeware.
  • Don’t open attachments in unsolicited emails.
  • We suggest treating all unsolicited communications as if they are scams. In other words, if you did not initiate a conversation, be extra careful even if the communication purports to be from someone you trust. Scammers can hijack or spoof email addresses.

    When in doubt, contact the alleged sender. Don’t use contact information from an email, text, or pop-up message. Go to your contacts list, address book, or an official source such as an agency’s website to get the email address or telephone number. Ask whether they sent the suspicious message before opening anything attached to it.

Train your staff to use internet-connected devices safely. If you become a victim, report the crime at www.ic3.gov. Do not jump to pay a ransom. First, turn off file sharing. Then, check to see whether any of your files have been compromised by running your antivirus program. Remove any infected files, and restore them from your backup. This may resolve the problem. If not, contact an IT expert for assistance. 

The President’s Supreme Court Nominee: Chief Judge Merrick Garland What Would His Confirmation Mean for Small Employers?

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In the wake of U.S. Supreme Court Justice Scalia’s death, there has been a lot of political hullabaloo about the confirmation process for Chief Justice Merrick Garland of the D.C. Circuit, President Obama’s nominee, to fill the position. However, little of the political maneuverings has anything to do with what is most important to small business owners: whether his judicial opinions have helped or harmed businesses.

Let’s take a look at a few opinions authored by Justice Merrick to see what we can glean.

First, there are several federal agencies that have regulatory power over American businesses including: the Department of Labor, the National Labor Relations Board, the Equal Employment Opportunity Commission, the Occupational Safety and Health Administration, the Internal Revenue Service, and the Federal Trade Commission. Justice Garland has a reputation for giving deference to agency determinations. Most of the time, agency contact with a business happens because the business has been accused of violating a rule, regulation, or statute.

When a business is appealing an adverse agency decision, Justice Garland appears to rule in favor of the agency more often than not.

Here is an example that explains why:

In a case involving the escape of a large amount of a corrosive and deadly chemical that sent 150 people to the hospital, the OSHA cited the business for multiple safety violations. The case went to a hearing in front of an administrative law judge who affirmed most of the violations. The company appealed to the D.C. Circuit, and in upholding the violations, Justice Garland wrote that the Court must uphold OSHA’s fact findings and conclusions so long as they are supported by substantial evidence and not arbitrary, capricious, abuse of discretion, or otherwise contrary to law.

This is simply a restatement of what the standard of review already is.

However, Justice Garland went on to quote a prior D.C. Circuit opinion stating, “We defer to [an agency’s] interpretation of the Act and regulations, upholding such interpretations so long as they are consistent with the statutory language and otherwise reasonable.”

The opinion goes on to painstakingly review OSHA’s fact findings. What this opinion tells me is that Justice Garland is not an activist judge. He follows historical precedents. Unfortunately, we are in an era when those precedents frequently favor employees over their employers.

This is not to say that Justice Garland hasn’t authored decisions favorable to businesses. He has.

When an employee wrongly tried to invoke protection of the Americans with Disabilities Act, Justice Garland sided with the employer. The employee asked for reduced work hours as a reasonable accommodation for arthritis. Days later, she fell and stopped working. For four months the employer asked for information about her health condition. She gave none, so the employer asked her to return to work. She didn’t. The employer terminated her. After that, she sent a doctor’s note saying she was totally disabled and could not work. She claimed the employer failed to give reasonable accommodation and retaliated against her. The trial court sided with the employer, and the employee appealed. Justice Garland wrote, “there can be no genuine dispute that [the employee] was not a qualified individual  . . .one who can, with or without reasonable accommodation, ‘eperform the essential functions’ of her position.”  Noting that an essential job function is the ability to appear for work, the Court found that the employee’s termination was legitimate, so there was no retaliation.

These are only two of the many legal opinions authored by Justice Garland.

However, they illustrate that he is a jurist that painstakingly reviews the facts of each case and who analyzes and complies with legal precedent. This is consistent with the observations of most commentators who have described Justice Garland as a moderate and as more conservative than President Obama’s previous nominees. What is apparent from the two cases described here is that Justice Garland appears to be neutral – neither pro-business nor anti-business.

Interestingly, Justice Garland’s father ran an advertising business out of the family home. Justice Garland describes it as the smallest of small businesses. He is known for being tough on crime and for having served as lead investigator and prosecutor of the Oklahoma City bombing case. Perhaps most importantly, Justice Garland has garnered praise from both sides of the aisle – Republicans and Democrats.

Regardless of the outcome, the path this nominee takes through the confirmation process will be interesting to watch.

Writing it Down: 4 A Recipe for Writing Simple & Personal Agreements

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My last post explored common problems with handshake agreements.

Now that you’re convinced to write stuff down, what do you write?

A contract is no good if it isn’t enforceable. To be enforceable, a contract must be made by people who are legally able to make a contract (generally, adults who understand what they are doing), must have a lawful purpose, and must have an offer, acceptance, and consideration.

An offer is exactly what it sounds like – a promise to do something if the other person will do something else. Acceptance means both parties agree to hold up their end of the bargain. Consideration is payment. Consideration can be money, a promise, an action.

The Texas Comptroller’s Office has a handout that describes the legal elements of a binding contract: 

http://comptroller.texas.gov/procurement/pub/contractguide/LegalElementsofaContract.pdf.

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