REMINDER: VOTE!

Two signs indicating separate choices

Early voting began Monday for the November 7 election. What’s on the ballot:

  • 7 proposed amendments to the state constitution:
    • Property tax relief for partially disabled veterans and their spouses who acquired their homes for less than market value through charities;
    • Expands the ability of lenders to make home equity loans;
    • Limits the time an unpaid political appointee can serve when he or she is appointed by the governor;
    • Requires courts to give notice to the Texas Attorney General when a litigant challenges the constitutionality of a state statute and making courts wait 45 days before holding a statute to be unconstitutional;
    • Allows professional sports teams’ charitable foundations to hold raffles;
    • Provides property tax relief to spouses of first responders who are killed in the line of duty;
    • Permits financial institutions to hold prize contests to promote savings.
  • Travis County – $185 million in bonds to finance bike paths, sidewalks, road expansion projects, and a sports complex in Bee Cave.
  • AISD – $1.05 billion in bonds for building improvements and to build an elementary school in the Mueller development.

The League of Women Voters produces an excellent, non-partisan voter’s guide that can be accessed free on their website: https://lwvaustin.org/wp-content/uploads/2013/09/VG-2017-NOV-online-web-site-FINAL.pdf

Year-End Tune Up For Your Small Business


Ah, December . . .  It’s chock full of holiday parties, events, out-of-town visitors, and shopping.

It’s also when small business owners must get things in order for tax season.

It’s also a great time to take stock of the year that is ending and plan ahead for a successful new year.

Here’s a handy checklist to help you perform a year-end business tune up. No list is exhaustive, yet this list is still pretty long. Adjust it to fit your business needs.

Staffing:

Complete performance reviews for all employees and independent contractors.

Review your staffing needs and plan to add, subtract, or reorganize accordingly.

Review job descriptions for independent contractors to ensure they are truly contractors and not mischaracterized employees.

Review personnel files and update I-9s and W-4s as necessary.

Review employee benefits.

Policies & Procedures:

Review your employment policies and procedures to ensure they are up to date and comply with recent changes in the law.

Review your administrative and business policies and procedures to see whether they accurately reflect your current practices.

Sales & Marketing:

Compare your actual sales to your yearly goal.

Identify successes and areas for improvement in the areas of lead generation and conversion of leads to customers.

Adjust marketing plan to match your goals.

Quality:

Check customer satisfaction.

Review customer service policies and procedures.

Identify ways to improve the customer experience.

Financials:

Reconcile accounts.

Collect W-9s from contractors and vendors that need 1099s.

Review yearly journal or transaction entries for accuracy. Especially make sure that income and expenses are properly categorized.

Verify year-end accounts payable and accounts receivable.

Reconcile payroll including comparing taxes paid to payroll returns.

Prepare documents and files for your CPA or tax professional.

Run year-end reports such as a profit and loss statement, budget report, and balance sheet. Compare to last year’s reports.

Prepare next year’s budget.

IT:

Review IT policies and procedures.

If you collect personal information from customers, review your PCI compliance.

Train employees as necessary.

Install security patches, software, and operating system updates.

Consider getting a cybersecurity audit.

Goal Setting:

Review last year’s goals.

Review your long-term goals.

Set next year’s goals.

Adjust your business plan accordingly.

 

Finally, have a successful new year! 

 

Time’s A Wastin’ – Get Ready for the New Overtime Rule

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Each year the Texas Workforce Commission and the Wage and Hour Division of the U.S. Department of Labor investigate scores of Texas businesses for violating minimum wage and overtime laws. With the new federal overtime exemptions imminently taking effect, employers should review their payroll policies to ensure compliance. Beginning December 1, salaried employees who make less than $47,476 per year or $913 per week will be entitled to overtime pay for working more than 40 hours in a work week. Texas recognizes the federal minimum wage which is currently $7.25 an hour.

 

Plan now to be in compliance with the overtime rule on December 1. Salary alone is not the only factor for determining whether a salaried employee is entitled to overtime or is exempt:

 

  • Salaried employees are paid a salary not an hourly wage;
  • Full-time exempt employees’ salaries must be at least $47,476 annually; and
  • Exempt employees must have executive, administrative, or professional duties, e.g., management, exercise of discretion and independent judgment, or work that requires advanced knowledge.

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Nonexempt employees are entitled to overtime pay at time and a half for each hour worked beyond a 40 hour work week. The Department of Labor enumerated four options for employers to comply with the new rule:

 

  • Raise salaries to maintain the exemption;
  • Keep current salaries and pay overtime;
  • Adjust workloads and schedules so that employees work no more than 40 hours per week; or
  • Adjust wages by converting salaried employees to hourly.

 

Raising salaries and paying overtime is not financially feasible for many small businesses. Converting salaried workers to hourly pay could tank employee morale. Another way to comply with the new rule without undertaking additional financial burdens is to adopt a workplace policy forbidding non-exempt employees from working overtime without prior written approval from a supervisor. Enforce the policy consistently. This allows the business to predict and control labor costs while encouraging healthy work-life balance for employees.

The last minute has arrived. If you haven’t already adopted procedures to comply, consult a lawyer to help your business transition to the new rule. The Department of Labor has published this fact sheet for employers: https://www.dol.gov/whd/overtime/final2016/general-guidance.pdf

 

What’s The Deal With Arbitration?

It seems like every contract, service agreement, or website terms of service has a mandatory arbitration clause in it. Why is that? There are compelling reasons to arbitrate disputes, but arbitration also has its drawbacks.

Arbitration

Why arbitrate?

Arbitration is private; whereas, generally documents in court cases are public records.

So, if keeping a dispute out of the public eye is important, arbitration is preferable. In most cases, arbitration is faster. Arbitration can be accomplished in a matter of months. In smaller cases, parties can ask for fast track arbitration which is even faster. Fast track arbitration can be accomplished in a month or two.

Litigation of smaller cases will generally take six months or more. Litigation of complex cases can take years. Arbitration is informal. Because arbitration is done by agreement, it is flexible.

The rules of evidence don’t apply, so parties can either loosen or dispense with the need for testimony necessary in court that makes documents and such admissible. The investigation phase of a lawsuit is called discovery.

Discovery in arbitration is more of an informal exchange of information rather than a structured process involving asking, objecting, and getting court rulings on information requests. Arbitrators can, but do not have to, strictly follow some statutes. For example, an arbitrator can relax some of the “gotcha” procedural laws that litigants find to be unfair such as the time limits for filing suit. Arbitration is final. It is very difficult to appeal an arbitration award.

 

What are the drawbacks to arbitration?

Because the arbitrator does not have to follow laws strictly, statutory claims and defenses that may be a slam dunk in litigation may not be followed by the arbitrator. It is very, very difficult to overturn or appeal an arbitration award. Litigants have a right to have a higher court review lower court rulings.  

Because the rules of discovery and rules of evidence do not apply to arbitration, parties run the risk of not getting all of the information and evidence relevant to the case. The arbitrator may base an arbitration award on evidence that is not admissible in court. Courts and juries cannot consider inadmissible evidence.

There is no jury right in arbitration. The arbitrator is both judge and jury. If the losing party doesn’t pay the award, it will take longer to make the award collectible. If a court judgment is not appealed, it becomes final and collectible in 30 days. After arbitration, the winner must file the arbitration award in court, and the court will confirm the award making it collectible. However, the loser has 90 days to dispute the award in court.

 

Which is more expensive?

That depends. The filing fees for arbitration are higher, but overall costs of arbitration can be lower because arbitration takes less time and because preparing the case for arbitration is less expensive.

 

Mediation is an alternative.

Mediation is a means of dispute resolution that is less expensive than arbitration or litigation. Mediation is attractive because the parties agree on a resolution. If mediation is not successful, then the parties may resort to arbitration or litigation.

Many businesses prefer arbitration because it provides a private forum for resolution of disputes, and arbitration can be faster and less expensive than litigation.

In business disputes among licensed professionals such as doctors or lawyers, the privacy afforded by arbitration is preferable to public court proceedings that may expose the dispute to media coverage.

In reality, inserting arbitration clauses into business contracts has become a knee jerk almost rising to the level of boilerplate. Before inserting an arbitration clause into a contract, consider the pros and cons in light of the contract and the parties’ relationship. Rather than inserting an arbitration clause into every contract, consider requiring mediation prior to arbitration or litigation as an even less expensive means of resolving disputes.

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.

Is an Employee Handbook a Contract?

 

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Texas is an employment-at-will state. That means either party can end the employment relationship at any time without reason. In an employment-at-will state, the employer does not have to have good cause to fire an employee. However, an employee who is terminated without good cause related to the job may be eligible to collect unemployment benefits.

Like any legal concept, there are a few exceptions.

An employment contract that specifies the situations when the relationship can be terminated will form a contract that overrides employment-at-will. That is why it is important that an employee handbook not create a contractual relationship between the employer and the employee.

A well-crafted employee handbook is a valuable asset to your business. A handbook describes operating policies, employee benefits, and sets clear expectations for the employment relationship. A common practice is for employees to sign and agree to abide by the policies outlined in an employee handbook; however, careful wording is necessary to avoid creating an employment contract that would abridge the employer’s ability to terminate the relationship at will.

What turns a handbook into a contract?

An enforceable contract must contain a mutual agreement and consideration (benefit). To avoid turning an employee handbook into an employment contract, set expectations but avoid making promises, state clearly that either party can terminate the relationship without cause, make no promises of continued employment, and avoid creating inflexible discipline systems. Employers whose handbooks contained discipline systems that abrogate the right to terminate the employee at will have inadvertently created employment contracts.

The simplest way to avoid turning an employee handbook into a contract is to provide a disclaimer that acknowledges the handbook contains guidelines only, does not create a contract of employment, and that it is subject to change including revocation by the employer at any time. Including a disclaimer protects the employer from claims that an employee handbook creates an employment contract that modifies the at-will employment relationship.

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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What’s the Deal with Open Carry?

Lots of people are asking about Texas’ new Open Carry law because it takes effect next week. Many people are wondering if Texas businesses have to allow customers to openly carry firearms on their premises starting January 1. The short answer is: No, if you notify customers not to carry handguns on the premises. Let’s take a look at Texas’ new open carry law.

The open carry law is HB 910; it goes into effect January 1, 2016.

 Read it in full here. 

Previously, eligible Texans could apply for a license to carry a concealed handgun. This has been changed to a license simply to carry a handgun. In other words, a handgun license allows the holder to carry a handgun openly or to conceal it. An openly carried handgun must be holstered. Note that the open carry law only covers handguns. The new law does not apply to shotguns, rifles, assault rifles, or other long guns. In fact, Texas law is silent about carrying long guns in public except for Penal Code section 42.01(a)(8) which makes it a crime to intentionally or knowingly display any firearm in a public place in a way that is calculated to cause alarm.

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Photo by: Eric Gay Scott Smith, a supporter of open carry gun laws, wears a pistol as he prepares for a rally at the Capitol on Jan. 26, 2015, in Austin, Texas. (Associated Press)

 

Businesses can prohibit both employees and customers from carrying handguns on their premises even if the person is licensed to carry a handgun. However, a business that wants to prohibit handguns must post a notice at every entrance. There are separate notices required to prohibit openly carried handguns and concealed handguns. The notices must be in 1 inch high block letters of contrasting colors in both English and Spanish. The contents of the notices are:

Pursuant to Section 30.06, Penal Code (trespass by license holder with a concealed handgun), a person licensed under Subchapter H, Chapter 411, Government Code (handgun licensing law), may not enter this property with a concealed handgun.

Conforme a la Sección 30.06, Código Penal (traspasar portando armas de fuego), una persona con licencia bajo el Subcapítulo H, Capítulo 411, Código de Gobierno (ley de licencias arma de fuego), no puede entrar en esta propiedad con una pistola oculta.

 

&

 

Pursuant to Section 30.07, Penal Code (trespass by license holder with an openly carried handgun), a person licensed under Subchapter H, Chapter 411, Government Code (handgun licensing law), may not enter this property with a handgun that is carried openly.

Conforme a la Sección 30.07, Código Penal (traspasar portando armas de fuego que se realiza abiertamente), una persona con licencia bajo el Subcapítulo H, Capítulo 411, Código de Gobierno (ley de licencias arma de fuego) no puede entrar en esta propiedad con un arma de fuego que se realiza abiertamente.

 

Many vendors sell notice signs that conform to the legal requirements. If a person carries a handgun into a business that has the notice sign posted, an employee or other authorized person should politely remind the handgun carrier that the business does not allow handguns and ask the carrier to remove the handgun from the building. Carrying a handgun on property where carrying is forbidden is a Class C misdemeanor – essentially the same as a traffic ticket. However, if a handgun carrier refuses to leave after being personally given oral or written notice of the prohibition, the offense is raised to a Class A misdemeanor. A person convicted of a Class A misdemeanor is subject to greater punishment than one who is convicted of a Class C misdemeanor.

Property owners can prohibit visitors from carrying long arms on their property by simply telling visitors that guns are not allowed on the property. No particular form of notice is specified to inform carriers of rifles, shotguns, or assault weapons.

Why are handguns treated differently than rifles, shotguns, assault rifles, and other long guns? Most likely because it is harder to hide a long gun. Handguns fit neatly into a purse, briefcase, or holster where they are not visible; whereas, rifles and other long guns are too large to easily hide on one’s body.

It is important to understand that the Legislature narrowly defined the word “premises” to essentially be inside a building. Even if a business owner prohibits carrying handguns on the “premises,” people may still keep a gun secured in their vehicle.

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