Business Law

Q: Can my business challenge the validity of a competitor’s claims in a national advertising campaign without having to engage in costly and lengthy litigation?

A: Yes. The National Advertising Division (“NAD”) of the Council of Better Business Bureaus (“CBBB”) provides an inexpensive, efficient and timely procedure for the review of national advertising for truthfulness and accuracy. In reaching its decisions, the NAD provides both parties the opportunity to present their positions in writing, and often in person, and also utilizes the expertise of well-informed attorneys and other experts who have direct knowledge of the industry that is the subject of the advertising dispute. The NAD provides a written decision within 60 business days, meaning that it is likely the challenge will be decided while the advertisement is still running. If you want more information on the NAD process, please contact our office.
James B. Shrimp, September 2011

Q: Can I protect my most valuable asset: my business’s name and reputation on the Internet?

A: Given today’s Internet-driven economy, businesses are vulnerable to the actions taken by unscrupulous individuals/businesses (cybersquatters), who utilize trademarks, or confusingly similar domain names, to make money from your hard-earned reputation. Although cybersquatters are themselves difficult to stop, there are cost effective measures that any business can take to protect its name, trademarks and reputation. For instance, a business can file a complaint with the World Intellectual Property Organization (WIPO), a specialized agency of the United Nations. The decisions of WIPO are recognized by most of the organizations that control domain names in the world. Swift action is crucial, as the cost to rehabilitate a business’s reputation is exponentially higher than preventative measures.
Joel D. Rosen, February 2009

Environmental Law

Q: How do we handle the drought?A: In this Middle Atlantic region, after a winter with almost no snow, we are having a spring with almost no rain. Near-record floods last year; drought this year. New high temperature records being set monthly. What does it mean? However, you might feel about the cause, the fact it that weather is getting both warmer and more extreme. What should we do about worsening droughts? Fish, lawns, flowers and all kinds of vegetation suffer. Businesses that rely on water, rivers and streams are hurt. In addition to conservation efforts and small adjustments in the way we use the existing reservoirs in the Delaware Basin, long range solutions should be near worked out. In our four-state area, the states and federal government have joined together to form a 100-year compact, the Delaware River Basis Commission, to handle the region’s water supply problems. I believe that the Commission and states need to work together to develop long range plans to give us better protection against drought injury. Kenneth R. Myers, April 2012

Franchise Law

Q: I am hoping to buy a franchise. Is there anything I need to look for in the Franchise Disclosure Document (“FDD”)?

A: When you are examining the FDD, you should be aware of these five (5) red flags:

1. Weak franchisor financials: If the franchisor does not have a strong balance sheet and P & L, do not expct to have them as a franchisee.

2. Litigation: Is the franchisor litigious or prone to litigate its disagreements?

3. Existing franchisees are closing, transferring or otherwise exiting the system. If more than 5% of the chain’s franchisees are leaving the system annually, there could be a systemic problem causing franchisee failure.

4. The franchisor is selling franchises, but the franchisees do not open outlets in a timely fashion.

5. A requirement to pay a non-refundable fee prior to the franchise fee.

If you see one ore more of these red flags, it might be wise to pass on the opportunity. Joel D. Rosen, April 2011

Q: I am considering buying a franchise. Where do I start?

A: If you are like me, the first place you look to research any topic is the Internet. If you are considering buying a franchise and search “buying a franchise,” there are countless sites you’ll discover. Be wary of most of them. They are trying to sell you something –either franchises or services related to franchisees — and most are not impartial. One site I recommend visiting is the U.S. Small Business Administration’s “Small Business Planner” for buying a franchise at www.sba.gov/small businessplanner/start/buyafranchise/index.html. The site contains some terrific free information, frequently asked questions, strategy tips and helpful guides to buying a franchise. And remember, never make a decision to acquire a franchise without first consulting a knowledgeable franchise attorney to review the proposed franchise documents. Joel D. Rosen, February 2010

Municipal Law

Q: Can I file a Human Relations Complaint with a local municipality?

A: The Pennsylvania Human Relations Commission (“PHRC”) receives complaints arising from allegations of discrimination based on race, color, familial status, age, religious creed, ancestry, sex, national origin, handicap or disability. However, it has no power to resolve discrimination complaints based on sexual orientation, gender identity or gender expression. Because local municipalities are authorized to create a local Human Relations Commission (“HRC”) with broader powers than the PHRC, many have chosen to do so. Thus, if you want to file a complaint that alleges an act of discrimination based on sexual orientation, etc., check with the local municipality where the event occurred to ask if it has the HRC with these broad powers. Gilbert P. High, Jr., June 2011

Q: I am considering buying property and opening a business office in a suburban municipality. Should I contact the municipality for information?

A: Yes. Go to the municipal building with a statement in writing as to what use you want to make of the property. Ask the zoning officer to advise in writing whether the zoning ordinance permits that use and, if not, whether you need to get zoning approval. Ask to see any prior zoning decisions, as they may affect your use. Ask to see the building department’s property file – look for any notices of violation. Go to the Finance Office – ask what local taxes will apply to your business. Note that those taxes will apply to each entity you use in your business. Gilbert P. High, Jr., May 2010

Q: How can the new “Right-to-Know” law affect my business?

A: Effective January 1, 2009, Pennsylvania’s revised Right-To-Know law, also called the Open Records Act, allows businesses access to copies of all “public records” kept by a governmental agency, though certain exceptions do apply. The law is useful if you are a business and want access to governmental records. However, the Open Records Act also provides that if a governmental agency has contracted with a third party to perform a governmental function, the third party’s records relating to that contract are”public records” and must be provided upon request unless an exception applies. If your business is a “third party” to such contracts, be prepared to promptly produce all of your records related to that contract should the governmental agency come knocking at your door. Gilbert P. High, Jr., April 2009

Alternative Dispute Resolution

Q: Lately, I have heard much discussion about consolidated or class-action arbitration, should I be concerned and is there anything I can do to avoid this type of arbitration?

A: Yes and Yes. Arbitration between two parties has benefits (decreased cost; less discovery; quick resolution; confidentiality) that outweigh the disadvantages (limited appellate rights; no jury trial). Consolidated or class-action arbitration alters this calculus, by permitting multiple plaintiffs to bring their claims in one arbitration, or by permitting one plaintiff to bring all the claims of similarly situated parties in one arbitration, which in turn compromises the benefits. e.g., a manufacturer might opt for arbitration in a dispute with one distributor; however, the manufacturer would not opt for an arbitration brought by numerous distributors with millions at stake. Parties who fail to consider this issue in drafting an arbitration clause could suffer monetary exposure. Therefore, steps should be taken to review and possibly, redraft arbitration provisions. James B. Shrimp, July 2010

Employment Law

Q: As an employer of a non-union workforce, do I have to be concerned about the application of the National Labor Relations Act (NLRA)?

A: Yes. Recently, the National Labor Relations Board (NLRB) has broadly interpreted the “other concerted action” language found in Section 7 of the NLRA. As a result, non-union employers who would not consider NLRA implications must now take this into consideration. For instance, in the Phoenix region, the NLRB argued, and an administrative law judge ruled, that at-will employment language found in an employee handbook which prohibits any change in the terms of employment except via a written document signed by a company executive violates the NLRA’s Section 7 right to participate in union activities. Also, the NLRB recently argued that instructing a non-union employee not to speak about a workplace investigation is a violation the NLRA. Be mindful of these interpretations when making employment decisions. James B. Shrimp, September 2012

Q: I have an employee who is volunteering to go to a military class associated with his National Guard/Reserve service. This is a busy time for my company. Do I have to let him go?

A: The law applies to any military service, regardless as to whether it is in a time of peace time or a time of war, whether it is for a class or for combat, and whether the service is completely voluntary or required by the military. This protection can generally last for up to five (5) years of military service, either consecutively or cumulatively during the time the employee has worked for you.

The Uniformed Services Employment and Reemployment Rights Act (“USERRA”) protects the employment of citizen-soldiers. An employee who takes a leave of absence for uniformed service is entitled to return to his or her job. There are very few exceptions to the employee’s right to keep their job, such as a disabling injury during their military service that prevents them from doing their normal job with a reasonable accommodation. Richard C. Sokorai, July 2012

Q: What is the ministerial exception?

A: The ministerial exception is a legal doctrine that prevents court interference in religious institutions’ employment decisions, particularly for employees who perform religious duties. The rule originates in the First Amendment to the United States Constitution and its guarantee of the free exercise of religion. The goal behind the ministerial exception is the prevention of state control over religious institutions. Despite the term “ministerial”, the exception applies to all religions and extends beyond employees in houses of worship. In early January 2012, the United States Supreme Court held unanimously that the ministerial exception barred employment discrimination claims by a teacher in religious school, who had church training and a commissioned minister’s title, and whose duties included teaching religious courses and leading religious exercises. Thomas D. Rees, January 2012

Q: If an employer dismisses an employee for cause, may the employee still receive unemployment compensation (“UC”)?

A. In Pennsylvania, employees discharged for performing poorly, but to the best of their ability, may receive UC, but those fired for willful misconduct are not eligible. Willful misconduct is conduct that violates a known rule, falls below the employer’s standards, deliberately disregards the employer’s interests, or is so negligent that it shows an intentional disregard for work duties. The employer must prove willful misconduct in hearings before a UC Referee and in appeals to a UC appeals board. Challenging an employee’s UC claim takes time and effort and is likely to anger the ex-employee; therefore, an employer should weigh the costs of any challenge against the benefits of a successful challenge that results in controlling costs or deters future misconduct and meritless claims. Thomas D. Rees, December 2011 Book of Lists

Q: I have an employee who was deployed to Iraq with his Army National Guard unit but his deployment is now ending. I hired someone to replace this employee. Do I have to re-employ this person?

A: The Uniformed Services Employment and Reemployment Rights Act (USERRA) protects the employment of citizen-soldiers. An employee who takes a leave of absence for uniformed service is entitled to return to the employee’s pre-mobilization employment, at the level that the employee would have achieved with reasonable certainty had the uniformed service not occurred. Certain limited circumstances can excuse compliance with the re-employment requirement, such as layoffs that otherwise would have included the employee’s position. However, the hiring of a replacement worker or additional expenses will not suffice. Courts traditionally construe USERRA liberally in favor of the employee. Non-compliance with USERRA can result in a court award for significant damages, including lost pay and benefits; double damages, attorney’s fees and an order to comply with the law. Richard C. Sokorai, September 2010

Q: What is “employment at will”?

A: “Employment at will” exists when no employment contract specifies the employment’s duration or limits employers’ or employees’ reasons for terminating employment – either party may end the relationship at any time, for any (or no) reason. The rule does not allow loose hiring or summary firing. At-will employers should not promise employment tenure, because oral employment contracts are enforceable in some states (e.g., Pennsylvania). Employee handbooks should state the at-will rule, particularly in New Jersey where handbooks may otherwise override the at-will relationship. Good cause should support all employment decisions, to prevent both discrimination and public policy/whistleblower claims- an important point in states like New Jersey whose whistleblower statutes (unlike Pennsylvania’s) cover both private and publicly funded bodies. Thomas D. Rees, 2010 Book of Lists

Q: What are state wage payment and collection laws (“WPCL”)?

A: State WPCLs require payment of employee wages on regular paydays or shortly after an employee leaves. WPCLs may impose liability on both employers and managerial decision-makers for unpaid wages and penalties. WPCLs can define wages to include vacation pay, bonuses, commissions, stock options, and severance or disability pay. WPCLs usually deal only with earned wages and do not create rights to future employment. Besides imposing penalties and personal liability, Pennsylvania’s WPCL requires payment of attorneys’ fees to employees who win WPCL claims. WPCLs may exempt certain employers; Pennsylvania exempts local governments and school districts. Pennsylvania’s WPCL does not cover independent contractors. State WPCLs vary and the law of the state where the employee works will typically govern any wage dispute. Thomas D. Rees, April 2010

Q: What is Pennsylvania’s New Mini-COBRA Law?

A: 1986’s federal Comprehensive Omnibus Budget Reconciliation Act (COBRA) requires employers with at least 20 employees to continue health insurance for most ex-employees and dependents. Pennsylvania’s July 2009 “mini-COBRA” law requires most employers with 2 to 19 employees to also provide continuation of health insurance for most ex-employees and their dependents. Like COBRA, mini-COBRA eligibility starts when group coverage ends through a “qualifying event,” including employment loss except through gross misconduct; work hour reduction below benefit thresholds; divorce; separation; Medicare eligibility; or employer bankruptcy. Mini-COBRA coverage continues for 9 months, shorter than COBRA’s 18 to 36 months. Insurers subsidize 65% of mini-COBRA premiums for 9 months for involuntarily terminated eligible employees. This subsidy ends January 1, 2010 unless extended by federal law. Thomas D. Rees, September 2009

Q: What is a restrictive employment covenant?

A: There are several types of restrictive employment covenants. Non-competition covenants prohibit ex-employees’ work for a competitor. An alternative to the non compete allows work for a competitor but prohibits serving the ex-employer’s customers. Non-solicitation covenants prohibit the ex-employee from initiating contact with customers or former co-employees for a new employer. An employer must provide a benefit to the employee in return for signing a restrictive covenant, typically through new employment or more generous employment terms. The covenant must also have reasonable time and geographic limits. An employer may not use a restrictive covenant simply to stop competition; the covenant must be needed to protect interests such as goodwill, special skills or training, or trade secrets. Nondisclosure agreements are separate restrictions that prohibit ex-employees’ use of confidential information. Thomas D. Rees, January 2009

Thomas D. Rees authored a chapter in the award-winning Pennsylvania Employment Law Deskbook

Employment law partner Thomas D. Rees authored a chapter on post-employment restrictions for the Pennsylvania Employment Law Deskbook. The Deskbook won the Association of Continuing Legal Education Administrators (ACLEA) award for Outstanding Achievement in Publications. The ACLEA is composed of CLE organizations and legal publishers from across the United States and Canada, whose members include both non-profit and for-profit providers. For more information, please visit www.pbi.org.

High Swartz LLP is pleased to announce that several of the Firm’s attorneys have achieved Super Lawyers or Super Lawyers Rising Stars status.

Mary Cushing Doherty, Gilbert P. High, Jr. and Thomas D. Rees have been named 2012 Pennsylvania Super Lawyers, and Melissa M. Boyd, Joo Y. Park, James B. Shrimp and Eric B. Smith have been named 2012 Pennsylvania Rising Stars. Super Lawyers, a Thomson Reuters business, is a rating service of outstanding lawyers from more than 70 practice areas who have attained a high degree of peer recognition and professional achievement. The annual selections are made using a rigorous multi-phased process that includes a statewide survey of lawyers, an independent research evaluation of candidates and peer reviews by practice area.

High Swartz LLP Managing Partner Joel D. Rosen was a key presenter at the Hepatitis B Foundation’s Crystal Ball fundraiser.

Mr. Rosen has been involved with the Hepatitis B Foundation for many years and currently serves as Chairman of the Foundation’s Board. The benefit raised more than $102,000 to advance the Foundation’s mission of eliminating hepatitis B worldwide. Brad Segall, the award-winning Suburban Bureau Chief for KYW Newsradio 1060, and a long-time active supporter of the Foundation, served as the event’s emcee. At the event, the Foundation honored Dr. Howard Koh, Assistant Secretary for Health of the U.S. Department of Health and Human Services (HHS), with its inaugural Baruch S. Blumberg Prize for his leadership in creating the first HHS Action Plan for Viral Hepatitis that has elevated hepatitis B as a national public health priority.

Thomas D. Rees recently authored two chapters in the Pennsylvania Bar Institute course book, “Restrictive Covenants, Trade Secrets and Computer Forensics”, and served on the faculty for this course in both Philadelphia and Mechanisburg, PA.

Mr. Rees contributed chapters titled “The Computer Fraud and Abuse Act and Criminal Prosecutions of Trade Secret Actions” and “Damages and Forfeitures in Restrictive Covenant Actions”. More information may be found at www.pbi.org.