July 2015

Jim Shrimp | July 24, 2015

Background Check on Potential and Current Employees

July 24, 2015

Today, most employers run some sort of background check on potential employees and current employees, including credit, financial and criminal background checks. In some industries, these background checks go right to the heart of the job. For instance, passing a background check is a requirement of school teachers and security guards because they are responsible for others, and for bank tellersand telemarketers that deal with credit card and social security information. In other industries, employers request background checks when criminal or poor financial conduct might not be as pertinent to the job responsibilities. In either case, the employer has certain responsibilities with respect to this information, as a recent lawsuit brought by the Equal Employment Opportunity Commission (“EEOC”) illustrates.

Federal law does not prohibit employers from seeking criminal background information regardless of how much it pertains to the job; however, Title VII does prohibit employers from discriminating when they use criminal history information. Specifically, Title VII prohibits employers from using policies or practices that screen individuals based on criminal background information if:

* The criminal background checks significantly disadvantages Title VII protected individuals such as African-Americans or Hispanics; and

* The criminal background information does not help the employer accurately decide if the person is likely to be a responsible, reliable or safe employee.

Moreover, the EEOC views an arrest record different than a conviction. For instance, if a potential employee has been arrested for theft, the arrest record alone should not be used by the employer to take an adverse employment action (e.g., not hiring, firing or suspension). On the other hand, a conviction record alone can usually be used by the employer to justify an adverse employment action.

The recent EEOC lawsuit relates to the records of criminal background checks that need to be kept by the employer. Federal regulations require that if an employer uses a “test” or other selection procedures to make employment decisions (e.g., hiring, promotion, and mass layoff) the employer must keep records regarding the test or the selection procedure, so that the EEOC can inspect to determine if the test of selection procedures have an adverse impact on any protected class. A criminal background check is such a “test.”

In 2010, the EEOC commenced an investigation into a Philadelphia area janitorial service company. The janitorial service company routinely ran criminal background checks on potential employees; however, when the EEOC subpoenaed the company for documents related to the criminal background checks and the decisions resulting from them, the janitorial service company said there were no records. Earlier this month, the EEOC brought an action asking the Court to order the janitorial service company to keep records related to criminal background checks and to pay the EEOC’s costs related to bringing the action.

In short, if you are an employer that uses criminal background checks or other tests to cull potential or current employees, make sure you maintain the background checks and tests for two reasons. First, the employer should periodically self-audit to ensure that its use of background checks and tests are not, for example, unfairly/unlawfully excluding a specific protected class from hiring. Second, the employer needs to keep the information in case the EEOC requests the information.

There are some state-by-state laws and regulations regarding the acquisition and use of criminal background checks and these laws and regulations also need to be consulted by employers.

For more information feel free to contact James B. Shrimp at (610) 275-0700 or by email at jshrimp@highswartz.com. Visit his attorney profile here.

Visit the firm’s Employment Law page here.

The information above is general: we recommend that you consult an attorney regarding your specific circumstances. The content of this information is not meant to be considered as legal advice or a substitute for legal representation.

William Kerr Jr. | July 24, 2015

Norristown’s New Real Estate Tax Abatement Zone Could Provide A Significant Financial Incentive To Your Business

July 24, 2015

By William F. Kerr, Jr., Esq.

This week, the Municipality of Norristown moved an important step closer to revitalizing the municipality’s economy when its Municipal Council approved a tax abatement program. The LERTA program now moves on for approval by Montgomery County and the Norristown Area School District, which approvals many expect will be a formality. For businesses looking to expand within the designated LERTA zone, or businesses thinking of moving to Norristown, the LERTA program offers the potential to help reduce costs, and thereby fuel their growth.

Local Economic Revitalization Tax Assistance (LERTA)

Here’s how LERTA works: Businesses which physically expand/add to their existing facilities, or which construct new buildings within the LERTA designated zone, will receive a 10-year real estate tax abatement on the value of new construction. This means that during that ten year period, taxes on the improvements are gradually phased in, with full taxes not being owed until 10 years after completion. The abatements will range from 100% of the added value in the first year, down to 10% in year ten.

Due to the size and duration of the abatement, this program has the potential to reduce real estate property taxes by as much as 50 percent over the 10 years. As such, the program can clearly provide significant benefits to owners of commercial, multi-family residential, office, industrial or other business properties. For those businesses, Norristown’s LERTA zone can offer an opportunity to create a significant cash flow advantage. Revenues that would otherwise be designated for real estate tax payments for ten years, can be used instead to support and grow the business in other areas, including hiring additional employees (which is what Norristown is looking for). Additionally, any successful use of this economic development initiative could help attract other businesses, which can make for a more vibrant commercial district that helps all businesses within the area.

The LERTA zone covers a significant chunk of the municipality, including significant portions of the Schuylkill riverfront, the former Logan Square Shopping Center, and a portion of Johnson Highway; each of which have history as significant commercial and business districts in the Norristown’s past, and which Norristown leaders hope may soon rise again.

Because the LERTA program, while streamlined, will require coordination and approvals by Norristown, Montgomery County, and the Norristown School District, business owners would be wise to have legal advisors with experience with the LERTA process to they correctly pursue and maximize this opportunity. Anyone interested in this new program should contact High Swartz partner William Kerr, who has extensive experience with the LERTA program in many areas of the state of Pennsylvania, is well versed in the development process, and is familiar with elected officials and the Municipality staff in Norristown.

High Swartz | July 23, 2015

Ashley Madison: A Family Lawyer’s View of the Cheating Site’s Hack

July 23, 2015

Ashley Madison is an online “dating” service for those who are married or in a committed relationship. Yes, you heard that right; it is a dating service which functions just like any other, except it helps people cheat. Founded in 2001, the website’s slogan is “Life is short. Have an affair.”

Lately, Ashley Madison has been making headlines for reasons other than its unique and controversial marketing angle. The site was the victim of a recent data hack. A group of hackers who call themselves “The Impact Team” accessed Ashley Madison’s entire customer base. They already published a small percentage of customer information online, and are threatening to release the additional photos, real names and payment information for a possible 37 million worldwide customers if the adultery site is not shut down.

Ashley Madison has been hacked. Marriages destroyed by cheating.

In addition to the customer list of men and women which likely includes a mix of “regular Joes” and well-known names, all of which were discreetly cheating on their significant others, the hackers also have Ashley Madison employee documents and emails.

For a family law attorney, this begs the question: Is there really ever such a thing as a discreet affair? This may prove that there is not. The hack is also an important reminder that fault divorces are alive and well in the Commonwealth. A “discreet affair” can have a financial impact in your divorce, both in the equitable distribution phase of your case and alimony analysis, which both have marital misconduct as a factor in determining the appropriate division of marital assets. While the courts do generally care more about the economic circumstances of the parties (income, assets and liabilities, health, education, etc.), fault can factor into the award.

As I consider the outcome for those whose marriages are impacted by the hack, I suspect that some users of the site may claim they had an open marriage in order to defend their actions. If the other spouse contests the claim, it likely won’t hold up in court.

The hack also serves as a reminder to all that online activities are truly never secure. As technology advances, we’ve seen it play a larger role in divorce cases. Marriage dissolutions have been impacted by uncovered online activity in the form of social media, emails, and now dating websites.

As for the hackers, even though they may have had a Robin Hood mentality-take from the cheaters to give to the faithful-they too can be held accountable for this and likely will face legal ramifications if identified.

For Ashley Madison and their clients, this is an uncomfortable time, and one in which they should likely be thinking about legal representation.

Joel D. Rosen | July 2, 2015

Reading between the lines: What is in a Franchise Agreement?

July 2, 2015

By Joel D. Rosen, Esquire

Deciding what kind of business opportunity you want to embark on can be challenging. There are countless industry segments and businesses that make your initial decisions daunting. If you are torn between a franchise or an independent business, read this article for some advice To Be a Franchisee or Not to Be; That is the Question.

If after considering your options you determine that franchising is the way to go, then there are some things you want to know about the key document in the franchise relationship, the franchise agreement. The importance of the franchise agreement should not be undervalued. There is a lot that can be gleaned from its terms. You can tell a great deal about the mindset of the franchisor by the way in which the franchise agreement is structured. Is it straightforward and reasonable or is it long, tedious, and onerous to the franchisee?

Though franchise agreements will vary depending on the type of business being offered, there are some basic items that should be included. The license fee is the amount you will need to pay initially in order to use the franchisor’s brand. There will also be terms related to royalty payments that dictate what percentage of your profits you will have to pay to the franchisor and how often. The agreement may also establish your territory to ensure that you don’t compete with other franchisees from the same system (of course, some systems do bot utilize assigned territories).

Advertising terms explain how much you, as the franchisee, will need to contribute to local and/or national advertising and explain how the franchisor will manage advertising, generally. There will also be terms that outline franchisee and franchisor performance obligations, non-compete provisions, choice of law and jurisdiction, as well as defaults and penalties for breach of the agreement. Because many of these terms will have a direct impact on the daily operations of your franchise, it is vital that you read them carefully and understand what they truly mean.

Some franchisors use the franchise agreement more as a weapon than as a tool. The franchise agreement can be fair to both parties and a vehicle to allow franchisee growth. As you read through the franchise agreement consider if you want to partner with a franchisor that starts with an agreement that indicates its distrust of its partners through the terms of its agreement?

At the end of the day it is vital to remember that the franchise agreement is the beginning in what will hopefully be a long and profitable partnership. As such, this document is the first opportunity for you to get an idea of what this relationship is going to look like. If the franchisor doesn’t see you as a partner or as a valued customer from the initial agreement, then why sign up? There are plenty of options out there for an enterpreneur, and finding the one that fits is absolutely the crucial first step.

For more information, visit our Franchise Law page or contact Joel D. Rosen at 610-275-0700 or by email at jrosen@highswartz.com.