Employers: Does a Force Majeure Clause in Your Contract Cover You During the Coronavirus Pandemic?

The Coronavirus pandemic has upended our lives with little notice. Public events have stopped, schools and stores have closed, the financial markets have been volatile, and people are staying at home.

Amid this chaos and uncertainty, how do contracts cover employer emergencies like the Coronavirus? The answer may depend on whether your contract has a “force majeure” clause. Consider talking with a corporate attorney near you in Bucks or Montgomery Counties to make sure.

What is Force Majeure?

“Force majeure” is a French term for “unforeseeable circumstances that prevent completion of a contract”. A force majeure clause can excuse one or both parties from fulfilling a contract’s terms when an unforeseeable event occurs. The clause may either release the parties completely from performance or allow delayed or modified performance. The clause may also allow or limit refunds to parties that have made advance payments.

Not every contract has a force majeure clause. Force majeure clauses most often arise in commercial and real estate contracts. Where a contract lacks a force majeure clause, a party may seek an excuse from performance on other grounds, such as impossibility or frustration of performance.

But it is easier to use an actual event (such as a hurricane or in this case, a pandemic such as the COVID-19 outbreak resulting in guidelines enforced to stop the spread of the coronavirus) for relief from performance than a subjective factor such as impossibility or frustration of performance.

Is the shutdown of my company due to the coronavirus and COVID-19 outbreak covered under my policy?

A typical force majeure clause MAY cover some or all the following events:

  • Fire
  • natural or man-made disturbances
  • war
  • Acts of terrorism
  • nuclear incidents
  • riots
  • Insurrections (a violent uprising against an authority or government)
  • strikes
  • boycotts
  • lockouts
  • criminal activity
  • hurricanes, tornadoes, storms, blizzards or earthquakes
  • weather emergencies such as extreme cold or heat
  • explosions
  • pandemics
  • health or environmental emergencies
  • embargoes
  • power outages
  • actions of a governmental agency
  • other cause beyond the parties’ control

This list includes several Coronavirus-related events such as pandemics, health or environmental emergencies, or actions of governmental agencies.

The types of events covered by force majeure clauses break down into human-caused events or “Acts of Man”( war, terrorism, riots, strikes); natural events or “Acts of God” (floods, hurricanes, tornadoes); events with both human and natural origins (fires, explosions, pandemics); or circumstances imposed by humans to deal with emergencies (governmental actions).

It is important that a force majeure clause is drafted precisely. The clause should focus on objective events.

For example, if a hurricane hits a community, it is easier to invoke force majeure if the clause mentions hurricanes, not just an “emergency” (which may depend on a third party’s declaration) or events beyond a party’s control. It’s always easier to point to a specific natural event, without having to argue whether events really were beyond a party’s control.

For example, if a tidal flood damages an auto dealer’s inventory, it’s far quicker to say “A flood took place” than to have to speculate on whether the dealer could have controlled the damage by moving the cars inland.

“It Can’t Happen Here”

Drafters of force majeure clauses should avoid the tendency to say, “It can’t happen here”, particularly for natural disasters. Major tornadoes have occurred in Massachusetts, disastrous floods have hit the fairly dry Dakotas, and the East Coast is among the more earthquake-prone regions in the country. It’s more prudent to assume that “Anything can happen”, and to describe a large group of events in the clause.

After the emergency occurs, the victim of the unforeseen event should give prompt notice to the other parties of the invocation of the force majeure clause. The victim should explain why the performance of the contract is totally or partly impossible. If partial performance can take place, it is advisable to work out a plan with the other party for limited performance: will delivery dates be postponed; will deliveries be smaller; will services be provided in another location? The parties should then reduce the plan to a signed written amendment to the contract.

The party invoking the force majeure clause will always need to account for its own performance. This requires a showing that every effort has been made to comply with the contract before the emergency and that the performance has truly been prevented by the unexpected event. The courts will look closely to see if the party seeking excuse from performance was performing the contract before the emergency. The courts will not favor a party who uses a force majeure clause to avoid performing a contract that the party was already handling poorly.

If your business has been affected by the COVID-19 outbreak or has ceased operations due to government guidelines, you may need a corporate attorney to examine your contracts. Contact the Business Law, Employment Law, or Commercial Litigation Attorneys here at High Swartz. We can help make sense of your rights under a force majeure clause. Call 610-275-0700 or fill out our contact form.

Mark R. Fischer, Jr. Elected Partner at High Swartz

High Swartz is pleased to announce that Mark R. Fischer, Jr. has been elected a partner at the law firm.

Mark R. Fischer, Jr. joined High Swartz in 2009 and has focused his practice primarily on representing businesses in breach of contract, payment collection, construction defect, and consumer protection disputes throughout Pennsylvania and New Jersey.

“We are pleased to welcome Mark as the newest partner at High Swartz” said High Swartz Managing Partner Joel D. Rosen. “ His hard work and dedication to his clients and the firm make this a well-deserved achievement. It’s my pleasure to personally congratulate Mark and look forward to his continued growth at High Swartz.”

Mark also represents local municipalities, property owners, and individuals in zoning and land development matters, local code enforcement proceedings, real estate disputes, business transactions, and general civil litigation. Mark has significant experience in both the Pennsylvania and New Jersey Courts.

Mark grew up in Lower Bucks County and now lives in Montgomery County with his wife and three children. He attended college at Widener University and obtained his law degree from Villanova University. He has been recognized by Super Lawyers as a top-rated civil litigation attorney and serves as Chair of the Montgomery County Law Reporter Committee.

“Over the years here at High Swartz, I’ve developed great relationships with my fellow attorneys and our staff, and I really appreciate all that they have done to help me get to this point in my legal career” states Mark Fischer. “This is truly a wonderful place to practice law and I am honored to become a partner at this fine law firm.”

11 High Swartz Attorneys named to PA Super Lawyers and Rising Stars lists

High Swartz is pleased to announce that 11 of its attorneys have been named among Pennsylvania’s 2019 Super Lawyers and Rising Stars. Among the highlights are two inclusions on the 50 Top Female Lawyers in Pennsylvania list going to Melissa M. Boyd and Mary Cushing Doherty of the High Swartz Domestic Relations practice.

2019 High Swartz Super Lawyers Melissa Boyd David Brooman Mary Cushing Doherty Mark Fischer Gilbert High, Thomas Panzer Thomas Rees Joel Rosen
2019 High Swartz attorneys added to the Super Lawyers List

What is Super Lawyers?

The Super Lawyers list recognizes no more than 5 percent of attorneys in each state. The Super Lawyers Rising Stars list recognizes no more than 2.5 percent of attorneys in each state. To be eligible for inclusion in Rising Stars, a candidate must be either 40 years old or younger, or in practice for 10 years or less. High Swartz 2019 Super Lawyers and Rising Stars are listed below in alphabetical order.

Melissa M. Boyd: Has been nominated to her 5th consecutive Super lawyer list preceded by 6 Rising Star distinctions. On top of her streak, Missy has been nominated to 3 Super Lawyers Top Lists in Pennsylvania. Those accolades are 100 Top Lawyers in Pennsylvania, 100 Top Lawyers in Philadelphia and 50 Top Female Attorneys in Pennsylvania. Missy is a partner and family law attorney with High Swartz and advocates in various areas including divorce, prenuptial and postnuptial agreements, child custody and child support, equitable distribution, alimony, adoptions, protection from abuse and juvenile law.

David J. Brooman: 2019 marks the return to the Super Lawyers list for David. This is his 10th selection. As a land development and litigation attorney, David J. Brooman has more than three decades experience in zoning and land use development, as well as environmental law.

Mary Cushing Doherty: This will be Mary’s 16th consecutive selection to the Super Lawyers list. Along with her distinction, she’ll join the 50 Top Female Lawyers in Pennsylvania list. With a distinguished record of professional and community service, Mary Cushing Doherty has more than 35 years of legal experience as a family law lawyer. She concentrates her practice on all aspects of marital dissolution and family law issues including divorce, child support, custody, spousal support and alimony, premarital agreement asset protection, complex property division, and is the chair of High Swartz’s Family Law practice.

Mark R. Fischer: Mark has been nominated to his second consecutive Super Lawyer designation. He focuses his practice primarily on representing businesses in breach of contract, payment collection, construction defect, and consumer protection disputes throughout Pennsylvania and New Jersey.

Gilbert P. High, Jr.: This will be Gil’s 14 section in a row. Gil’s impressive career is devoted primarily to the practice of municipal and Real Estate and Land Use Law. He regularly speaks on issues pertaining to municipal liability, particularly regarding the maintenance of the Urban Forest, a subject on which he has lectured nationally.

Thomas E. Panzer: This is Tom’s first and much-deserved selection to the Super Lawyers’ list. Thomas E. Panzer, a workers’ compensation attorney, joined High Swartz in 2016 as a result of a merger with McNamara, Bolla & Panzer, Attorneys at Law, a firm for which he served as Managing Partner. Mr. Panzer is active in his community and is currently the Bucks County, Pennsylvania Treasurer.

Thomas D. Rees: Elected to his 14th Super Lawyers list, Tom heads the firm’s Litigation and Employment Practice. He focuses his practice primarily on employment law and private education law. In the education area, Tom represents a number of independent schools in the Philadelphia area, handling employment, student discipline, contract, and governance matters.

Joel D. Rosen: As High Swartz’s Managing partner, Joel has been a Super Lawyer since 2017. With more than 30 years of legal experience as a corporate law attorney, Joel Rosen’s areas of practice include franchise law, business and commercial law, employment law, trademark/copyright law and commercial leasing.

list of 2019 high swartz super lawyers rising stars
2019 Rising Stars attorneys from High Swartz

Kevin Cornish: Recently elected as a partner at High Swartz, Kevin receives his 8th Super Lawyers Rising Star selection. Kevin focuses his practice on commercial, civil, and contract & multi-state litigation support. His clients include individuals as well as local, regional, and national businesses up and down the east coast.

Elizabeth Early: has been nominated to her third consecutive Rising Star selection. Her areas of specialization include divorce, custody, support, equitable distribution, pre and post-nuptial agreements, parenting coordination and abuse matters. Liz also serves as court-appointed counsel and guardian for minor children.

Brittany M. Yurchyk: High Swartz congratulates Brittany’s first nomination to the Super Lawyers’ list as a Rising Star. Specializing in alternative dispute resolution, Brittany concentrates her family law practice on equitable distribution, child custody, child and spousal support, abuse and domestic relations.

How were the High Swartz Super Lawyers selected to the list?

Super Lawyers nominates the best attorneys using a unique selection process. Peer evaluations and nominations are combined with independent research. Nominees are evaluated on 12 indicators from professional achievement through peer nominations. Nominations are made on an annual, state-by-state basis. The Super Lawyers objective is to create a credible, comprehensive and diverse listing of outstanding attorneys on a national level that can be used as a resource for attorneys and consumers searching for legal counsel. As an aid to those selecting a lawyer, Super Lawyers only selects outstanding local lawyers who are able to be retained by the public.

Starting or Relocating a Business: Watch Out for Local Requirements!

Anyone who starts or relocates a business goes through exciting and challenging times.  It is understandable that the business owner’s primary focus  is getting established and meeting customer needs.  It stands to reason that a business plan will include big picture items such as marketing strategy and customer satisfaction, which in turn may lead to profits and success.

But there are many other issues to consider, some of which even experienced business owners overlook.  An important part of the original due diligence process and planning period should be attention to the local rules and regulations.  If proper attention is not given to local regulations, the business can have difficulty down the road.  That is why it is important for any person contemplating a change in business location or starting a business to consult not only an experienced financial professional but an experienced municipal attorney.

Three important areas of local regulations are taxation, zoning and land use.  This blog will deal with tax issues.  Zoning and land use issues arise earlier in the process, when a business buys or leases land.  Local ordinances may include additional protections beyond federal or state law (e.g., LGBT), but the pattern of regulation is similar to the federal or state regulations.

But taxation can be a trap for the unwary.  When choosing a business location, business organizers often consult with accountants and financial planners who are familiar with federal and state taxes.  These businesses assume that their consultants are familiar with local tax laws.  But this may not be a correct assumption.  The business owner needs to ask whether there are local taxes or registration requirements to be concerned about.  The answer may be yes and should be answered as soon as possible and before the doors open for business.

Pennsylvania is unique in that it consists of 67 individual counties and 2,500 municipalities – cities, townships and boroughs, each with their own ordinances and regulations.  Allegheny County, containing Pittsburgh, has 130 municipalities!  The four suburban Philadelphia counties contain 238 municipalities, ranging from Chester County’s 73 down to Delaware County’s 49.

Of the Commonwealth’s 2,500 plus municipalities and over 500 school districts, 90% impose Earned Income Tax and 80% impose a Local Services Tax (formerly Occupational Privilege Tax or Municipal and Emergency Services Tax).  These taxes are paid by employees but must be collected and remitted by the employer or the employer may be responsible for penalty, interest and perhaps fines.  The passage of Act 32 of 2008 providing for Central Tax Collection Committees on the County level made the payment, collection and disbursement of Earned Income Tax easier for all parties.  But even this statute requires employers  to collect the taxes from employees and quarterly remit the taxes to the correct county, failure to do so will result in interest and possibly penalty imposed on the employer.

It is at least as important that each business know the registration and tax requirements of any municipality in which it does business.   Failure to register a business when required and remit Business Privilege and Mercantile License Tax (business taxes) can result in penalty and interest assessments by the municipality.  These taxes are often overlooked when starting a new business or moving an existing business because less than 10% of all municipalities in Pennsylvania impose Business Taxes.  The taxes are self reporting, and the responsibility for filing and reporting falls on each business.  It is imperative when moving or starting a business, especially in southeastern Pennsylvania, to consult with an experienced municipal attorney who can guide you through the process of making sure you are properly registered and ready to pay any taxes the way they should be paid to avoid any unnecessary penalty and interest.  This will help you keep your focus on the reason you are in business to begin with – your success and the satisfaction of your customers.

At High Swartz, our business and corporate law attorneys provide businesses of all types and sizes with efficient and precise commercial law solutions. For more information or if you have any questions, please contact Kathleen M. Thomas at 215-345-8888 or kthomas@highswartz.com.

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.

Small business owners: Beware these recent developments in PA law!

For small business owners, the growth of a startup business can cause you to overlook the legal minutiae that come along the way.  It is not unusual to see small businesses that started out using form contracts or invoices that may have done the trick at the time, but ten or more years later they remain unchanged, without any new terms or conditions to accommodate the growth of the business.  The business may have started selling goods or services in a relatively small, local area, then before they know it, especially in the digital age, they are selling goods or services across State borders.  But have they considered whether those initial contract forms sufficiently address the needs of the expanded business?  Or whether the contracts and business practices comply with the laws of the jurisdiction in which they are selling?  As an example of unexpected issues that may arise, below are summaries of two interesting decisions that the Pennsylvania Courts have issued this year.

In February, the Pennsylvania Supreme Court issued a decision in Danganan v. Guardian Protection Services,[1] in which a customer (Danganan) purchased a home security system and services from Guardian Protection Services, a Pennsylvania business, for his residence in Washington, D.C.  The service contract had an initial term of three years.  Before the three years expired, Danganan moved and sold his residence in D.C., but Guardian continued to bill him and collect for the remainder due under the contract.  Danganan sued Guardian in Pennsylvania and asserted a claim under the Pennsylvania Unfair Trade Practices and Consumer Protection Law (“UTPCPL”), which allows consumers to pursue triple damages and attorney’s fees for deceptive business practices.  Guardian tried to get the UTPCPL claim dismissed, arguing that the law did not apply to non-Pennsylvania residents or transactions outside of Pennsylvania.  Ultimately the case was submitted to the Pennsylvania Supreme Court, which determined that a non-Pennsylvania resident may bring suit under the UTPCPL against a Pennsylvania business based on transactions that occurred out-of-state.

This decision should remind Pennsylvania business owners to confirm that its consumer contracts for transactions both inside and outside of Pennsylvania are compliant with the provisions of the UTPCPL and any regulations emanating from that law.  For those newer businesses still filling out those initial forms from the startup days, it is time to have a qualified attorney take a look and make any necessary revisions to properly protect the business.

In addition, in June the Pennsylvania Superior Court issued a decision in Webb-Benjamin, LLC v. International Rug Group, LLC,[2] which involved a dispute over a commission payment.  Webb-Benjamin, a Pennsylvania company, entered into a contract with International Rug Group, a Connecticut company, to provide services for a furniture sale in Canada.  Before the furniture sale ended, the two parties decided to terminate their contract but agreed that Webb-Benjamin would be paid its final commission at the end of the Canadian furniture sale.  Shortly after the termination, but before the end of the sale, International Rug registered to do business in Pennsylvania.  When International Rug failed to pay the commission, Webb-Benjamin sued in Pennsylvania to collect.  International Rug attempted to get the case dismissed on the grounds that the Pennsylvania Courts had no jurisdiction over the Connecticut company.  The Pennsylvania Superior Court disagreed and ruled that when an out-of-state company registers to do business in Pennsylvania, it consents to the jurisdiction of the Pennsylvania Courts, even for disputes that arose before the company’s registration.

This decision is pertinent to both Pennsylvania businesses and out-of-state companies that do business in Pennsylvania.  For Pennsylvania companies, the case may provide a basis to sue in Pennsylvania for disputes with out-of-state companies.  For non-Pennsylvania companies, the case points out another factor to consider when deciding to register to do business in Pennsylvania.

For all companies, these cases are a reminder to: (1) research the legal requirements for expanding the company’s business into other States, and (2) always have an attorney review the company’s contracts and transaction documents to assure that they include provisions that will best allow the company to grow and avoid undesired consequences.

Decisions made and actions taken during the process of business formation will have a significant effect on the owner’s exposure to personal and professional liability and the company’s profitability. At High Swartz LLP our attorneys have extensive experience in a wide range of industries, and provide investors, entrepreneurs and businesses in transition with sophisticated legal counsel designed to protect and promote the new and restructured businesses. As your counsel, we will help you make the right decisions and will implement necessary legal measures on your behalf, allowing you to focus on business management. For more information or if you have any questions, please contact Mark R. Fischer, Jr. at 610-275-0700 or mfischer@highswartz.com.

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.

[1] 179 A.3d 9 (Pa. 2018).

[2] 2018 WL 3153602 (2018 PA Super 187).

Joel D. Rosen Appointed to the Montgomery Bar Foundation Board of Trustees

High Swartz managing partner, Joel D. Rosen has been appointed to the Board of the Trustees for the Montgomery Bar Foundation. Mr. Rosen has been reappointed for a 3-year term.

The Montgomery Bar Foundation is the charitable affiliate of the Montgomery Bar Association. Since 1987, the Bar Foundation has supported law-related educational, charitable, and humanitarian projects throughout Montgomery County. Grants awarded by the Foundation have been used to help the elderly, homeless, victims of domestic violence, troubled and underprivileged youth, and many other individuals and families in need. Visit their website at http://www.montgomerybarfoundation.org/index.html.

Joel D. Rosen is Managing Partner of High Swartz LLP. With more than 30 years of legal experience, his areas of practice include franchise law, business and commercial law, employment law, trademark/copyright law and commercial leasing. Mr. Rosen has counseled numerous businesses with regard to general corporate and commercial transactions, including, formation, mergers & acquisitions, licensing, sales, and financing projects. Mr. Rosen’s corporate client base spans a broad spectrum of industries, including: biotechnology, franchise, weight loss, food and restaurant, consumer products, media and entertainment, software and technology and nonprofit organizations.

About High Swartz LLP: High Swartz LLP is a full-service law firm serving clients in the Delaware Valley and throughout Pennsylvania from offices in Norristown and Doylestown. Established in 1914, High Swartz serves the needs of businesses, municipalities, government entities, nonprofits and individuals. With offices in Bucks County and Montgomery County, the full-service law firm provides comprehensive counsel and legal support to individuals and business entities of all sizes across a broad spectrum of industries throughout Pennsylvania and New Jersey. For more information, go to www.highswartz.com.

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Be Wary of “Binding Mediation”

Over the last 100 years, High Swartz attorneys have engaged in countless cases involving alternative dispute resolution, representing litigants in arbitrations and mediations and serving as arbitrators and mediators.   Recently however, I have noticed a newer concept being incorporated into contractual provisions and settlement discussions:  “binding mediation”.  Such a provision raises immediate questions.  What is binding mediation?  Is this something that a party should agree to?

While not widely used, or even widely known about, binding mediation is a form of alternative dispute resolution.  Alternate dispute resolution is, generally speaking, a collection of methods of resolving disputes outside of court.  In the arbitration method of alternate dispute resolution, the parties conduct a evidentiary hearing before a neutral arbitrator, or panel of arbitrators, that decides the case as would a judge and jury.  Except in very limited circumstances, and unless the parties expressly agree otherwise, the parties are bound by the arbitrator’s decision, and there are very limited rights of appeal.  The arbitrator’s decision can be entered as a judgment in court, the judgment can be enforced, and assets of the losing party can be seized to satisfy the judgment  In a mediation, there is no evidentiary hearing.  A neutral mediator listens to the various positions of the parties and facilitates their settlement discussions.  In mediation, there is no “decision” to be binding.  The culmination of the mediation is either a settlement acceptable to both parties, a partial settlement acceptable to both parties, or the parties leave without their dispute resolved.

“Binding mediation” therefore would seem to be a contradiction in terms, and is often discarded as a viable option.   There is no statutory definition or even universal understanding of what binding mediation even means.  Some consider it to be a traditional mediation, except that the parties are expressly bound by any agreement they reach.  Others consider it to be a traditional mediation, but if the parties do not settle, the mediator determines the final settlement somewhere at or between the final positions of the parties.  Still others believe it is simply another term for arbitration.

Case law highlights that the term is vague.  In Pennsylvania, the Superior Court addressed binding mediation in its unreported decision Miller v. Miller, 2016 WL 6301602 (Pa.Super. 2016), when it found that because the parties used the word “binding” it meant that they were agreeing to an arbitration, despite the use of the word “mediation.”  In Connecticut, the Appellate Court found in the case of Tirreno v. The Hartford, 129 A.3d 735 (Conn.App.Ct. 2015) that binding mediation was not an arbitration, and thus not subject to that state’s Arbitration Statute, particularly since there was no hearing.  However, the mediation decision in Tirreno was nonetheless found binding in the context of a petition to enforce a settlement that was pending was before the court.

While there is no clear accepted definition, what is clear is that if you are going to enter into a binding mediation agreement, simply referencing the process by name is not sufficient to protect your rights.  You must clearly set forth how the process will be conducted, how the decision will be treated, and how the decision will be enforced.

Is it a good idea to enter into a binding mediation agreement?  Since you are potentially giving up your rights to a hearing, to examine and challenge evidence and the ability to cross examine witnesses, it would seem that it is rarely a good choice, particularly in an agreement addressing prospective disputes.  However, binding mediation may be appropriate in some circumstances, such as when a dispute has arisen, there are relatively few material facts in dispute, there is a clear mutual understanding of each party’s positions and the scope of the mediator’s authority (such as monetary limits) is clearly defined.

If you have any questions about binding mediation, please contact Richard C. Sokorai at 610-275-0700 or rsokorai@highswartz.com. Our Bucks County and Montgomery County Litigation attorneys  have knowledge and experience in all facets of arbitration and mediation.

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.

Franchisees – Things to Watch Out for in 2018

Increased ICE Enforcement

As many of you have probably read about already, on January 10, 2018, Immigration and Customs Enforcement (“ICE”) performed raids at over 100 7-Eleven convenience stores checking on the immigration status of those stores’ employees.  After the raids, Acting ICE Director Thomas Homan cautioned employers that “today’s actions send a strong message to U.S. businesses that hire and employ an illegal work force - ICE will enforce the law, and if you are found to be breaking the law, you will be held accountable.” He continued - “businesses that hire illegal workers are a pull factor for illegal immigration and we are working hard to remove this magnet. ICE will continue its efforts to protect jobs for American workers by eliminating unfair competitive advantages for companies that exploit illegal immigration.”

If you are a franchisee that relies on minimum wage labor, make sure you obtain proof of legal immigration status and have a copy of the I-9 in all employees’ files.  Importantly, a violation of Federal regulation/statute is a default pursuant to most franchise agreements.  Therefore, not only are you as the franchisee going to be dealing with fines and legal action with respect to your employment of undocumented workers, you may also be dealing with the loss of your business.

In short, any savings you might be realizing by hiring undocumented workers is not worth the risk, especially in this environment.

Browning-Ferris Overruled by NLRB - Franchisors Will Reassert Control Over Branding

In late December 2017, the National Labor Relations Board (“NLRB”) overruled the Browning-Ferris decision of two years ago regarding joint employer.  You may remember that the Browning-Ferris decision caused franchisors concern, because over-asserting control over the brand, in relation to employment standards, policy standards, etc… might lead to liability on the franchisor for the acts of the franchisee. Thus, franchisors seemingly had to choose between tight brand control, with potential liability for the acts of the franchisee, or loose brand control, but no risk of liability for the acts of the franchisee.

In December’s Hy-Brand ruling, the NLRB restored the traditional joint employer standard, requiring proof that the alleged joint employer actually “exercised joint control over essential employment terms (rather than merely having ‘reserved’ the right to exercise control) and that “the control must be ‘direct and immediate’ (rather than indirect), and joint-employer status will not result from control that is ‘limited and routine.’”

As a result, franchisees will likely see franchisors reasserting control over the brand – meaning more inspections, more policies and more training.  In addition, for new franchisees you will also likely see more control of the brand/business set forth in the franchise agreement.

If you have questions about franchise law, please contact James B. Shrimp at (610) 275-0700 or jshrimp@highswartz.com

Our attorneys in Bucks County and Montgomery County are here to assist you.

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.

What the heck is a Confession of Judgment?

A Confession of Judgement is one of those terms you may have heard of if you have ever obtained a business loan or signed a commercial lease. Even if you have heard that phrase, chances are you have no idea what it means. And chances are you signed those loan or lease documents anyway.  This is a fact of life for seasoned business professionals down to new start-up owners.  Consider this a quick and dirty explanation of one of the most archaic legal mechanisms faced by business owners.

A confession of judgment is a legal process by which one party to a contract (most times a borrower or tenant) agrees to allow the other party (the lender or landlord) to enter a judgment against them if they default under the contract.  The contractual provision will state that the lender/landlord can go to the court and enter a judgment without any notice and without doing any of the hard work typically required to obtain a judgment (e.g. filing and serving a complaint, taking discovery, going to trial, etc.).  Confession of judgment provisions allow the lender/landlord to enter a judgment for money or to regain possession of the property, or both.  Some States have abolished the use of confessions of judgment because they are so oppressive and eliminate the due process protections required in a typical lawsuit.  Pennsylvania has abolished confessions of judgment in consumer transactions, but still allows them in commercial transactions, subject to certain protective requirements found enacted by the legislature or imposed by the courts.  For example the contractual provision allowing the confession of judgment must be clear and conspicuous (perhaps separated from the other text or in bold or CAPS), not hidden in the contract or difficult to notice.  The courts strictly scrutinize confession of judgment provisions and the court filings relating thereto for any defects under the law.

Many times commercial borrowers and tenants are not aware of these requirements, or the effect of such provisions, until after a confession of judgment has been entered, leaving them fighting an uphill battle to vacate the judgment and avoid collection or loss of their property.  Therefore, it is extremely important for business professionals to have an attorney review any loan documents or leases for these provisions before completing the transaction and explain the potential consequences.  If you find yourself served with a confession of judgment, it is imperative to act swiftly and contact an attorney to determine whether there are legal grounds to challenge the judgment.

For commercial lenders and landlords confession of judgment provisions can be very beneficial, saving significant legal fees and time to recover possession of a rented property or obtain judgment on a large commercial loan.  However, it important to have legal counsel draft these provisions so that they comply with the strict requirements imposed by the courts and do not fall victim to any technical challenges raised by a saavy borrower/tenant seeking to avoid the judgment.

If you have questions about a confession of judgement, please contact Mark R. Fischer, Jr. at (610) 275-0700 or mfischer@highswartz.com

Our attorneys in Bucks County and Montgomery County are here to assist you.

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.

Breaking Down “BYOD” Policies

February 14, 2017

The explosion of smartphones, tablets and technology generally, has inevitably resulted in employees performing work tasks on their personal devices.  In the age of the ever present smartphone, and for many, the accompanying compulsion to stay constantly connected, employers and employees find themselves balancing the benefits and pitfalls of employees using their personal phones to conduct their employer’s business.  This has resulted in increased productivity and flexibility and oftentimes resulted in lowering a companies technology costs.  With these benefits, however, come certain risks that a prudent employer should consider and provide for.  The most popular means of addressing these issues is in the implementation of a Bring Your Own Device (“BYOD”) Policy.

While there are many concerns an employer must consider in crafting the most appropriate BYOD policy, some of the most common include: data security, employee privacy, theft or loss of device, non-exempt employee usage, and employer liability for employee misconduct.

Data Security

Data security is a huge concern for employers and as such this element is crucial to alleviate company concerns that an employee could potentially compromise company data through lax or nonexistent device security.  Similarly, employers justifiably have concerns regarding employees connecting to unsecured Wi-FI hotspots or sharing their devices with other individuals leading to compromised data. Accordingly, employers should consider requiring password protection, automatic locking after a certain period of inactivity, mandating regular backups, restricting access to especially sensitive company information or even using software to create a virtual partition in devices to keep personal data separate from work data.

Employee Privacy

A good BYOD policy will clearly set forth the employees expectation of privacy on their personal device that is being used for business purposes.  It is important that after signing the agreement the employee understands what their rights are as to the device and information thereon.

Theft/Loss

Because phones are lost or stolen with unfortunate frequency, it is important that there be a policy in place that requires employees to immediately report a lost or stolen device. This section of the agreement may also contain a provision regarding the company’s decision to install software that would allow the company to remotely wipe the device in the event it is lost or stolen. Ultimately, all parties should be aware of what will happen to the device in the event it is lost or stolen.

Non-exempt employees

Because the Fair Labor Standards Act requires that non exempt employees be paid for all hours worked, a comprehensive BYOD policy will include a prohibition against off-the-clock email access/work by non exempt employees unless specifically authorized  This ensures that all work performed on the company’s behalf is compensated.  Accordingly, deciding what classifications of employees will be able to use their personal devices for business is crucial. A company must proactively determine how it will handle such situations to avoid exposure under federal and state labor laws.

Employee misconduct

Finally, an employer wants to consider its potential liability if an employee uses his or her personal device to send harassing emails, even outside of work hours.  Because the device is the employee’s personal property, employees may feel more comfortable engaging in inappropriate conduct than they would on company owned property.  This could potentially lead to an employee using social media, texting, or phone calls to defame, harass or otherwise inappropriately treat the company, co-workers, or other related parties.  To address such concerns a policy should reaffirm that the company’s policies prohibiting such conduct apply with equal force to all devices covered under the BYOD policy.

There is no one size fits all BYOD policy.  What a Company needs by way of a BYOD policy will be controlled by the type of business,  type of information contained on employee’s device and the availability of IT support to the employer.  Additionally, due to the number of laws that intersect and impact BYOD policies, consulting an attorney to draft such a policy is crucial to the its success.

If you have any questions about BYOD policies, please contact us at 610-275-0700 or via email at main@highswartz.com.

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.