Legal Changes

Keep tabs on the areas of law that affect your business

Is your business structured in the best way to minimize liability exposure? Are you exposing your personal assets to liability? Have you reviewed the many tax implications associated with your business? Are you paying more in self-employment taxes than necessary?

These are just a few questions that company owners, CEOs or office managers should be asking or paying special attention to in today’s high-tech business climate.

Too many business owners take costly shortcuts in dealing with legal matters, whether it’s too complex, too confusing or too easy to Google a virtual lawyer.

“They look to the internet or shop at office supply stores to find contracts to use,” says Gerold Stout of Smith Law Services in Merrillville. “Many of these contracts come up short and do not protect owners like they think they do.”

In some cases, these contracts don’t even follow the law in Indiana, legal experts say, insisting that every contract should be reviewed by an attorney before it is signed with blind faith.

“Business owners should always be concerned about liability issues,” Stout says.

“The internet and social media are dramatically affecting business,” says Jim Jorgensen, of Hoeppner Wagner and Evans in Valparaiso. “The impact upon brick-and-mortar retail is immediate. However, the impact reaches all businesses: cyber security, protection of confidential information, social media as the platform for employee-concerted action, rights of privacy and so on.”

Employment Law Issues

Jorgensen, who practices in the areas of labor, employment, banking and business law, represents business clients ranging from small, closely-held firms to American subsidiaries of foreign corporations. He also was an adjunct professor at the Valparaiso University School of Law for more than 10 years.

“Even with the changes brought by an increasing information and technology based economy, and the pressure of the law to keep current with it, some business laws and principles remain unchanged,” he says.

For example, if you make an agreement, keep it. If you have employees, do not discriminate against them. If you want to be treated equitably, act equitably, he says.

“Too many businesses under-address employment law issues. Businesses will always have employees and, unfortunately, the workplace has become the most fertile source of business-related litigation,” Jorgensen says.

Alfredo Estrada, an associate attorney at Burke Costanza & Carberry LLP in Merrillville, specializes in the current “magnet” attracting individuals to reside illegally in the United States for employment purposes.

“Employers must plan carefully when employing immigrants,” he says. “This issue is getting a lot of scrutiny.

“Employers must ensure that employees have proper U.S. work authorization,” says Estrada, co-chair of his firm’s immigration practice group, as well as a member of its business and litigation practice groups.

“An immigrant lawfully admitted into the United States does not automatically authorize them to be employed,” he says, offering a reminder to cost-cutting business owners.

The U.S. Citizenship and Immigration Service is responsible for most documentation of immigrant employment authorization. Immigrant and non-immigrant visas allow for work authorization; therefore, employers should focus on proper completion of Form I-9 and the Employment Eligibility Verification, he notes.

“To comply, employers must verify the identity and employment authorization for each person they hire, complete and retain a Form I-9. Failure to comply can result in penalties which include a cease and desist order and civil fines,” Estrada says.

The Form I-9 verification is universal to all employers, regardless of size or informality of employment. Employers are responsible for reviewing and ensuring that the employee fully completes the form within three business days of the hire.

Employers, Estrada points out, may not request employees to provide a specific document with a Social Security number.

“To do so may constitute unlawful discrimination,” he says.

Employees may voluntarily provide Social Security numbers for a Form I-9 unless the employer participates in the E-Verify program. Employees must provide E-Verify employers with their Social Security numbers.

Business Law Ethics

Jana Szostek, director of Center for Management Development at Indiana University Northwest’s School of Business & Economics, says that the concept of business law ethics is evolving. The term “corporate social responsibility” involves responsibility that businesses have in areas such as protecting the environment, being engaged in the community and considering all stakeholders rather than just the stockholders.

“These concepts go beyond prior expectations of financial responsibility and fair dealings,” she says.

Still, many business law principles remain staples to focus on, with timeless aspects to keep tabs on.

“There are definitely legal principles that are fairly stable; however, lawsuits are very fact-sensitive and can go either way,” Szostek says. “I tell my students that both parties in a lawsuit go into a trial believing they will win, but one of them will be wrong.

“The goal is to not end up in that situation. It is good for business owners and managers to keep tabs on all of the areas of law that affect their business.”

One piece of advice she emphasizes to business owners is to read the annual summary of laws when it’s published.

“That is a great way to know when a law that affects your business has changed or been created,” she says.

Certain aspects of business law too often get overlooked or ignored by company owners, and it is proper protocol to periodically revisit these factors.

“In the day-to-day operation of the company, I think employment law and safety issues would rise to the top,” Szostek says.

Most companies have systems in place for contracts, taxes, intellectual property and compliance issues, but the day-to-day operations is “where the people are,” she advises, and it’s where more attention is needed.

“Things that the people are doing, or not doing, is where a tremendous amount of liability lies,” she says. “Where attention is lacking, response to a problem will also be lacking.”

Database Protection

Marc Stearns, an attorney with Drewry Simmons Vornehm, LLP in Carmel, suggests that business owners focus on protecting their databases, which can contain a large amount of confidential and personal information.

“Data breaches are becoming more prevalent, and the laws in this area continue to develop,” he says.

In 2016, more than 600 data breaches affecting thousands of Indiana residents were reported to the office of the Indiana Attorney General.

“Businesses must be vigilant and, in the event of a breach, report it to potentially affected individuals and to the office of the Indiana Attorney General to avoid legal liability,” Stearns says.

Also, it remains essential for companies to maintain their corporate form to ensure their shareholders, members or affiliated entities are protected from liability. This means, for example, staying capitalized, maintaining corporate records, and ensuring your company is only handling its own finances, affairs and obligations.

“It’s about observing all corporate formalities and is not using the company to perpetuate any type of fraud or deception,” Stearns says.

Sometimes, companies seeking alternative methods to raise capital will overlook the steps necessary to properly do so. For example, a company offering securities as an alternative way to raise capital may need to register with U.S. Securities and Exchange Commission. Or ensure it meets the requirements to qualify for an exemption from registration.

“Either way, these securities are governed by anti-fraud provisions of the federal securities laws,” Stearns informs clients. “And potential purchasers of securities must be comprehensively informed about the company, the type of securities offered, and all risks involving the securities.”

Benefits and Risks of Electronic Technology

For a different take, consider what Dave Hunt, owner of the Hunt Group in Valparaiso, tells his clients about business development and legal protection.

“One key area is in the utilization and optimization of software applications,” Hunt says. Obviously, the applications on our smartphone and personal computers have enhanced our lives in terms of time and energy afforded to perform basic or complex tasks. For businesses, software usage rights must be understood and followed to avoid copyright infringement or piracy.”

Such violations can result in jail time or stiff fines and penalties, at a minimum.

“That’s the benefit and the risks associated with software applications,” Hunt says.

The reality is that nearly 70 percent of IT executives are not in control of their software licensing agreements, according to a recent King Research survey. Couple that with the fact that organizations have nearly an 80 percent probability of being audited by one or more software publishers in the next year.

“Understanding that the world is shrinking as a result of technology is key,” Hunt says. “Technology laggards are losing out.”

Szostek, who’s also an adjunct educator teaching Legal Environment of Business at IUN, agrees that technology is a rapidly evolving area of business law.

“Technology is changing so rapidly that the law is really not able to keep up with it,” she says. “For example, protecting intellectual property is a challenge when corporate logos are readily available in an electronic format.”

Disgruntled employees can also more readily share trade secrets and other company information electronically.

“Something that will be interesting to watch is how the court balances employee First Amendment rights and the company’s right to protect its reputation and information,” she says. “Privacy is a huge issue.”

Kevin Werner, a Crown Point attorney, offers one last point to keep in mind.

“Too many small businesses are relying on Google, which in the right hands is very beneficial. In the wrong hands, it can be very destructive,” he says. “What I see is too many people using Google to solve problems, which sometimes leads to more and bigger problems.”

He’s not blaming Google or other commonly used internet sites that are brimming with legal insights or information. Nonetheless, a search engine shouldn’t be mistaken for a business law expert.

“I can swing a hammer, but I should not be trusted to build your house,” Werner says.