Disputes arise in every type of business—big or small, new or established. Disputes can develop between a business owner and employee or with an independent contractor. And litigation is always costly.
For instance, a dispute could arise over Internet use at work, about what’s being posted and how that might affect a business’s reputation.
How to keep your company from getting embroiled in legal tangles and minimize costs, whatever the issue, is what our experienced attorneys will try to accomplish in this article.
“As the saying goes, an ounce of prevention is worth a pound of cure,” says attorney Rabeh Soofi Bruder of Ice Miller LLP’s Indianapolis office.
One of Soofi Bruder’s specialties is assisting corporate clients with questions and concerns about the Internet and its application in the workplace. Soofi Bruder and a colleague recently completed a survey polling chief executive officers called “CEO Survey: Internet, Technology and Social Media Rising Concern.”
Q: How are most companies dealing with the use of social media, such as Facebook and Twitter, by employees? Since social media has been around for several years, most companies are probably used to dealing with this issue, correct?
Soofi Bruder: What we’re seeing nationally is that most companies do not have social media policies in place. As you know, sometimes it takes a while for business to catch up to technology. … Everybody is involved. For employers, it’s not possible to stop employees on what they do after hours. They have social lives. They are going to use these sites. They are going to make comments about their jobs and bosses. Most companies do not know how to handle it. Some companies have responded by banning social media sites altogether. That’s not an effective way of handling the problem. Businesses need to see that the Internet could be their biggest opportunity to growing their business. We’re seeing companies using coupons on the Internet and offering special discounts for people only using Facebook.
Attorney Eric Seigel, a partner with Tuesley Hall Konopa LLP in South Bend, also deals with social media issues with business clients.
Q: Should employers have policies about the use of the Internet while on the job?
Seigel: I recommend that businesses do have a policy in place for use on the job. They need to have a policy that addresses the use of social media on work hours and on work equipment. There are benefits and a downside when it comes to social media.
Let’s say someone is on their Facebook page on something unrelated to their work and they post some unflattering comments about the company. That can cast the company in a bad light. Can you take action against that employee? Even if you don’t have a policy in place, depending on the conduct, you can still take action, but you’d be in a better position if you have a policy in place before you get to that point.
Of course, not all disputes involve social media. Some disputes can arise over the simple task of deciding who will take over a business if the CEO or owner passes away. Thomas Gardiner says most smaller companies do not have a succession plan in place. Gardiner is a partner with the Chicago law firm of Gardiner Koch Weisberg & Wrona.
Q: What is the benefit of having a succession plan and do all companies need one?
Gardiner: I would be surprised if most companies have a succession plan. Succession planning is something we would recommend because in the event of an emergency, it’s clear what would occur. However, I don’t think in a family business it’s often necessary. The board of directors will convene a meeting and make a decision. In a family-operated type business, a succession plan isn’t often stated but in practice a succession plan may mean the son might take over. That might be the assumption without a stated plan. In Fortune 500 companies, sometimes the frontrunner for the top position may not be the person chosen to be the new CEO. Sometimes things are not set in stone.
Given today’s economy, one might think it’s not a good time to start a business. But some people are opting to make a go at it. If you do try to become an entrepreneur, it’s vital to do your homework. Attorney George W. Carberry, a partner with Burke, Constanza & Cuppy LLP in Merrillville, assists and guides new business owners.
Q: What are some of the legal considerations an entrepreneur should consider before starting a business?
Carberry: Some of the things that we first talk about is what is the best model for the business? Will it be a corporation, an LLC, sole proprietorship? We also recommend that whatever the venture is in, know the market. What drives the market of this particular area of business? Who would the competition be? Put together a business plan. We also talk about capitalization. How much money is it going to take? Don’t underestimate how much it will cost to acquire the inventory. How long is it going to take the business to be successful? So many new businesses are so undercapitalized that six months into it, the owner is trying to find out how he’s going to come up with other sources of income. Banks are putting a hold on lending. Banks are in business to lend money but it’s just not happening right now. The client has to be realistic about that.
A new business or company may want to acquire property to build a warehouse or plant, but the property may have some environmental issues. Attorney Nicholas J. Chulos, a partner with Krieg DeVault, says there are many issues to consider. Chulos works out of the firm’s Indianapolis and Schererville offices.
Q: What do buyers of property with environmental concerns need to be aware of?
Chulos: The very first thing to do is make sure that they hire a strong environmental firm do a site assessment and other analysis on the property. You really need to get a handle on what the scope is. You also want to talk to the land owner and see what the owner has to say. They may say they don’t know or they might not be forthright. The owner still needs to disclose what’s wrong with the land. Many times it’s covered in a fairly detailed real estate agreement. In some cases, the property has had issues with the EPA or Indiana Department of Environmental Management. Sometimes there’s ongoing remediation. Sometimes, whether you’re the buyer or seller, you can’t quantify the liability. It’s hard to figure out. In most cases, you can quantify the liability, within a range. It depends on the size of the property and what’s going on or has gone on with the property. In some cases, you buy the property at your own risk.
In some businesses, employees may feel the need to organize a labor union. Gerald F. Lutkus is a partner in the South Bend office of Barnes & Thornburg LLP and a member of the firm’s Labor and Employment Law Department.
Q: Can a company stop or prevent employees from organizing a labor union?
Lutkus: It’s not a matter of allowing or not allowing employees. Employees have a right to organize. If it’s determined there is majority support for a union, they have a right to do that. Employers do have a right to inform their employees why unionizing is not a good thing. They need to make sure that they communicate to their employees the downside of union organizing. The expense of paying union dues, for instance, or going through the union for complaints. And there is no guarantee of higher wages or better benefits. All that is subject to negotiation. Likewise, an employer can’t threaten job loss for unionizing. That’s illegal. But there is a reason why only 8 percent of American employees in the private sector are represented by unions today. They have fallen into disfavor.
Some communities have provided tax incentives to lure new business to a blighted or underdeveloped area. This may include the use of TIFs (tax increment financing districts). TIFs continue to receive a bad rap by some in the community. According to the state of Indiana, once a TIF district is created, the property tax revenue attributable to new assessed value within the district accrues to the redevelopment district rather than traditional taxing units such as schools, the county or the township. The new revenue is usually used to pay for improvements to the infrastructure within the designated TIF district. Richard Hill, a partner with Baker and Daniels in South Bend, advises local municipalities in establishing a TIF district. He once served as city attorney for the city of South Bend.
Q: Why have TIFs received such bad publicity in some places? Is it worth the headache for communities to establish such a district?
Hill: In dealing with a blighted area, TIFs may be suitable to attract new jobs to a community. From the standpoint that it brings business into that community, they may have very few resources at hand. We don’t get the benefit of new taxes if it’s not for the new project going into a blighted area with the help of a TIF.
With unemployment in Indiana at 10 percent, which is slightly more than the national average, business owners have the potential to hire very qualified candidates for vacant positions. On the other hand, there are a number of “overqualified” candidates that some firms may decide not to hire. Jim Jorgensen is a partner in the Valparaiso office of Hoeppner Wagner & Evans. He specializes in the areas of labor, employment, banking and business law.
Q: Should employers be careful when deciding not to hire someone they have deemed to be “overqualified”? And why are companies reluctant to hire someone who is overqualified for a position?
Jorgensen: I think the concern is that the person will immediately be looking for another job. When someone is hired into a position for which they are overqualified, overqualified means I’m also underpaid compared to what I’m used to. The person may spend most of the time and attention in finding another job. Individuals who are overqualified are usually over the age of 40. The person could file an age-based claim. There are more of those types of claims emerging. The courts are looking closely to determine if the firm had a legitimate business reason not to hire that person. There always has to be a legitimate, non-discriminatory reason not to hire a person.
Even after a dispute ends up in court, there are still ways to resolve the dispute. Civil mediation is one way disputing parties can try to resolve the matter. Daniel W. Glavin, managing partner with Beckman, Kelly and Smith in Hammond, is a certified mediator. He’s helped mediate hundreds of civil cases.
Q: Why would a party or parties to a lawsuit want to try to settle a dispute by going through the mediation process? Does it work?
Glavin: At their core, all business disputes involve somebody not wanting to pay. Sometimes, one party doesn’t want to pay because they feel they didn’t get the value or that they didn’t receive what they have contracted for. There are also business disputes litigated simply because one party cannot pay. We’re seeing more of that given the economic pressures.
A mediator is completely neutral. … The process kind of forces the party to take a cold hard look at their case before they get ready for trial. Some cases are starting mediation much earlier in the process. … Sometimes cases are referred to mediation by the court. That’s usually the rule rather than the exception. Judges want the parties to make a genuine effort without the courts involved. … I think a competent mediator with every case feels that there is some way to get these people to reach an agreement. Sometimes it doesn’t take very long for you to conclude that is not going to happen. Sometimes you feel that this is definitely going to happen. Then, there are other cases where almost every issue is being disputed in the case. It’s disappointing.
