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    Wednesday, December 31, 2008

    How to Terminate an Employee

    In these tough economic times, you may be forced to lay off some of your employees. While never a pleasant experience, if you are prepared, you can handle the task professionally and make the process easier for both you and the employee. Here are some suggestions to help you prepare for the task.

    Be Prepared Before Terminating an Employee
    ● Determine is any contractual obligations are owed to or owed from the employee. Examine any applicable employment contract, collective bargaining, non-disclosure or non-competition agreement.

    ● Review the employee's compensation and benefit issues. Calculate what may be owed and identify which benefits may be continued. If possible, have the necessary notices and/or forms ready.

    ● Plan ahead for what steps you must take in the termination process:

    ○ identify the customers, files, projects and other responsibilities handled by the employee and determine an orderly transition for each;

    ○ investigate how will you secure the return of any company property - including laptops, files (physical & electronic and ask if any copies were made), credit cards, company cars, etc.;

    ○ make arrangements for the collection of the employee’s personal belongings at the office, if any; and

    ○ assess how the employee may react to the termination and take appropriate measures.

    Delivering the Bad News

    When conducting the exit interview, have another person in the room to serve as a witness to the discussion.

    ● Quickly tell the employee the purpose of the meeting. Although the reason for termination should be stated, there is no need to go through a step-by-step analysis of the rationale supporting the decision. You may need to stress that the decision is final, emphasize that all relevant factors have already been reviewed, and if applicable, stress that those involved in management decisions agreed to the decision.

    ● Summarize what can be expected as final compensation and any benefits they have. If possible have all notices and forms ready (e.g., COBRA notices, IRA rollover forms). Discuss any severance and/or any agreement required, if applicable.

    ● Discuss customers, files, and projects that the employee is working on & ask if there are any issues that need attention.

    ● Verify their contact information

    ● End by wishing them good luck in their future endeavors.

    Follow-up on the Post-Termination Actions

    ● Notify all departments (HR, Payroll, IT, etc.) and all necessary staff, subordinates and/or co-workers of the termination. Be cautious as to what you say. You do not need to provide a reason for the termination. Assume that the former employee will contact your employees and will ask them about what they have been told.

    ● Inventory all of the customers, documents, files and property assigned to the employee and any other company property to which they had access.

    ● Immediately delegate any customers, files, or projects to the appropriate parties and assign new reporting lines (if applicable).

    ● Disable the employee's passwords/access to your networks and voicemail systems. However, you may want to keep email and voicemail accounts active (or forwarded) for awhile to field customer contacts.

    ● Notify your vendors of the employee’s termination and remove them as an authorized user.

    ● Consider changing the locks.

    Handling Customer Relationships
    ● Assign the former employee's files and customer accounts to a new account representative.

    ● Have the new account representative call the customers to introduce themselves. If you fear the former employee may contact them, deal with it directly by advising the customer that the former employee may contact them and ask them to notify you if he/she contacts them.

    ● For those customers who inquire, only tell them the former employee is no longer with the company. Do not discuss the reasons for the separation, and do not state anything that may be considered derogatory or negative - e.g., that their performance was inadequate.

    ● Assign someone to monitor the former employee’s email, voicemail (office & cell phone) accounts and notify the new account representative of the customers who leave messages.

    Finalizing the Compensation Owed & Benefits Due
    ● Assign someone to ensure all required notices are sent and to coordinate with the former employee on the completion of any election forms (e.g., COBRA election forms for the employee & any applicable dependents, and any profit-sharing/401K election forms, if any).

    ● Have a paycheck ready by the next regular payday. This check must include the final salary and any earned commissions up through the final day of work and payment for accrued benefits and vacation (if any). Any unearned but pending commissions can be paid on the next regularly scheduled pay date after they are earned (e.g., when the customer pays for the sale).

    ● Remember to ask the employee turn in any required final time sheets and/or expense reports.

    ● If the employee is older than 40, then there are certain laws that may impact your actions. If possible, address this issue before conducting the exit interview. Otherwise, be sure to address this issue before finalizing any compensation/ severance.

    Be Cautious When Communicating with Former Employee
    ● All communications should be brief and to the point. You do not need to review the reasons for the termination.

    ● Use special caution when communicating by phone. Assume all phone calls with the former employee are being illegally recorded - so be cautious in what you say. You should take calls on a speaker phone with an additional person in the room as a witness, and close your door before taking the call to ensure privacy. Make a written summary of the conversation and identify the date and name of the person who served as a witness.

    ● When contacted for a reference, be brief and never say anything negative. If you are uncomfortable providing a reference (or have nothing positive to say about the person), you should only verify the employment dates and indicate that the decision was made to go in a different direction. If pressed further, you may state what duties/responsibilities were assigned to the position held by the former employee.

    Tuesday, May 13, 2008

    Avoiding the “Kotecki Gap”

    Have you signed contracts that increase your liability without insurance coverage? There are traps here that you will need your attorney’s knowledge of the law to avoid.

    Suppose you buy or lease some heavy equipment for use in your business. Often your seller or lessor will require — in the purchase contract, lease or maintenance contract — that you assume any liability it may have if your employee is injured while using the machine.

    Ordinarily, your liability for any claim by your employee against you is limited by workers’ compensation laws. But the employee may sue the manufacturer or your seller or lessor — the “supplier” --- based on defects in the product or its maintenance. Under Illinois law, the supplier can sue you for contribution — paying part of a judgment awarded to the employee — to the extent you are also responsible for the injury. However, under the Kotecki case,(1) your total liability would be limited to the maximum amount under the workers’ compensation law.

    Your supplier will want more protection from this liability. At the least, it will require that you accept responsibility for your full contributory share of the judgment, waiving the protection of Kotecki. But it will often require more, that you indemnify it against all losses resulting from your use of the equipment. Your supplier will not want any liability, whether or not you failed to maintain or use the equipment properly or to provide adequate safety precautions for your employees or otherwise.

    You may think that your insurance covers the additional liability when you waive Kotecki protection and/or indemnify your supplier. But a "general liability" policy usually excludes from its coverage damages for bodily injury or property damage that you are obligated to pay because you assumed the liability in a contract or agreement.(2) So by signing a contract with such a waiver and/or indemnification, you may lose insurance coverage for the additional liability you assume under those provisions.

    This loss of coverage can occur in other indemnification situations as well. The Illinois Supreme Court just last year held that a construction subcontractor whose employee suffered injury had no coverage for indemnification liability it undertook in its contract with the general contractor.(3)

    Whenever you are asked to sign a contract requiring waiver or indemnification of losses by your vendor, your carrier or customer, you should have an attorney look carefully at both the proposed waiver and indemnification provisions of the contract and your general liability policy. There are usually ways to modify the protection you are to provide to the other party in the contract in order to avoid falling into the exclusion from insurance coverage.

    The legal fees will be well-spent if they avoid your ending up with a significant uninsured liability!
    At Griffith & Jacobson, LLC, we can help you address the “Kotecki Gap” and help you identify many other similar issues in your every day business dealings that can be a trap for the unwary.
    For more information please contact Louis Michael Bell ( 312-236-8110 or at lmb@gjlaw.com) at Griffith & Jacobson, LLC.
    Griffith & Jacobson, LLC - We know your business!

    Check us out at www.GJlaw.com

    * * * * * *
    1. Kotecki v. Cyclops Welding Corp., 146 Ill.2d 155, 585 N.E.2d 1023 (1991). Other states will have similar decisions.
    2. In Illinois this uninsured liability can be referred to as the “Kotecki gap.”
    3. Virginia Surety Company, Inc. v. Northern Ins. Co. of New York, 224 Ill.2d 550, 866 N.E.2d 149 (2007).

    Wednesday, March 26, 2008

    Key characteristics of a good business attorney

    Below are a few key characteristics of a good attorney that you may use to evaluate whether or not a prospective business attorney may be right for you (in no particular order of relevance or importance):

    • Advocate: An attorney needs to be supportive and not just sympathetic to your cause. You do not want a "yes" man. A good attorney is supposed to tell you where you may be wrong. Can the attorney be straight-forward with you?

    • Judgment: Are you comfortable with their business judgment? Do they seem to exercise reasonable and sound business judgement? Or are they too theoretical, impractical and/or out-of touch with your business reality well-thought ideas and reasons.

    • Availability: Do they have adequate time to take on your matters. Make sure to get a commitment from the attorney.

    • Communication - No "Legalese" please: Your attorney must be able to explain to you even the most complex issues into terms you understand. Your attorney is supposed to find solutions for you, not mystify you.

    • Foresight/Proactive: Does the attorney think of ways to help you and your business? Do they seem to understand the problems you are likely to have? Do they have a plan to avoid likely problems?

    • Professionalism: Are they organized and handle themselves with professionalism? Are they respectful of your time - were they on time?

    • Resources: Do they have the resources and connections you may need to support your business? Do they know the players in your industry? Ask about their Affiliations with accountants, financial advisors, bankers, and other professionals. Can you leverage their resources, connections and referrals?


    For more information or if you need a great business attorney in the Chicagoland area, contact Arieh M. Flemenbaum at Griffith & Jacobson, LLC at 312-236-8110 or amf@gjlaw.com.

    Griffith & Jacobson, LLC - We know your business.

    Friday, March 7, 2008

    Why your company needs a registered agent?

    Too often when a person or their accountant forms a new corporate entity, some of the legal issues are ignored - particularly the need for a independent, unaffiliated registered agent.

    We recommend you engage a law firm as your registered agent.

    With a law firm serving as the registered agent for your corporate entity, you will have the peace of mind that you will receive timely and prompt notice if your corporate entity is served with a summon and an attorney will be able to immediately to review and assess the lawsuit and provide you with legal advice on how to answer the summons.

    In contrast, if you serve as your own registered agent, you may save some money, but you put your company at risk. You risk having a summons being served without your knowledge and a critical deadline may pass before the summons reaches the appropriate party. Without an independent, affiliated registered agent, a summons is generally permitted to be served on any (adult) person at your principle place of business - and you have no assurance that the summons may wind up sitting in some one's inbox for days. Worse yet, you may suffer the embarrassment of having a summons served at your home, since some jurisdictions permit a summons to be served on any adult at the home of any officer of a corporate entity.

    Having a law firm serve as your independent, unaffiliated registered agent is also beneficial because a law firm should help your corporate entity maintain its the corporate shield and its separate legal identity for tax purposes. A corporate entity must comply with the statutory requirements regulating the corporate entity, including, but not limited to filing an annual report and/or corporate franchise tax return. However, you should also address any recommended corporate formalities (which are certain legal principles generally recognized in your jurisdiction) that may help a corporate entity maintain its separate legal identity for liability and tax purposes. One such important - but often overlooked - corporate formality is the creation and maintenance of corporate minutes for the annual (and special) meetings of a company's governing board and stakeholders (i.e. shareholders or members). So, your registered agent should not only make sure that all required reports are filed, but they must be familiar with and understand how to comply with the recommended corporate formalities that may apply in your jurisdiction to your corporate entity.

    At Griffith & Jacobson, LLC, we charge a flat fee to service as corporate entity's registered agent in Illinois. For the 2008, our fee for this service is $325 per year. With Griffith & Jacobson, LLC, you should be secure in the knowledge that any court actions which may be taken against your company and served on us as your registered agent, will be addressed promptly - you will be notified and we will advise you on how to take care of the matter quickly. As part of our service, we will also prepare your corporate entity's annual report with the Illinois Secretary of State and ensure the recommended annual corporate minutes (resolutions) are completed and maintained in your corporate minute book.

    If you would like to engage Griffith & Jacobson, LLC to act as your company’s registered agent in Illinois, please contact:

    Arieh M. Flemenbaum
    Griffith & Jacobson, LLC - We know your business!
    312-236-8110 or at amf@gjlaw.com

    Check us out at

    Our Law Firm's Business Philosophy

    At Griffith & Jacobson, we mean business – your business. Our driving philosophy and our ultimate goal is to provide our clients with efficient, affordable legal solutions for all of your business needs. In order to achieve this goal, we believe it is important to be:

    • Proactive – We are "can-do." There are no "legal problems", only obstacles to confront and solutions to find.
    • Direct – We help identify your issues, analyze the options available to you and provide you with clear and concise advise.
    • Efficient – We address the identified issues and commit only needed resources and persons to resolving them.
    • Tenacious – We own your issue until it is resolved or mitigated. An issue is not resolved until you are satisfied it has been fully addressed.
    • Diligent – We step into your shoes. An issue can only be fully understood from your viewpoint.
    • Responsive – You should never feel you do not know the status of your matter.
    • Accountable – Every project will have a deadline and will be completed by that deadline; except as circumstances out of our control change.
    • Accessible – We strive to return every telephone message on the day it is received, preferably within two hours, and return all messages within one business day.
    • Available – Information flow must flow freely to resolve maters to your satisfaction. We prefer to communicate with you
      (in descending order of preference):
      a. Face to face,
      b. By telephone,
      c. Via email, and then
      d. By letter or fax.
    • Affordable – We strive to present practical options and a cost-effective, comprehensive legal resolution of your business issues in a timely manner.
    For more information, please contact Arieh M. Flemenbaum at Griffith & Jacobson, LLC at 312-236-8110.

    Griffith & Jacobson, LLC – Chicago lawyers who know your business.

    Friday, February 29, 2008

    E-Commerce Startup Checklist

    There are many business issues and considerations unique to an online business when considering starting an e-commerce business. Below is a E-Commerce Start-up Checklist from the law firm of Griffith & Jacobson, LLC. This checklist contains many of the key issues a new e-commerce business should address before launching an online business.
    For a more thorough review of the issues and considerations that you may need to address in launching your e-commerce business, please contact Arieh M. Flemenbaum at Griffith & Jacobson, LLC - 312-236-8110 or at amf@gjlaw.com
    1. Have a Business Plan:
    • Define niche market
    • Write brief mission statement
    • Develop a business identity
    • Have a reliable source for your product- manufacturers/suppliers
    • Have a reliable source to deliver your product- direct delivery or drop-shippers

    2. Form a business/corporate entity:

    • Choice of Entity/ State Selection
    • Obtain a federal tax employer identification number (EIN)
    • Obtain state tax identification number
    • Obtain a state/local sales tax license, as necessary
    • Open a business checking account

    3. Business Logistics:

    • Establish business address
    • Set up phone & fax service
    • Establish PayPal/Google checkout accounts or a merchant account (direct credit card processing)?
    • - review procedures, fees and dispute mechanisms
    • - Information Security - determine what services are offered/needed to establish
    • security for payments
    • Contract with a preferred shipper - set up shipping provider accounts:
    • - Establish fixed & discount shipping rates
    • - Purchase shipping supplies
    • Contract with suppliers/vendors

    4. Web logistics:

    • Choose a web hosting provider - address costs, liability for service interruptions
    • & denial of service, services offered/security
    • Designing your e-commerce site - Contracting a web designer and/or graphic designer
    • Address web-marketing & Search Engine Optimization for your website and products - Ensuring that your clients find you on the web

    5. Legal Issues:

    • Terms & Conditions of Use for your website
    • - Disclaimers
    • - Limitation of Liability
    • Warranties/liability for products:
    • - charge backs, consumer disputes, procedures for returns
    • - responsibility for shipping and handling costs
    • Liability for 3rd party content (product descriptions, endorsements, comments)
    • Safeguarding Privacy:
    • - establish procedures for safeguarding certain non-personal information
    • - determine marketing practices: Will you sell website user information?
    • - certain industries and certain information require privacy notices
    • Use of copyrighted materials/trademarks

    For further information, please contact Arieh M. Flemenbaum at Griffith & Jacobson, LLC via email - amf@gjlaw.com or by phone at 312-236-8110.

    For additional resources for entrepenuers and business start-ups at: http://www.gjlaw.com/CM/FSDP/PracticeCenter/Business/Starting-a-Business.asp

    Wednesday, February 20, 2008

    Beware of form bank resolutions!

    It’s not smart to trust anyone’s standard documents. Your vendor or your bank may tell you that its documents are safe because so many of their customers (buyers, borrowers, users, etc.) use them. And you may think that you can save hundreds or thousands in legal costs by not having your attorney review "standard form documents" or negotiate with the other side (especially when the other side is a bank and will charge you for the fees and expenses of its own attorneys). This can be penny-wise, but pound-foolish.

    Banks often offer to save legal expenses for our small and mid-sized clients by using standard documents from their word-processing and/or in-house legal departments. Bankers often refer to these as "LaserPro® documents," using the trade mark of a well-known bank document package. We have found that these bank documents are drafted to only protect the interests of the bank and ensure that the bank has no liability. These form documents usually do not address a borrower's concerns or issues. So, accepting these standard form documents (without an attorney's review) can put your company at risk be and can lead to unintended consequences.

    In the case Dalton Point, L.P. v. Regions Bank, Inc.1, a bank customer signed the bank-supplied form resolutions. These resolutions contained a limitation of liability that protected the bank when it honored Dalton Point's checks. Apparently, Dalton Point’s owners did not think they needed outside review of form documents for a loan transaction of more than $1 million and a new operating account with the bank.

    The court records indicate that the bookkeeper was embezzling money by using Dalton Point's checks to pay her own personal loan from the bank. Dalton Point sued the bank, claiming the bank should have realized the bookkeeper was commiting fraud. The bank argued that the terms of the form resolution protected it from liability and the court agreed. So, Dalton Point ended up with an unrecovered loss of almost $67,000.

    We understand that the expense of custom-tailored documents may not seem justified for small credit transactions. But for a borrower’s protection, those documents do need to be reviewed and appropriate changes negotiated with the bank, and in some cases replaced by documents drafted by the borrower’s attorney.

    Over the years, the attorneys at Griffith & Jacobson, LLC have represented both borrowers and banks in a great many loan transactions. With this experience we are able to efficiently identify and address the substantive legal issues that are important to both parties. Banks are generally willing to negotiate many of the terms and conditions contained in their documents (even their standard form documents) - but you have to ask. Generally, banks have been very receptive to our revisions and suggestions. We credit this positive response to the fact that we strive to be fair and balanced while protecting our client's best interests.

    So at Griffith & Jacobson, LLC, we advise our clients that — even if the bank will use its standard form documents — we should review all of the documents, including the bank-supplied account resolutions. We also suggest drafting at least the approving resolutions for the transactions, rather than adopting the bank resolutions wholesale.

    Our advice to our clients and our readers is a slight twist of an old saying:

    "Trust, but double check with your lawyers!"

    Louis Michael Bell
    Griffith & Jacobson, LLC - a Chicago business law firm
    - We know your business.

    Contact me at 312-236-8110 or lmb@gjlaw.com
    or check us out at http://www.gjlaw.com/.

    Read more details on the Dalton Point case below....

    * * * * * * * * * * ** * * * * * * * * * * ** * ** * * * * * * * * *
    In the Dalton Point case, Dalton Point had an account and a loan with Regions Bank. When Dalton Point opened the account, the signatory card was signed by a limited partner and by Dalton Point’s bookkeeper. The documents they signed and delivered to the Bank for the account included a Certificate of Resolution, which included the following:

    "RESOLVED, that all drafts and other items for the payment of money from the accounts identified shall be signed by any 1 of the following: Ronald G. Ralston, Limited Partner; Patricia H. Page, Bookkeeper."


    "RESOLVED, that the Bank is authorized to honor all drafts, checks, or other items or instructions for payment or transfer from a deposit account even though drawn, endorsed or otherwise payable to a person identified above, and whether presented for cash or for credit to the account of that person or another person, or in payment of an individual obligation of that person or another person, and the Bank need make no inquiry concerning such withdrawals or disposition of the money, items or credit given therefor."

    Over the next 48 months, Ms. Page allegedly embezzled a substantial amount of money. Accordingly to the court records, Ms. Page used company checks to pay down a personal loan from Regions Bank. She was able to do this becuase Dalton Point also had a business loan from the bank. Rather than write a company check directly to the bank in the amount of Dalton Point's monthly payment (approximately $23,100 per month), each month she wrote a company check for almost $24,000. She took this check to the bank to have it cashed and she instructed the bank teller to apply approximately $23,100 of the check towards the monthly payment due from Dalton Point and requested a check or cash for the remaining $900. The court records state that she used these funds to pay the $900 she owed on a personal loan from Regions Bank.

    When Dalton Point discovered this some time later, it sued Regions Bank for the embezzled money and interest (almost $67,000), claiming that the Bank should have noticed the fraud committed by Ms. Page. Regions Bank argued that it was protected, among other things, by the quoted language in the Certificate of Resolution. The trial court ruled in favor of Regions Bank and rejected Dalton Point’s claim, and the Georgia Court of Appeals upheld the result.

    The report of the case does not say who drafted the Certificate of Resolution, but it is similar to a number of "standard form" bank resolutions that we see from time to time. We doubt that any borrower’s lawyer would have read and accepted those resolutions, much less drafted them for a client. Dalton Point seems indeed to have been "penny-wise and pound-foolish."

    Louis Michael Bell
    Griffith & Jacobson, LLC - a Chicago business law firm
    - We know your business.

    Contact me at 312-236-8110 or lmb@gjlaw.com
    or check us out at http://www.GJlaw.com.
    ____________________________________________________ 1. Dalton Point, L.P. v. Regions Bank, Inc., 287 Ga.App. 468, 651 S.E.2d 549, decided on September 10, 2007 by the Georgia Court of Appeals.