Ping® January 2022 – Reminder To Review Your Contracts

Review Your Contracts Every Year.

One of the most important tools to protect your business – your ideas (copyrights, trademarks, trade secrets, confidential and proprietary information), customer relationships and talent pool – is your written contract. Your contract is the foundation for a reliable relationship for you, your customers and your employees. More importantly, it helps to prevent misunderstandings and false expectations that can lead to a breakdown in your customer relationship, jeopardize projects, or even worse, result in litigation.    

Starting with a form is just OK.

Many companies start with a model or “form” contract adapted from forms available online or drafted when the business first started.  Oftentimes, I am presented with form contracts “downloaded from the Internet” or provided by a form-filling service that will do cheap and quick corporations or LLCs, without actually providing any legal services. Although these forms may be a good starting point, your business needs, it deserves, contracts tailored to the specific needs of the enterprise or relationships.

Franken-contracts can ruin your business.

As businesses develop over time, you may have revised your contracts, adding a little here, removing a little there. Maybe you read an article about an important case in your industry and decided to add some text from the contract discussed in the court’s legal opinion. In many cases, over time, the agreements become “Franken-contracts” an odd amalgamation of trade lingo, inconsistent terms and even contradictory conditions. At best these are ambiguous and confusing to read. At worst, they become unenforceable.

Review contract annually to avoid weak spots.

At some point, you should review, revise and generally “tighten” existing contracts. You should have your lawyer review them to make sure that there are no mistakes, ambiguities or omissions that could cost you or your customers. I urge clients to have their contract forms reviewed on an annual basis. Depending on changes in the law, changes in the industry or changes in your own business, this process should only take a few hours.

Contact us for a free, no-obligation consultation.

To learn more about how we can help your with your business and contracts, contact the Lawyers at the Adler Law Group at David @ adler – law . com (without spaces) or (866) 734-2568. Learn more abut us here:

http://www.adler-law.com

Ping® Webinar: 5 Things Every Design Contract Needs

I want to give a big thanks to Houzz PRO for hosting this webinar.

This program covered: 

–The five key problem areas in design contracts 

–What the key terms of a contract should be, why they are there and when they should be changed 

–Rights & Remedies: what a designer can do if a client is not living up to his/her side of the deal.

Read More Here.

Ping® October 2021 Changes Coming to Non-Compete Agreements in Illinois

EMPLOYMENT (820 ILCS 90/) Illinois Freedom to Work Act.

Illinois passed a law that amends the Illinois Freedom to Work Act. Expands the scope of the Act to apply to all employees (rather than only low-wage employees). Prohibits all covenants not to compete.

Scope

The law goes into effect January 1, 2022 and amends the Freedom to Work Act (the Act), which restricts the use of non-compete agreements for low wage workers. For the first time, Illinois will have statutory requirements for mandatory review periods, definitions of adequate consideration and legitimate business interests, as well as specific salary minimums for employees subject to restrictive covenants. 

Application

The law will apply to non-compete and non-solicit covenants. The law does not apply to contracts covering confidential and proprietary information, protection of trade secrets, or inventions assignment agreements. The law also does not address covenants for independent contractors, and expressly carves out restrictions on a person purchasing or selling the goodwill  or an ownership interest in a business.

Mandatory Review

The law requires that an employer advise the employee in writing to consult with an attorney prior to entering into the covenant and provide the employee with at least 14 calendar days to review the agreement. 

Consideration

Contract lawyers know that to be enforceable a promise must be supported by consideration. Due to the unique nature of restrictive covenants, there is heightened scrutiny of what will constitute sufficient consideration for a restrictive covenant under the Illinois law. The leading Illinois case, 

Fifield v. Premier Dealer Services, Inc., 993 NE 2d 938 (Ill.App.1st 2013), an Illinois court decided that mere employment or continued employment for at-will employees, is not adequate consideration to support a restrictive covenant unless the employee remains employed with the employer for at least two years after signing the agreement. 

Illinois law will now expressly defines “adequate consideration” as either (1) the employee working for the employer for at least two years after signing the non-compete or non-solicitation covenant or (2) other sufficient consideration, such as “a period of employment plus additional professional or financial benefits or merely professional or financial benefits adequate by themselves.”

The law leaves open the definition of “additional professional or financial benefits.” Courts have found signing bonuses, equity grants, and other types of consideration sufficient under current case law. 

Going Forward

While there is time to plan for the effect of the new law, it’s not too soon to begin reviewing current existing “form” contracts and consider changes. One-size-fits-all contracts always need fine-tuning. Change sin the business operating environment require a closer look at non-compete and non-solicitation covenants. 

Ping® – Arts, Entertainment, Media & Advertising Law News – “Five Rs” To Remember

“Five Rs” To Remember When Letting Employees Go

It is inevitable in almost every business. You will need to let an employee go. Whether it’s a seasoned designer coming with plug-and-play experience or a fresh face just out of design school, sometimes it just doesn’t work out. Recently, several of my designer clients have had to fire an employee due to the employee’s misconduct. This could be anything from soliciting and directing company clients and prospects, to doing personal consulting work on the company’s dime, to taking property and information. Regardless of the reason, here are five “R”s to keep in mind.

1. Review the contract.

2. Reconcile and pay.

3. Request return of property.

4. Reiterate respectfulness. 

5. Reserve rights.

With those ideas in mind, let’s consider each one. A little more.

1. Review the contract/offer letter. This is always the first step and will provide guidance on termination rights, procedures and remedies, if any.

2. Reconcile and pay what’s owed. See number 1. Ensure that except for payment of contractual and statutory amounts, no other salary, commissions, overtime, bonuses, vacation pay, sick pay, severance pay, additional severance pay or other payments or benefits whatsoever will be paid.

3. Request return of property and information, in whatever form. Request all property any and all property or documents the employee created or received in the course of employment, including, but not limited to e-mails, passwords, documents and other electronic information, hardware such as laptop computers and cellular telephones, calculators, smartphones and other electronic equipment (mobile phone, tablet, etc.), software, keys, company credit cards, calling cards, parking transponder, information technology equipment, client lists, files and other confidential and proprietary documents, in any media or format, including electronic files.

4. Reiterate a professional’s obligation to remain respectful. Specific admonition of non-disparagement such as “refrain from saying, making, writing or causing to be made or written, disparaging or harmful comments about us, our employees and/or our clients.”

5. Reserve rights. Close your termination notice by expressly reserving legal and equitable rights and remedies.

Please note that this is not legal advice and you should consult your own lawyer regarding your rights and obligations in the context of terminating your employee’s employment.

Why Now is the Time to Buy or Sell a Business

Looking for Business Opportunities Ahead of the Economic Fallout

In this difficult time of staying at home, people may be looking to buy or sell a business. We have all been impacted in different ways, each of which may be a reason to make a change. Traditional reasons people exit a company arise because of changing economic conditions, a tragic family event, a loss of passion, or simply the desire to retire. At the same time, buyers may be seeking to expand in a sector or industry, add talent, enlarge the customer base, or acquire technologies or resources that can provide a competitive advantage. Witness the unprecedented overnight shift to tele-work, tele-health, remote online primary school education, and live-streamed happy hours and family gatherings.

Thinking of Buying or Selling a Business?

If you are thinking of buying or selling a business, here are three key reasons to act now. First, labor is in flux, and available. As retailers, restaurants, travel companies and other service sectors that employ tens of millions of Americans get squeezed, the tech sector, which tends to have relatively few employees, has surged. Many target businesses may have a lower headcount while retaining a leaner operating infrastructure and access to a ready, willing, and trained talent pool.

Second, the federal government will do what it takes to stabilize the economy and accelerate the recovery. Nevertheless, there is a real risk of many “main-street” companies going bankrupt – making them easy acquisition targets. Opposite that, large-scale public companies (consumer-packaged goods, media) are boosting the broader recovery. Companies on either side of this equation may benefit from the changing market dynamics and opportunities for what comes next. As of this writing, nine states have lifted the stay-at-home orders or will let them expire, with many others soon to follow. The window is closing.

Third, one of few benefits of the current crisis is the acceleration of investment and escalation of consumer-facing products, services, and technologies. Reports indicate that 2020 shows a year-over-year (YoY) increase of over 15% in use of contactless payments.  This is a real opportunity for companies to not only “get lean” but also digitize business practices that can improve the customer experience.

Changing consumer behavior will continue to force this along. According to Forbes, U.S. YoY online retail revenue growth is up 68% in April, surpassing the earlier peak of 49% in early January. U.S. & Canadian e-commerce orders grew 129% with 146% growth in all online retail orders. Online conversion rates increased 8.8% in February, an increase of shopping intensity usually seen only during rare events such as Cyber Monday.

Bottom Line

Most people are sitting around waiting for things to shift and change around them, while others are moving through it all and pivoting on their own. Don’t wait for your competitors to invest in the next generation technologies. Working with experienced legal counsel will help you identify the opportunities and act quickly to negotiate and close a deal. If you are interested in learning more about buying or selling a business, please get in touch.

Choosing the Right Legal Entity for Your Business – Webinar

Seasoned business owners usually know enough to invest in the protection of some form of business entity. Too often, these individuals fail to engage in the necessary business and tax planning to get the most from their investment.
Whether you are a sole proprietor, partnership, corporation, limited liability company (LLC), limited liability partnership, or hybrid entity, you will gain useful knowledge. This webinar covers why a business owner should consider the benefits and costs of each type of entity, the existence of limited liability for owners, flexibility in terms of governance and ownership structure, and favorable treatment under state and Federal income tax laws. More sophisticated entrepreneurs may find certain advantages in terms of estate and gift planning and flexibility in operations and management.
I want to say thanks to the folks at IVY for giving me the opportunity to present the Ivy Webinar – Choosing the Right Legal Entity for Your Business with David M. Adler. In case you missed it, there is a link to the full webinar details below.
NOTICE AND DISCLAIMER: The webinar content is for informational purposes only. It is not legal advice and does not create a lawyer-client relationship with David M. Adler.
View Webinar Here.

Illinois law and enforceability of postemployment restrictive covenants

Every business in this, the Information Age, is highly dependent on confidential and proprietary information.  As many design and creative professionals know, a design business is often based on intimate, personal relationships with clients. As a result,  relationships are built upon a high degree of trust and the professional reputation of the designer.  In addition, the designer brings a host of regular vendors and proprietary skills, knowledge, experience, including private and confidential information about clients, used for operating the Business.  It is not surprising that businesses will seek to prevent disclosure of business, technical and financial information (including information relating to clients, employees and vendors, as well information an employee learns during her employment.

Do I need a Non-solicitation agreement for my Design Business?

Increasingly, I am being asked by clients to prevent departing employees from using proprietary and confidential information and form poaching clients and employees.  These non-disclosure or non-solicitation provisions seek to prevent an employee from encouraging or soliciting any client, employee, vendor, or contractor to leave. Unfortunately,

Restrictive Covenants Are Hard to Enforce!

Post-employment restrictive covenants are carefully scrutinized by Illinois courts because they operate as partial restrictions on trade. Fifieldv. Premier Dealer Services, Inc., 2013 IL App (1st) 993 N.E.2d 938 (citing Cambridge Engineering, Inc. v. Mercury Partners90 BI, Inc., 378 Ill.App.3d 437, 447 (2007) ). In order for a restrictive covenant to be valid and enforceable, the terms of the covenant must be reasonable. It is established in Illinois that a restrictive covenant is reasonable only if the covenant (1) is no greater than is required for the protection of a legitimate business interest of the employer, (2) does not impose undue hardship on the employee, and (3) is not injurious to the public. Reliable Fire Equipment Co. v. Arredondo, 965 N.E.2d 393 (2011). The courts consider the unique factors and circumstances of the case when determining the reasonableness of a restrictive covenant. Millard Maintenance Service Co. v. Bernero, 566 N.E.2d 379 (1990). However, before even considering whether a restrictive covenant is reasonable, the court must make two determinations: (1) whether the restrictive covenant is ancillary to a valid contract; and (2) whether the restrictive covenant is supported by adequate consideration. Fifield, 993 N.E.2d 938. Absent adequate consideration, a covenant, though otherwise reasonable, is not enforceable. Id. ¶ 14 (citing Brown & Brown, Inc. v. Mudron, 887 N.E.2d 437 (2008) ); see also Millard, 566 N.E.2d 379.

For most businesses, enforceability of such covenants turns on the concept of “consideration.” The current Illinois authority on “consideration” is Fifieldv. Premier Dealer Services, Inc., 2013 IL App (1st) 120327. In Fifield, the Illinois appellate court noted that Illinois courts have repeatedly held that there must be at least two years or more of continued employment to constitute “adequate consideration” in support of a restrictive covenant.  The court also clarified the process by adding that “Fifield [did not overrule or modify] Brown, which engaged in a fact-specific approach in determining consideration.

As a general rule, courts do not inquire into the adequacy of consideration. However, postemployment restrictive covenants are excepted from this general rule because “a promise of continued employment may be an illusory benefit where the employment is at-will.”  Most design businesses have at-will employees.

Fifield is equally important for both what it says and for what it does not. Clearly employment alone – any less than two years duration – is  NOT adequate consideration. However, the Fifieldcourt also stated that there could be other or additional factors such as an “added bonus in exchange for this restrictive covenant, more sick days, some incentives, [or] some kind of newfangled compensation,” that could be considered additional compensation that could support enforcement of the covenant.

Despite the recognition that the bar is set high for the amount of consideration necessary to enforce restrictive covenants, it makes sense to include them in your agreements with those who work for you.

In addition to the non-solicitation language, one should create a strong and broad definition of protectable proprietary and confidential information.  While it may not always be possible to stop a former employee from directly competing against you, it is possible to prevent said employee from using your own proprietary and confidential information against you.

 

Technology, Innovation and the Law

In today’s world, business is no longer about simply having an online presence. Digital business is transactional and social across platforms and networks across thew globe. The previous model of one-to-one transactional business relationships has evolved to one that is reciprocal, collaborative and highly interactive.

This new level of engagement is not without risks. As businesses expand into new online areas for marketing and commerce, businesses should be aware of a myriad of laws and risk areas implicated when one conducts business online. Business lawyers must be familiar with Technology Law.

There are a wide variety of services around the most common types of content and businesses need legal disclaimers, protection of intellectual property rights and other ways to limit liability.

Generally, the key areas and issues are:

Trade & Commerce Issues

  • Advertising & Promotions Laws (these vary by state)
  • Affiliate Marketing Agreements/Relationships
  • Federal Regulatory Guidelines
  • Industry Regulations & Guidelines
  • CAN-SPAM Act
  • Online Contracts/Terms of Use (Click-Wrap/Browse-Wrap Agreements)
  • Disclaimers
  • Limits of Liability
  • Sales & Taxation/Clarifying Nexus Confusion
  • Choice of Law/Forum
  • Insurance Law
  • Website Representations and Warranties

Intellectual Property Issues

  • Copyright & Digital Millennium Copyright Act
  • Defamation/Free Speech
  • Trademark Law
  • Unfair Internet Business Practices Such as Domain Name Hijacking & Cybersquatting
  • Anti-cybersquatting Consumer Protection Act
  • Linking/Scraping/Crawling
  • Patent Law
  • Licensing
  • Trade Secrets

Privacy & Security Issues

  • Credit Cards / Transaction Processing
  • E-Payment and Credit Card Security/Privacy
  • Children’s Online Privacy Protection Act
  • Data Breach Notification Laws
  • Data Privacy Laws

Human Resources & Employment Issues

  • BYOD & Computer Usage Guidelines for Employees
  • Employment and Labor Laws
  • Social Media Guidelines for Employees

We look forward to the opportunity to discuss any questions you may have regarding the range of business, technology and intellectual property services we offer. Our law office is based in Chicago, Illinois. Please feel free to call us at (866) 734-2568 should you have any questions.

Contract Basics for Interior Designers

Ever had an Interior Design client refuse to pay, not give you credit for your work, or use your design without actually hiring you? As unfair as these situations sound, the truth is they happen often. Poor planning, client management or incomplete contracts account for most of these situations. Get expert legal advice from a Chicago-based lawyer who understands the ins and outs of the design industry and learn how to address some of the biggest risk factors designers face today and how your contract can (and more importantly, should) protect you. Follow the link for access to the free informational prevention about improving your interior design contracts.

presentation-contract-basics-for-interior-designers

You’re Invited to LAUNCH: Client Contracts 2.0

Contracts

DATE: Wednesday, June 29
TIME: 9:30AM to 11:30AM
LOCATION: New York Design Center, Conference Room
ADDRESS: 200 Lexington Avenue, NYC

Have you ever had a client refuse to pay a bill, not give you credit for your work, or use your design scheme without hiring you? As loathsome as these situations sound, the reality is that they happen more often than we like to admit. The best way to avoid these issues is to arm yourself with an airtight contract. For this task, we’ve enlisted David Adler, a Chicago-based lawyer who understands the ins and outs of the design industry, to serve as your legal expert for the morning. He will address some of the biggest risk factors interior designers face today and how your contract can (and more importantly, should) cover you. You’ll leave with a better understanding of how you can tighten up your existing contract so you don’t have to learn the hard way.

Register for the event here.