Category Archives: Contracts

Can Your Business Avoid a Pearl Harbor?

Pearl Harbor Day is approaching.  The Japanese Imperial Navy burned that day into US history with the sneak attack the naval yards and airfield in Pearl Harbor, Hawaii.  Historians have written volumes about the warning signs the US had leading up to the attack.  The Japanese planes may have flown into the teeth of a prepared defense on December 7, 1941 had the US paid more attention.

You and your business should take action to avoid a surprise attack.  Here are potential areas of concern.

  1. Financial Controls. Do you have adequate financial controls and oversight over those who have access to the business bank accounts and credit cards?  Do have or need employee dishonesty insurance coverage?  A standard liability policy may not cover theft or embezzlement by your employees.  All it takes is one dishonest employee to do significant damage.  The better your controls are, the more likely you will deter wrongdoing or detect a problem earlier.
  1. Confidential Data. Confidential data comes in many forms, be it your trade secrets, your employee’s or customer’s private data (social security numbers, medical records, etc.), or bank account or credit card information.  There are federal and state laws covering much of the data on when/how you need to protect the data, and how to act if you have a data breach.  What do you have in place?  Ignoring the issue can cost far more than paying after the damage is done.
  1. Customer Contracts. Do you use contracts with your customers?  It does not matter they are one-page documents, the text on the back of an invoice, or multi-page tomes.  It makes sense to review them on a regular basis for updating, check for compliance with any applicable state and federal laws, and so forth.
  1. Employee Contracts or Policies. “I don’t need no stinking contracts with my employees” you may say.  Maybe – maybe not.  Do you give employees the company credit/debit card?  Do you allow employees to use their personal smartphones or other devices to access company data or email or cloud accounts?  Do you have trade secrets to protect?  Can you use a non-compete?  Do you have a sexual harassment policy?  It is better to get these in place before the proverbial horse gets out of the barn.
  1. The Corporate Book. I am referring to the bylaws, operating agreement, partnership agreement, and so on.  How well are they working out?  Have you deviated from them and need to return?  Do you need to revise them? Keeping these in order will help if you have a dispute with your other owners or have an audit.

These are but some of the areas where preparation can do wonders for a business.  Take the time to reduce the risk of your business suffering a Pearl Harbor that could sink your business.  Please contact us to assist you in this process.

Maximize Your Options under the Defend Trade Secrets Act of 2016

Trade secrets are valuable. The owner of a trade secret must take reasonable measures to protect the trade secret. The reason measures can include limiting access on a need-to-know basis and the agreements put in place. For example, when an employer sues an employee for stealing a trade secret, the court will ask whether the employee signed a trade secret or confidentiality agreement. Not having an agreement would be a serious setback for the employer.

A well-drafted trade secrets agreement is useful, while a poorly drafted agreement can backfire. Anyone using those agreements should regularly review the agreements for updates. For example, in May 2016, the federal Defend Trade Secrets Act of 2016 (“DTSA”) became law. The DTSA opens the federal courts to more civil cases over trade secret misappropriation. The DTSA also imposes a notice requirement on employers. An employer that fails to comply with the notice requirement, when required, will limit what the employer could recover under the DTSA.

Employers that use trade secrets or confidentiality agreements need to have a notice of the whistleblower protections in the DTSA. The requirement applies to contracts entered into or renewed on or after when the law came into effect.  The employer also can comply by having the agreement cross-reference a policy document that has the required notice.  What is unclear is whether the notice can be a summary of the whistleblower rights, a repeat of the statute, or something else.

An employer that does not include the notice when required will not be able to get punitive/exemplary damages or an attorney’s fee award on a DTSA claim in a lawsuit against an employee. Regardless of whether state law or the contract covers that “gap,” it makes sense for an employer to include the notice when required to preserve as many options as possible.

It pays for an employer to review its agreements going forward for DTSA compliance, and to make sure the agreements still meets the employer’s needs. The recent DTSA gives employers and others an excuse to review their agreements.

We are happy to assist employers and others with their policies, procedures, and agreements. Feel free to give us a call.

This post provides general information only. This post is not intended to create an attorney-client relationship or to be legal advice about your situation. Laws change and your situation may be different. You should consult with a licensed attorney for legal advice specific to your circumstances.

© 2016 Matthew D. Macy

“Damn the Legalities! Full Speed with the Remote Wiping!”

     Dorothy, the new IT Director for the Golden Brick Road Company, took one look at the computer security protocols and said, “Hackers, spammers, and scammers, oh my!” A hole she saw was Golden Brick’s BYOD (Bring Your Own Device) practice. Golden Brick cut costs by ceasing to provide smartphones to its employees. Golden Brick instead allowed employees to use their personal devices to access company email, cloud storage accounts, etc.

     Dorothy thought it would be a good idea for Golden Brick to wipe those devices when an employee left the company or if the employee’s device was lost or stolen. She went to Golden Brick’s in-house attorney, the Wicked Witch of the West, and the CEO, the Wizard, with her suggestion. The Wicked Witch and the Wizard agreed that it was a good idea. Dorothy had a remote wipe program automatically upload onto the employees’ devices as they accessed the company’s systems.

     The Wizard instructed the Wicked Witch to draft a BYOD policy. It was the end of day and the Wicked Witch had to rush out to get to the Flying Monkeys’ soccer game. She planned to write the policy the next day. Unfortunately, it rained at the soccer game and the Wicked Witch was no more. No one drafted a BYOD policy.

     The Scarecrow, a Golden Brick employee, used his smartphone to access the company systems. A week after the Wicked Witch’s passing, the Scarecrow told Dorothy over lunch that he thought he lost his smartphone. Dorothy remotely wiped the Scarecrow’s smartphone. Fortunately (or not), the Scarecrow found the smartphone between his couch cushions. Everything on it was gone, from personal files to company data. The Scarecrow denied that he gave anyone permission to access his smartphone in that way. He hired a lawyer and sued Golden Brick.

     What is an employer to do? It is becoming more frequent for employers to allow employees to use their personal devices to access the employer’s systems. This may improve efficiency and cut costs while creating a potential security hole and a legal headache. The use of personal devices raises questions of what rights the employer may have to access or wipe the personal device. A BYOD policy may help. A well-written policy in place should outline for both employer and employee the rights and expectations either have when an employee uses a personal device to access the employer’s systems.

      Will the Scarecrow win his lawsuit over the remote wiping of his smartphone? Will Dorothy get her Ruby Slippers Bonus? Will the Wizard hire an attorney who is not water-soluble? A written policy could have helped answer one of those questions.

This post provides general information only and is not intended to create an attorney-client relationship or to be legal advice about a specific situation. Laws change and your situation may be different. You should consult with a licensed attorney for legal advice specific to your circumstances.

Dude, Pass the Chips

Some people are excited that legalizing marijuana is gaining traction at the state level.  However, marijuana remains illegal under federal law even if it is for “medicinal” use.  The tug-o-war between state and federal law over the legalization of marijuana raises questions for those in Colorado.  Grab some snacks to satisfy the munchies as you enjoy the following question-answer session.

Q:  Can I lose my job for smoking pot at home on my own time?

A:  The answer in Colorado is a qualified “yes.”  The Colorado Court of Appeals ruled that an employer may terminate an employee for “medical” marijuana use.  The Colorado Supreme Court is reviewing that decision.  If you want to read more, I wrote an article for The Colorado Lawyer about medical marijuana and employment law that you can find here.

Q:  I have a warehouse I want to lease to a marijuana business that is illegal under state law.  Is this a good idea?

A:  Are you high?  That is a terrible idea.  Do you like prison?

Q:  I am too pretty for prison.  I will lease the warehouse to a marijuana business that is legal under state law.  Happy now?

A:  You are not out of the woods.  Marijuana remains illegal under federal law and federal drug laws can trump state drug laws.  The current approach by the feds to marijuana businesses that comply with state law can change at any time.  If that happens, anyone involved in the business could face prosecution and efforts by the federal government to seize property.  You had better take a hard look at whether that anvil could land on your head.  You also should find out what other risks are involved.

Q:  Stop harshing my mellow, man.

A:  Sorry.  So long as marijuana remains illegal under federal law, getting involved with that business carries additional risks.

Q:  Do you have any good news?

A:  Yes.  I brought you some bags of Cheetos.

Q:  Excellent, dude!

This post provides general information only and is not intended to create an attorney-client relationship or to be legal advice about a specific situation.  Laws change and your situation may be different.  You should consult with a licensed attorney for legal advice specific to your situation.