12th Anniversary Message to Clients

Dear Clients and Friends,

This week, on December 13th, General Counsel, P.C. celebrated our 12th Anniversary.  This would not be possible without the trust, support and loyalty of our clients and friends.  Thank you.

Personally, as I trust most of you have also experienced over the past 12 years, there have been countless challenges, many victories, and occasional losses.  I hope that these experiences have helped me grow as a business owner and legal advisor.

I often tell clients (and other GCPC attorneys) that as attorneys, our responsibility is to serve our clients.  We must understand and proactively protect our clients’ interests.  We must actively communicate.  We must consistently strive to do our best to serve and satisfy our clients to the best of our abilities.  I sincerely hope that we always accomplish this goal for our clients.

When I started General Counsel, P.C. 12 years ago, I was fortunate to have 5 clients leave my prior firm with me.  They were taking a chance since they were leaving a large national law firm to continue working with a start-up solo practitioner.  My gratitude to these 5 original GCPC clients cannot be understated.  They were the foundation of the firm.  And, I am proud to state that each of these 5 clients remain General Counsel, P.C. clients.

It is this long term client relationship built on trust, support and service that I hope we can build with all General Counsel, P.C. clients.  Yes, there are sometimes challenges, but I hope that our dedication to service and absolute client satisfaction will continue to build the foundation of client relationships.  If we ever do not satisfy such expectation, please never hesitate to contact me immediately.

Finally, if you have not had the opportunity to review our revamped website recently, here is a link:  www.gcpc.com.  We continue to serve our clients with 4 primary practice areas:  (1) employment; (2) corporate; (3) litigation; and (4) government contracts.

In closing, thank you again.  General Counsel, P.C. would not be able to celebrate 12 years without the support and loyalty of our clients and friends.  I wish each of your success in your business and personal pursuits.  And, if we can ever be of service, please contact us.

December 16, 2016 0

Employment Law: Changing Requirements for White Collar Overtime Exemption on Hold

Employment Law: Changing Requirements for White Collar Overtime Exemption on Hold

Introduction

As we told you earlier, the general rule for the white collar overtime exemption was subject to an overhaul this year, with the changes scheduled to go into effect December 1, 2016.  Specifically, the minimum salary level for exempt employees was scheduled to rise from $455 per week, or $23,660 annually, to $921 per week, or $47,892 annually.  The new rule also allowed for salary adjustments every three years.  

Legal Posture

On Tuesday, November 22, 2016, U. S. District Judge Amos Mazzant II issued a preliminary injunction in response to an Emergency Motion for same filed by the State of Nevada and 20 other states.  

In their Emergency Motion for a Preliminary Injunction, the states questioned the lawfulness of the Final Rule, whether the Department of Labor had the authority to promulgate the rule, and whether the automatic update provision complied with certain requirements.  

Preliminary injunctions are fairly rare.  In order to prevail on a motion for a preliminary injunction, the plaintiffs must establish four things, as follows:

  • There is a substantial likelihood of success on the merits;
  • There is a substantial threat to the plaintiffs that they will suffer irreparable harm without the injunction;
  • That the injury threatened outweighs the damage that might be caused by an injunction; and
  • That the injunction does not disserve the public interests.

Likelihood of Success on the Merits

After an analysis of the statutory language governing the white collar overtime exemption, the Court ruled that Congress, not the Department, has the authority to make determinations about raising the minimum salary level.  Consequently, the Court found the plaintiffs would likely be successful on the merits.

Substantial Threat of Irreparable Harm

The plaintiffs argued the implementation of the law would have irreparable harm on the states.  They offered, for example, the state of Kansas’ Department of Children and Families, and the Department of Corrections, both of which had over 50% of their employees affected by the rule.  Plaintiff argued, and the Court agreed, that the budget constraints of these departments were such that they would not be able to increase salaries per the law.  This could lead to lay-offs, which would impact public safety considerations.

Balancing the Injury Against Potential Damage Caused by the Injunction

Plaintiffs argue the substantial sums that would be spent under the rule would not be recoverable if the rule went into effect.  They also argue the rule could impact government services, would cause administrative disruptions, would result in employee reclassifications or terminations, and general harm to the public.  The Court notes that there is little to no harm to the defendant if the rule is delayed, and thus finds on balance, the plaintiffs’ potential injuries tip the scale in favor of the plaintiff.

The Public Interest

The Court noted that due to the rapidly approaching effective date, the Court did not have time to “render a meaningful decision on the merits.”  Because of this, a preliminary injunction would provide the Court the time to review the case more completely.

Conclusion

In light of the above, the Court has issued a nation-wide injunction, prohibiting the implementation and enforcement of the modifications to the white collar overtime exemptions.  

Of course, we at General Counsel, PC will keep you apprised of new developments as they occur.  

You can read the court’s decision in its entirety here.

November 28, 2016 0

Employment Law: Court Determines Gov’t Contractor’s Non-Compete Unenforceable

Case: RLM Commc’ns, Inc., v. Tuschen, No. 14-2351 BL 244020, 41 IER cases 971 (4th Cir. July 28, 2016)

Issue: Non-Compete Agreement Determined to be Unenforceable Because Overly Broad

Court Holding: In litigation between two competing government contractors, Fourth Circuit affirmed district court’s summary judgment against plaintiff.  Former Employee and her new employer did NOT violate non-compete agreement or other obligations because, in part, non-compete was overly-broad and, as such, unenforceable.

Employment Counsel: Employer’s MUST make sure that its non-compete / non-solicitation agreements are narrowly written to protect the legitimate interest of the business.  If not, they will not be enforceable.

Case Summary: The plaintiff, RLM Communications, Inc. (“RLM”) is a government contractor that specializes in cyber security, information technology, and information assurance.  The defendant, Amy Tuschen (“Tuschen”), worked for RLM for six years managing an information-assurance contract with the U.S. Government. She resigned about a year before this contract was due to expire and joined a competitor, eScience and Technology Solutions (“eScience”).  Prior to departing, Tuschen copied several files related to the contract that she managed onto a CD, which she allegedly provided to her successor at RLM.  Initially, RLM did not object to Tuschen’s resignation and new job.  However, when RLM learned that eScience planned to bid against RLM on a government contract similar to the one Tuschen had managed at RLM, RLM filed lawsuit against Tuschen and eScience.

 

RLM’s filed a suit in North Carolina that included multiple claims against Tuschen and eScience, including breach of Tuschen’s non-compete and confidentiality agreements, misappropriation of trade secrets, conversion, tortious interference with contractual relations and unfair and deceptive trade practices, and civil conspiracy.  The district court granted summary judgment on all claims to Tuschen and eScience.  RLM filed an appeal. The appeals court upheld the district court’s decision based on the following analysis:

  1. Non-compete. The court concluded that Tuschen did not violate her noncompete agreement. It found that the agreement itself was overly broad and therefore invalid because it prohibited direct and indirect participation in similar businesses. In relevant part, Tuschen’s noncompete prohibited her from “directly or indirectly” participating in a business similar to RLM and located in the same geographical area.  Specifically, the non-compete provided:

While I, the Employee, am employed by Employer, or for 1 years/months afterward, I will not directly or indirectly participate in a business that is similar to a business now or later operated by Employer in the same geographical area.  This includes participating in my own business or as a co-owner, director, officer, consultant, independent contractor, employee, or agent of another business.

The court concluded that this language created a “restriction on Tuschen’s future employment that is largely unmoored from RLM’s legitimate business interests,” and could be read as preventing Tuschen not only from working with a competitor in a similar position to the one she held at RLM, but also from doing any other job, such as mowing lawns, working as a realtor, etc., for any business that provided similar services.  As such, it was unenforceable.

  1. Confidentiality Agreement. RLM claimed that Tuschen breached her confidentiality agreement when she copied confidential files onto a CD without permission. The court, however, noted that this action would only constitute a breach if it was outside the scope of her professional duties. Tuschen testified that she only copied files in order to give them to her successor and so ease his transition into the job. RLM could offer no contradicting evidence to her testimony. Therefore, the court affirmed summary judgment as to this claim because RLM failed to provide sufficient evidence that Tuschen breached her confidentiality agreement by both copying information without permission and for reasons other than the furtherance of her professional duties to RLM.
  1. Misappropriation-of-trade-secrets. RLM claimed that Tuschen created a copy of the CD to share confidential information with eScience. The court reasoned that multiple interpretations of North Carolina’s misappropriation statute can “produce a rule sufficient to resolve the case: “When an employer brings a misappropriation claim against an employee, admitting that the employee had authorized access to its trade secrets at all relevant times, the employer must raise an inference of actual acquisition or use of trade secrets to survive summary judgment.” Applying this rule, the court rejected RLM’s misappropriation-of-trade-secrets claim because RLM authorized Tuschen to have access to its trade secrets, and it did not establish that she ever accessed them without proper authorization. Moreover, the court dismissed RLM’s claim that an “unexplained leap in technical capacity” permited an inference of misappropriation in this case because the only evidence of such a leap was eScience’s unsuccessful bid for the government contract.
  1. Tortious Interference with Contractual Relations: Citing Peoples Sec. Life Ins. Co. v. Hooks, the court concluded that summary judgment was appropriate on RLM’s tortious interference claim because “competition in business constitutes justifiable interference in another’s business relations” and in the present case, there was no evidence that eScience was motivated by malice or anything other than normal competition in its dealings with Tuschen. 322 N.C. 216 (N.C. 667).  
  1. Other Claims: The court affirmed summary judgment on RLM’s conversion claim using its misappropriation-of-trade secrets analysis. Similarly, it dismissed RLM’s remaining claims of unfair and deceptive trade practices and civil conspiracy, reasoning that those claims relied on analysis that the court had already found meritless.

For additional information about this case or other employment law matters, please contact Merritt Green at mgreen@gcpc.com or (703)556-6505.  Mr. Green leads General Counsel, P.C.’s Employment Law Practice and has been representing employers (and occasionally employees) for over 18 years.

 

October 5, 2016 0

Pregnancy Discrimination: EEOC vs. Dimensions Healthcare Sys., No. PX15-2342

Pregnancy Discrimination: EEOC vs. Dimensions Healthcare Sys., No. PX15-2342

Case:  EEOC vs. Dimensions Healthcare Sys., No. PX15-2342 (D. Md. Sept. 2, 2016).

Issue:  Pregnancy Discrimination

Court Holding:  Employee provided sufficient evidence to defeat employer motion for summary judgment.

Employment Counsel:  Telling employee that she did not get promotion because “you were on maternity leave for a while,” will likely expose employer to pregnancy discrimination liability.

Case Summary:  In a September 2, 2016 decision, the Maryland U.S. District Court denied summary judgment for Dimensions Healthcare System in a case brought by the EEOC.  When discussing why female employee did not receive promotion, manager allegedly stated: “Well, like I said, he had a management background.  Plus, you were on maternity leave for a while.”  When reading this statement, it is easy in hindsight to realize that if actually stated, saying that an employee did not receive a promotion because she was on “maternity leave for a while,” was incredibly foolish and likely will cost the employer (or its insurance company) significantly. 

A plaintiff may survive summary judgment by establishing her Title VII discrimination claim either through direct and indirect evidence of discriminatory animus, or through the burden-shifting framework of McDonnell Douglas Corp. v. Green, 411 U.S. 792 (1973).  Under the direct method of proof, “[t]o avoid summary judgment, the plaintiff must produce direct evidence of a stated purpose to discriminate and/or [indirect] evidence of sufficient probative force to reflect a genuine issue of material fact.” Rhoads v. FDIC, 257 F.3d 373 , 391 (4th Cir. 2001).  

Under the burden-shifting framework, the plaintiff must establish a prima facie case of discrimination by a preponderance of the evidence. Then, the burden shifts to the defendant who [*6] must articulate a legitimate, nondiscriminatory reason for the adverse employment action. If the defendant offers a legitimate reason, the burden shifts back to the plaintiff to demonstrate that the reason offered by the employer is false. See McDonnell Douglas Corp. v. Green, 411 U.S. 792 (1973).

To establish a prima facie case, a plaintiff must present facts upon which a jury could conclude that, more likely than not, the defendant’s failure to promote was motivated by sex discrimination. More specifically, the plaintiff must produce sufficient evidence to show that: 1) plaintiff is a member of a protected class; 2) defendant had an open position for which she applied or sought to apply; 3) plaintiff was qualified for the position; and 4) plaintiff was rejected for the position under circumstances giving rise to an inference of unlawful discrimination. See Evans v. Techs. Applications & Serv. Co., 80 F.3d 954 , 959-60 (4th Cir. 1996).

In this case, the District Court determined that the plaintiff had presented sufficient evidence to survive summary judgment under both the direct evidence and the burden shifting tests.   The case will now proceed to a jury trial or, more likely than not, the parties will reach a settlement.

For additional information about this case or other employment law matters, please contact Merritt Green at mgreen@gcpc.com or (703)556-6505.  Mr. Green leads General Counsel, P.C.’s Employment Law Practiceand has been representing employers (and occasionally employees) for over 18 years.

September 30, 2016 0

NEVER Purchase a Business without Advice of Expert Corporate Law Attorneys

NEVER Purchase a Business without Advice of Expert Corporate Law Attorneys

This article will help you to better understand the ins and outs of when you decide to Purchase a Business.

Recently, a client arrived at our office:

  • On his last leg.
  • In Debt.
  • Humiliated.
  • Scared
  • Facing Divorce over a business mistake.

Why?

Two years ago, he put his family’s savings into an LLC formed on one of those online ‘form your company and save money’ websites, and bought a retail company to fulfill the husband’s life long dreams of self-employment through owning a business – all without ever contacting a Corporate Law Attorney for guidance or advice.

What could go wrong?

This man contacted a business broker and a few months later purchased a retail store selling the latest fad in sugary foods.

Almost immediately, the business was in trouble. The first month’s revenue was less than half of what he expected based on the financials the Seller provided during “due diligence” review.  

He never asked a Corporate Law Attorney to examine the business and financial documents provided by the Seller or even review the purchase agreement.

What Happened?

As the hole got deeper the new business owner struggled to maintain the business and realized the mathematical fact that the business was insolvent – INSOLVENT!  

Just two years earlier this man was a well-respected professional with significant savings seeking an acquisition opportunity. He invested Several HUNDRED THOUSAND dollars to buy a Company without any outside advice.

As they shut down the business and negotiated a Lease Termination, the Client learned that the Sellers provided the Landlord with monthly revenue numbers that were consistently half of the revenue numbers provided to the Client during negotiations.  Suspecting fraud, he contacted General Counsel, P.C. (experts in Corporate Law) for advice.  It took a lawsuit and over a year of negotiations to get a reasonable settlement for our Client.

What Could have been?

The cornerstone of an experienced Corporate Law Attorney’s due diligence review as a buy-side advisor is to examine and scrutinize the financial statements for accuracy.  In addition, we interview the accountant to ensure there are no procedural or accounting irregularities.  

The central issue in the acquisition of a business is the Allocation of Risk between the buyer and seller. Our transaction documents are drafted to identify any liabilities and address them in advance.  As you can imagine, our Client presented us with a deal document that could have been written on the back of a napkin – stains and all.

The financials are the scoreboard of any business and the entire basis for determining the value; there are simple multipliers setting the value based on the Financials.  If the reported numbers are not correct the entire transaction should be abandoned.  In this case, due to an “accounting problem,” the Seller could not provide up to date financials before closing – to a good Business Attorney, this is a major RED FLAG.  If this Client had contacted General Counsel, P.C. just 15 minutes before closing the transaction, this disaster would have been avoided.

In just 30 minutes we diagnosed what happened to this family – to the trained Business Attorney it was obvious – it would have saved him over a year of anxiety and several additional thousands if he had sought guidance.

If you are considering buying a business, contact an experienced business attorney at General Counsel, P.C.  Richard Trimber can be reached at:  rtrimber@gcpc.com or (703) 556-0411.

Decide what you want your company’s future to be and call Richard Trimber at General Counsel, P.C. for a free consultation and fitness checkup on your company’s operations, stress points, structure, HR Policies and Procedures (strategic HR with training plans) and team needs so you can grow a great business – a living company that can survive and thrive in the future. 

General Counsel P.C. has the expertise, skill and–the real key–unique experience of running companies as C Level Executives that makes a difference when advising our clients on: (i) structuring operations for efficiency and legal protection (which means more value); (ii) administration (not just overhead but value added elements); and (iii) Sales/Marketing (proper incentive based compensation causing the behavior that drives results!).  

September 23, 2016 0

Wells Fargo False Accounts Scandal

Wells Fargo False Accounts Scandal

Poor Culture, Misaligned Incentives and Massive Fines… Lessons for Businesses of Every Size

Many of the employees felt pressure to sell customers multiple products or services… to stay in their jobs or earn bonuses tied to sales goals… branch employees met with their managers several times a day to report their progress on meeting cross-selling targets…” – Article in the Wall Street Journal, September 14, 2016, found here: http://www.wsj.com/articles/wells-fargo-ceo-defends-bank-culture-lays-blame-with-bad-employees-1473784452

Wells Fargo was caught falsifying accounts to meet sales goals for cross-selling products to customers and paid a $185 million fine.

I will not be surprised if we find that this is not the only issue inside of the bank that comes to light.  At the core of this type of behavior is a cultural corruption and mis-alignment among the company, employees and incentives.

The Peg Bundy Business Model

Years ago on an episode of “Married with Children” the character Peg Bundy got involved in a home based business selling make-up to her neighbors.  Peg made an off handed comment to her friend that ‘while the make-up isn’t very good… every time I order more they send me a check…’  Later in the episode Al Bundy gets the bill for all the orders and explains to Peg that her behavior is how they are ‘rocketing to the poorhouse…’

Peg was not incentivized to sell the make-up, instead she was incentivized to order more make-up because that is how she earned money in the venture.

Likewise, the incentive structure at Wells Fargo was not to service customers, rather it drove improper cross-selling and has cost Wells Fargo a great deal in actual and reputational capital.

Wells Fargo CEO John Stumpf contends that “There was no incentive to do bad things,” in connection with the scandal, the results suggest otherwise.     

How About Your Business?

I once participated in a meeting with a Sales Director who was asked – ‘How do your sales managers earn bonuses and commissions? How do they earn their commissions and bonuses?’  His answer:  “I have no idea.”  Would you be surprised to learn that the company had stagnated growth for five years and over 100% turnover on its sales team?  This sales leader had no idea what incentives motived employee behavior.  I wondered: How could he lead?  He was removed him from the position on the spot – the company grew 15% in the following year as a result of a revitalized marketing and sales team.

Alignment

As you can see in the WSJ Article, Mr. Strumpf “feels accountable” for what happened.  Well, leadership is always, completely accountable for what happens inside an organization because leadership sets the strategy, culture and compensation plans that drive the behavior that determines results.

Compliance and Accountability – Keys to Building Company Value

While the bank explains that the number of people involved is small 5,300 (with few, if any in senior management getting the ax) – it is telling that it was so wide spread and lasted for several years. The compliance department failed to check the accounts – even in the face of customer complaints and the only people held to account are line employees.  

Well, in middle market businesses there are no such protective barriers for Owners and Leaders.  Make sure your company has a culture focused on effective execution, focused on doing the right things well. Walk the halls of your business, find out what is happening at the loading docks and at the point of delivery of your services.  Leadership must hold itself accountable to set the example and hold others accountable before massive failures, fines or worse…

Decide what you want your company’s future to be and call Rich Trimber at General Counsel, P.C. for a free consultation and fitness checkup on your company’s operations, stress points, structure, HR Policies and Procedures (strategic HR with training plans) and team needs so you can grow a great business – a living company that can survive and thrive in the future. 

General Counsel P.C. has the expertise, skill and–the real key–unique experience of running companies as C Level Executives that makes a difference when advising our clients on: (i) structuring operations for efficiency and legal protection (which means more value); (ii) administration (not just overhead but value added elements); and (iii) Sales/Marketing (proper incentive based compensation causing the behavior that drives results!).  

September 18, 2016 0

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