One company used the trade secrets of another company, yet despite this fact the court didn’t stop them. This can happen to your company as well if you fail to properly protect your company secrets. Failing to implement non-disclosure agreements (“NDAs”) and take other minimal steps to formalize relationships discussed in this article can be costly to you and your business.

A recent case, Fail-Safe, LLC v. A.O. Smith Corporation (No. 11-1354 for those wanting to read the opinion), handed down by the United States Court of Appeals for the Seventh Circuit demonstrates the need for NDAs and other precautionary measures if you hope to protect your trade secrets. This is especially crucial in the early stages of business dealings, before any formal relationships are put into place.

In denying Fail-Safe’s claims, the Court focused much of its attention on Fail-Safe’s failure to protect its information, and specifically mentioned its failure to require the other party to sign an NDA. While A.O. Smith had Fail-Safe sign an NDA, Fail-Safe did not have A.O. Smith sign one in return. Further, as Fail-Safe continued to release information and correspond with A.O. Smith, not once did they mention confidentiality or ask that certain information remain confidential.

Despite the fact that Fail-Safe may have subjectively believed that they had entered a joint-venture type relationship with A.O. Smith (thus requiring confidentiality), the Court determined that because Fail-Safe did not act reasonably regarding the protection of their confidential information, that information was not entitled to protection. By not having an NDA in place, and by not marking any information with the word “confidential” Fail-Safe forfeited any protection it may have had to the trade secrets that it likely spent years and significant amounts of money developing. A.O. Smith was free to use that information for their own benefit, and not share any profits with Fail-Safe, the company that played a large role in developing the product.

The case dealt with two companies who entered discussions to develop a pump motor to prevent entrapment of swimmers by suction created by pool drains. Throughout the relationship, Fail-Safe sent information it apparently viewed as confidential to A.O. Smith, including testing details, test results, required components, and other information related to designing the pump, all without a formal relationship in place. The relationship soured when the companies began discussing a formal marketing agreement. When A.O. Smith eventually introduced and marketed pumps that incorporated Fail-Safe’s trade secrets, Fail-Safe sued for misappropriation of trade secrets and unjust enrichment.

To avoid your business falling into a similar predicament as Fail-Safe, it is important for you to protect all of your confidential information and trade secrets with “eternal vigilance”. For help drafting NDAs and other mechanisms for the protection of your company’s valuable information, please contact Waltz, Palmer & Dawson, LLC at (847)253-8800.

As you probably know, the Family Medical and Leave Act only applies to companies who employ 50 or more employees (within a 75 mile radius) each working day during at least 20 calendar weeks in the current or preceding calendar year.  But how do you get to 50?  Do part-time employees count? How about temporary employees?  Does the owner of the company count toward the 50?

The Department of Labor (DOL) recently issued a response to letter requesting clarification on this topic.   In that response, the DOL clarified certain areas, stating:

-      Employees on paid and unpaid leaves of absence are counted as long as there is a reasonable expectation that the employee will return to active employment.

-      Where there is no continuing employment relationship (e.g., employee is temporarily or indefinitely laid off), or where the employment relationship does not continue for each working day of the workweek, the employee is not counted.

-      When there is a “joint employer” (e.g., employee leasing or temporary placement arrangements) employees who are jointly employed must be counted by both employers, whether or not they are maintained on only one employer’s payroll.

-      Whether an owner counts toward the 50 is fact specific and depends largely upon whether an employment relationship existed between the business entity and the “owner.”  In general, whether an individual is a true owner or partner as opposed to an employee depends on whether he or she acts independently and participates in management or instead is subject to the control of the organization.

-      Independent contractors do not count towards the 50, however be sure they are truly contractors under the DOL’s definition and not just labeled that way for your convenience.  The DOL can reclassify your contractors if it determines they are truly employees.

Particular complications arise when companies have all of these types of employees and their use varies from week to week. The DOL listed some examples to clarify these situations. Assume in each example that the company at issue has 42 full and part time employees.

-      Example One: The temporary service agency provides the company with five day laborers in addition to five or six routine temps. The same five day laborers work for the company all week. In this example, the company would count the 42 employees, the five or six routine temps, and the five day laborers, as the day laborers are jointly employed by the client employer each working day of the week and there remains a continuing employment relationship with the client employer for the week.  Total employees for the week: over 50, so this week is counted toward the 20 workweek threshold.

-      Example Two: In addition to the company’s regular employees and the five or six routine temps, the temporary service provides three day laborers each day, but not the same three workers.  You would count the company’s regular employees and the five or six routine temps as in Example One above. The day laborers in this example need not be counted as no day laborer worked for the company each day of the week or appeared to have a continuing employment relationship with the client employer.  Total employees for the week: Under 50 so this week would not be counted.

-      Example Three: The Company needs six day laborers one day and three each of the following three days, in addition to regular employees and five or six routine temps. In this case, the company would count its employees and the routine temps. The day laborers need not be counted as no day laborer worked for the client employer each working day of the week or appeared to have a continuing employment relationship with the client employer.  Total employees for the week: Under 50 so this week would not be counted.

Always remember determinations of compliance, eligibility and other issues under the FMLA are very fact-specific. If you have any questions about FMLA and your business, contact Waltz, Palmer & Dawson, LLC at (847)253-8800.

It has been widely reported that the EEOC is following the NLRB’s lead when it comes to analyzing company policies. It seems that company policies regarding confidentiality during harassment investigations are under fire.  In a letter dated August 3, 2012, the EEOC’s Buffalo, New York office notified a company that the EEOC was expanding its investigation of a discrimination charge because the employer’s policy mandated that employees keep the investigation confidential while the investigation was being conducted.  The EEOC specifically stated that the company had “admitted to having a written policy which warns all employees who participate in one of your internal investigations of harassment that they could be subject to discipline or discharge for discussing “the matter,” apparently with anyone.”

In the letter, the EEOC pointed out that “EEOC guidance states that complaining to anyone, including high management, union officials, other employees, newspapers, etc. about discrimination is protected opposition. It also states that the most flagrant infringement of the rights that are conferred on an individual by Title VII’s retaliation provisions is the denial of the right to oppose discrimination. So, discussing one’s complaints of sexual harassment with others is protected opposition.”

The letter is not a formal decision or policy, nor is it law, but it does give employers a preview of how investigators may react to policies that prevent employees from discussing their claims.  It is common for companies to require confidentiality during ongoing investigations.  After all, if employees are allowed to talk, that can lead to employees “getting their story straight” to support the accused, or at minimum, spreading rumors about incidents that are merely alleged.  So what now?

• Modify Applicable Policies. 

If you have any written policies that mandate confidentiality during ongoing investigations, you may want to consider modifying them so instead they “request” confidentiality.  The policy should also remove any language that can be interpreted to mean breaking confidentiality will lead to an adverse employment action.  Also be sure the policies provide that employees will not be retaliated against for participating in both EEOC and internal investigations. 

• Do Not Mandate Confidentiality.

When speaking to employees during the investigation, request that they keep the matter  confidential but don’t tell them they must do so.  Talk to the employee about the ramifications of talking and how that may affect the investigation.  Particularly the accuser and the accused may appreciate the value of keeping the investigation private.

Keep in mind again that this letter is not a formal decision. However the argument by the Buffalo office in this letter to support the investigation into the company’s confidentiality policies seem to be in line with the EEOC and the NLRB’s recent thinking.  You do not have to take any action in response to this letter, but if your company has a policy that mandates confidentiality during ongoing investigations, at minimum you should be watching closely.

If you have more questions about investigation policies or other employee policies, please contact Waltz, Palmer & Dawson, LLC at (847)253-8800.

Depending on your business, there are likely many practical as well as legal reasons why it would be wise for your company to create and implement a records retention policy. A records retention policy ensures that necessary records and documents of your business are adequately protected and maintained, and also ensures that records that are no longer needed by your company (or no longer offer any value) are discarded at the proper time and in the proper manner. These policies will apply not just to paper documents, but in an increasingly digital world will apply to email, instant messages, databases, word processing documents and other forms of electronically stored date.

A retention policy not only helps you save documents that are required to be retained, but it also will help you get rid of documents that there is no reason to hold onto. Typically, records should be maintained so long as they are necessary to the conduct of your business, required to be retained by state or federal law, or pertain to pending or foreseeable investigations or litigation. Failing to properly maintain records can result in your company losing protection to records or the trade secrets those records represent, violating laws, or exposing yourself to liability in investigations or litigation.

When implementing a records retention plan, there are many practical concerns that you should consider. Below is just a brief list issues to consider:

• Are there any legal requirements associated with my business that I need to be aware of?
• Will any state or federal agencies be requesting and reviewing my documents?
• How detailed does my policy need to be?
• What types and categories of documents must I keep?
• In what format should I keep my documents?
• Where  and how do I physically store the documents?
• When  and how often do I need to back up computer and other electronic systems?
• How do I dispose of computers and other electronics when they are no longer in use?
• Do I need to designate a custodian of records?
• How do I convey my policy to my employees?
• How do I ensure that my employees follow the policy?
• What do I do with duplicate copies of documents?
• May I change my policy once it is implemented?
• Last, but most certainly not lease, how much will this plan cost me?

While there is no way to foresee every situation that will come up or prevent every issue regarding your company’s records, having a plan in place and implementing that plan can make sure that everything is done consistently across your company. This includes management and everyday employees. No plan can be successful if it is not followed. Taking time to flush out an appropriate plan for your business can save you headaches in the future.

If you need help developing a document retention policy, or have any other legal issues with your business, please contact Waltz, Palmer & Dawson, LLC at (847)253-8800.

If you file Uniform Commercial Code (“UCC”) financing statements as a part of your business, or have financing statements filed against your business by others, you need to be aware of the newest amendment to the Illinois UCC.

For those unfamiliar, UCC financing statements are documents filed with the SOS by lenders, consignors, and other contracting parties to secure an interest in property of a debtor. In simple terms, these documents provide the lender, also known as a “secured party”, with a ticket to receive repayment of amounts owed in the event that the debtor goes bankrupt. While certain rules and exceptions apply, those parties that file a financing statement first have a superior claim to the possessions of the debtor than those parties that file a financing statement later.

The amendment to the Illinois UCC, which went into effect on July 20, 2012, gives the Illinois Secretary of State office (“SOS”) authority to investigate, punish, and terminate false filings, in addition to establishing criminal and civil penalties for those causing a false financing statement or lien to be filed. The amendment prohibits filings that are: (1) not authorized by the UCC; (2) not related to a valid existing or potential commercial or financial transaction, an existing agricultural or other lien, or a judgment of a court of competent jurisdiction; and (3) filed with the intent to harass or defraud the person identified as the debtor in the record or any other person.

One important aspect allows debtors that believe a fraudulent or mistaken financing statement has been filed to initiate a procedure by which the SOS may verify a financing statement, and if found in invalid, terminate it. In the past, debtors’ only recourse was to file a lawsuit to declare the financing statement invalid. A debtor that believes a fraudulent or mistaken financing statement has been filed must submit an affidavit to the SOS, which may then send written notice of the affidavit to the secured party and provide them with 30 days to supply evidence to refute the claims. If the SOS determines that the record was filed in violation of the statute, it can then terminate it. The SOS’s actions can be appealed to a court or tribunal.

Be aware that the SOS is not required to take action. In instances where there is no clear fraud or mistake in the filing, or which are or may become complex, the SOS may likely pass the responsibility to the court system rather than make the decision whether to terminate a filing.

In addition to the new procedure available through the SOS, the statute also makes violators guilty of a Class A misdemeanor for the first offense and a Class 4 felony for subsequent offenses. The offending party would also be liable in a civil action for actual damages or up to $10,000 statutory damages, in addition to attorney’s fees and other costs.

If you need help filing a UCC financing statement on behalf of your business, or believe that fraudulent filings have been made against your business, please contact Waltz, Palmer & Dawson, LLC at (847)253-8800.

The days in which an employer could request social media passwords from employees and prospective employees are coming to an end in Illinois. Continuing to request or use such social media account information could find the offending individual guilty of a petty offense, as well as being found liable for statutory damages, attorneys’ fees, court costs, and actual damages caused to the employee or prospective employee.

Becoming just the second state to pass such a law, on August 1, 2012, in an effort to further protect workers’ privacy in Illinois, Governor Quinn signed into law an amendment to the Illinois Right to Privacy in the Workplace Act (“Act”).  The Amendment has quickly earned the nickname the “Facebook Bill”.

This amendment, which will go into effect on January 1, 2013, makes it illegal for any employer to request or require an employee or prospective employee to provide any password or other related account information in order to gain access to an employee’s or prospective account or profile on a social networking website (Facebook, MySpace, Twitter, etc.). The amendment also prohibits employers from demanding access in any manner to an employee’s or prospective employee’s account or profile on a social networking website.

The Right to Privacy in the Workplace Act, 820 ILCS 55/5, applies all employers and makes it “unlawful for an employer to refuse to hire or to discharge any individual, or otherwise disadvantage any individual, with respect to compensation, terms, or conditions or privileges of employment because the individual uses lawful products off the premises of the employer during nonworking hours.”  The Facebook Bill is the first amendment to the Act.

Nothing in the new law will limit an employer’s right to set and maintain lawful workplace policies regarding internet use, social networking site use, and email use. The law also does not prevent the employer from monitoring employee’s use of equipment and email that is owned by the employer. The law also does not prohibit employers from obtaining information about an employee or prospective employee that is made available to the public.

The passing of this law further demonstrates to employers the need to consult experienced individuals on employment matters, particularly regarding social media and other fast changing areas. This is especially true with companies that operate across multiple states, as your company policies must conform to the varying laws of each state. As more states adapt to the changing employment landscape brought on by technological advances, the need to consult a knowledgeable attorney to aid in crafting company practices is apparent.

If you need help ensuring that your workplace policies, or specifically your company’s social media policy, comply with this and other laws, please contact Waltz, Palmer & Dawson, LLC at (847)253-8800.

One large mistake that many emerging companies can make is failing to protect its intellectual property in a timely manner. Delay in both obtaining intellectual property rights, as well as delay in enforcing existing rights, could cost a company in both the short- and long-term.

For example, if your company notices that another company is using your trademark (even if that mark is not yet registered with the United States Patent and Trademark Office) and you neglect or delay in enforcing your rights, you may lose the right to sue that company to prevent them from profiting off of your trademark. By failing to enforce your rights, you also risk losing legal remedies, such as preliminary and/or permanent injunctions forbidding that company from using your trademark. Without the threat of legal remedies, you may lose significant leverage in attempting to enhance or encourage settlement with the offending company.

If you fail to enforce your rights, you also run the risk that your trademark may be considered abandoned. If this occurs, this may open the door for the offending company, and many other companies, including your direct competitors, to use your trademark in the marketplace. This poses the risk of significantly reducing or completely eliminating any goodwill or value that you have built in the product identified by the trademark at issue.

While this is only a limited example, for this reason, and many others, you should seek the help of an experienced attorney as soon as you become aware that there is a potential misuse of your copyrights, patents, trademarks, rights of publicity, trade secrets, or any other property rights. This will enable you to assess your risk and develop the best strategy possible to handle the issue.

If you need help protecting the value in your business, or have any other issues with which you may need help, contact Waltz, Palmer & Dawson, LLC at (847)253-8800.

As your idea for a business slowly grows, you will undoubtedly be faced with several situations in which the help of a licensed and experienced attorney can aid you and provided added value. Below are a series of events where a business startup should seek the guidance of an experienced attorney:

Intellectual Property Protection

As you develop your company, you may want to protect your company name, products, or services. The help of an attorney versed in intellectual property issues can help you trademark your name, logo or product, as well as procure other protections, such as patent protection for ideas that are patentable. An experienced lawyer should be consulted to determine the best type of intellectual property to protect your business (for example patent, trademark, copyright, or trade secret) and to then put those protections in place.

An attorney will also be of assistance when you decide to monetize this intellectual property. An attorney can draft and negotiate licenses agreements, as well as advise and assist with the enforcement of your property rights.

Leasing

While many small companies may have their beginnings in a home office, as your company undoubtedly expands, you will likely need to lease office or industrial space. A lawyer will help you negotiate the terms of a lease so that your company is in the best position possible, as well as be able to advise you of various pitfalls that may be contained in the lease. Most commercial leases last for several years, so entering a lease without an attorney’s review may be the start of problems and expenses that last for years.

Employment Issues

As your company hires employees, it is important to have procedures and protocol in place for dealing with these employees. Before hiring employees, at a minimum you should have an employee manual in place that discusses work procedures, expectations, requirements, holidays, paid time off policy, sick policy, and termination provisions. This area can be particularly tricky without an attorney, as there is a maze of federal and state laws that cover employees, and your policies must be in compliance.

Records and Compliance

An important aspect of being a business owner is keeping up-to-date and accurate records of your business. An attorney can assist you with keeping records regarding your business as well as employees.

Additionally, a lawyer will be of great help with complying with any and all rules and regulations affecting your business. Whether it be compliance with workers’ compensation insurance requirements to preparing corporate resolutions reflecting your business decisions, a lawyer will be aid you with all of these issues.

This article is part two of a two party article, and only briefly discusses a small number of issues and legal needs that may face your company. If you have any questions or need further advice regarding your company’s legal needs, please contact Waltz, Palmer & Dawson, LLC at (847)253-8800.

As your idea for a business slowly grows, you will undoubtedly be faced with several situations in which the help of a licensed and experienced attorney can aid you and provided added value. Below are a series of events where a business startup should seek the guidance of an experienced attorney:

Entity Formation

You need help determining the benefits, and potential risks, of various entity structures, often determining whether a corporation or limited liability company is a better choice for your business. Other issues that an attorney will guide you through are tax treatment, government regulation, government filings and disclosures, business organization, obtaining investors, and required investor disclosures, as well as preparing the necessary paperwork to form the company.

Licenses

Your business may need to apply for various licenses or permits before it can do business, including city, state, and county governments. A lawyer can help you properly obtain the permits or licenses that your business needs.

Non-Disclosure Agreements

As your company starts out, you may need help from friends or companies to get your idea off the ground. Whether it be consultants, manufacturers, or developers, to help with various aspects of your business it is important to have agreements in place that prevent these parties from disclosing or using any of your ideas or company information. A skilled lawyer can help craft a document that stringently protects your rights.

Contracts

Eventually a startup company will need to hire or engage various people. Whether it’s a consultant, manufacture, or developer as discussed above, or key employees who will help you grow your business, you need to have contracts in place that govern these relationships. An attorney can help draft these contracts to best protect the interests of your company.

This article is part one of a two part article, and only briefly discusses a small number of issues and legal needs that may face your company. If you have any questions or need further advice regarding your company’s legal needs, please contact Waltz, Palmer & Dawson, LLC at (847)253-8800.

Now that the U.S. Supreme Court has affirmed the constitutionality of the Patient Protection and Affordable Care Act of 2010 (the “Act”), businesses with more than 50 employees need to take a close look at their health insurance coverage to ensure that they are complying with the Act’s requirements. It is also important that businesses maintain a close watch over the number of employees working for the company since hiring new employees can result in additional obligations under the Act.

Obligations under the Patient Protection and Affordable Care Act

Beginning in 2014, employers that employ, on average, 50 full-time employees (those who work more than 30 hours per week) on more than 120 calendar days during the prior year are considered “applicable large employers.” Applicable large employers are required to offer their full-time employees health care coverage that meets the minimum coverage requirements under the Act.

If an applicable large employer fails to provide the required health insurance coverage, the business could be subject to hefty fines. For instance, if the employer fails to provide the required health coverage and just one employee receives coverage that is subsidized through the federal government, the employer is required to pay a $2,000 penalty for every full-time employee on its payroll.

Prohibitions under the Patient Protection and Affordable Care Act

Applicable large employers are not permitted to have extended waiting periods (those in excess of 30 days) for enrollment of full-time employees in the employer-sponsored health plan. If an employer fails to enroll new employees in a health insurance plan within 30 days, but enrolls the employee within 60 days, the business must pay a $400 penalty per employee. If the employer fails to enroll a new employee in a health insurance plan within 60 days, the business must pay a penalty of $600 per employee.

Businesses that employ more than 200 employees may not have any waiting periods for enrollment in the employer’s health plan and, instead, full-time employees must automatically be enrolled in the health care plan upon employment.

Reporting and Workplace Requirements

All employers are also required to comply with certain reporting and workplace requirements. For instance, employers must report the value of health benefits on employees’ W-2 forms. Employers must also provide employees with a uniform summary of benefits and coverage, and employee handbooks and health plan documents must be revised by the end of 2012 to reflect the Act’s $2,500 cap on employee contributions to flexible spending accounts.

Additionally, employers are required to provide reasonable break time and a private space for nursing mothers to express breast milk for up to one year after giving birth.

Get the Legal Advice You Need to Run Your Business

The Chicago area business attorneys at Waltz, Palmer & Dawson, LLC have extensive experience representing employers throughout Chicagoland with the wide variety of issues that they face in running their business. Contact that Chicago area business lawyers at Waltz, Palmer & Dawson, LLC at (847)253-8800 if you would like additional information regarding the ways that the Patient Protection and Affordable Care Act may impact your business.