Your business name is one of your most valuable assets. If you’re not careful, all the time and energy you’ve spent into building your brand can be for nothing.

Don’t assume that because your name was available with the Illinois Secretary of State to that no other research is necessary. Any business owner who has received a letter from an attorney threatening a lawsuit because their business’ name is too similar to a client’s trademark can tell you that it pays to do your due diligence. If your chosen business name, even if it was available through the Illinois Secretary of State, that is so similar to an existing trademark that you are violating federal or state law, all the effort you’ve expended to build up your company name may have been wasted.

Even if you are lucky and are not subject to an expensive lawsuit, being forced to change the name of your company, not to mention your logo, marketing materials, signage, and any other material containing your business name, can be very pricy.

By having an attorney conducting a simple trademark or other searches before you establish your business, you can better protect one of you most valuable assets, your business name and the goodwill associated with it. It will help to protect you and your business from infringement by others, not to mention helping you avoid liability to other companies for violating their marks.

If you need help establishing your business, and performing the due diligence that goes along with it, please call Waltz, Palmer & Dawson, LLC at (847)253-8800.

If your business prints any portion of the expiration date of your customer’s credit and debit cards on the receipts you give them for their purchase, you need to change your practice immediately. On January 24, 2012, the US Court of Appeals for the Third Circuit held that to do so is a violation of the Fair and Accurate Credit Transactions Act (the “Act”). This could open your business up to lawsuits and liability to your customers. Whether your business is big or small, if you accept payment by credit or debit card, you need to make sure your policies are in line with the Act.

The Act, which is intended to prevent identity theft, prohibits anyone that accepts credit or debit cards for the transaction of business from printing more than the last five digits of the card number or the card’s expiration date upon any receipt provided to the card holder at the point of sale. The Act provides for actual damages incurred if violation of the Act was negligent. However, if the violation was willful the Act provides for either actual damages or statutory damages between $100 and $1000 (plus attorney’s fees) and possible punitive damages.

The defendant in the case decided by the Court of Appeals was found to have violated the statute because it printed the month of expiration on their receipts (for example “EXPIRY: 04/##”). Nevertheless, the defendant was found only to have negligently (rather than willfully) violated the Act, due in part to the fact that there was no guidance from the federal courts on the issue of whether printing partial expiration dates was acceptable.

The Court’s decision suggests that going forward, merchants who are sued for similar violations after January 24, 2012 will be found to have willfully violated the Act, opening themselves up to larger damages. To avoid finding yourself in court over this, you should completely remove the expiration dates of your customer’s credit and debit cards from the receipts.

If you need help ensuring that your business complies with the Act, or any other law, please contact Waltz, Palmer & Dawson, LLC at (847)253-8800.

Business owners need to be careful when dealing with social security numbers (“SSN”) of customers or employees. Illinois has laws designed to protect individuals’ privacy and prevent identity theft, and specific laws that restrict the manner in which social security numbers can be used. Those with access to social security numbers must be sure to abide by the restrictions put in place or risk being found to have committed an unlawful practice under the Consumer Fraud and Deceptive Business Practices Act (the “Act”). A single violation subjects the violator to an action for damages, as well as a civil penalty of up to $50,000.

The Act forbids a person from: (1) publicly posting or displaying an individual’s SSN; (2) printing a SSN on any card required for the individual to access products or services, or printing a SSN on a wristband or on the outside of a file; (3) requiring an individual to transmit a SSN over the internet, unless the connection is secure or the SSN encrypted; (4) requiring an individual to use a SSN to access a website, unless a password or unique PIN is also required to access the website; and (5) printing a SSN on materials that are mailed to the individual, unless State or federal law requires the SSN to be on the mailing (along with several exceptions). The Act also prohibits a person from encoding or embedding a SSN in or on a card or document, such as a barcode, chip or magnetic strip.

A person that used an individual’s SSN inconsistently with the provisions of the Act prior to July 1, 2005 may continue to do so provided that the use is continuous and the individual is provided an annual disclosure informing the s/he has the right to stop the use of his/her SSN in the manner inconsistent with the Act. The collection, use, or release of SSNs that are required by State or federal law or the use of SSNs for internal verification or administrative purposes is excepted from the Act. The Act also does not apply to documents that are recorded or required to be open to the public under State or federal law, case law, Supreme Court Rule, or the Illinois Constitution.

If you need help making sure your business complies with this law, or any other requirement, please contact Waltz, Palmer & Dawson, LLC at (847)253-8800.

The California Transparency in Supply Chain Act of 2010 (“Act”)  recently went into effect on January 1, 2012. If your company does business in CA, has real or personal property located in CA, or has employees in CA, you need to be aware of this Act.

The Act requires retail and manufacturing companies to disclose what efforts they have taken to eliminate slavery and human trafficking from their supply chains. The policy behind the law is to educate consumers regarding companies’ efforts to eradicate human trafficking and enable them to purchase goods produced by companies that responsibly manage their supply chain.

The new law requires any company that (1) is a “retail seller or manufacturer”, (2) “does business in California”, and (3) has annual worldwide gross receipts that exceed $100,000,000.00, to disclose its efforts to eradicate slavery and human trafficking from the company’s direct supply chain for tangible goods offered for sale.

If your company falls under the Act, at a minimum, your company must disclose whether, and to what extent, your company:

1.         engages in verification of product supply chains to evaluate and address risks of human trafficking and slavery, and whether the verification was conducted by a third party;

2.         conducts audits of suppliers to evaluate supplier compliance with company standards for trafficking and slavery in supply chains, and whether the audits were independent and unannounced;

3.         requires direct suppliers to certify that materials incorporated into the product comply with the laws regarding slavery and human trafficking of the country or countries in which they are doing business;

4.         maintains internal accountability standards and procedures for employees or contractors failing to meet company standards regarding slavery and trafficking; and

5.         provides company employees and management, who have direct responsibility for supply chain management, training on human trafficking and slavery, particularly with respect to mitigating risks within the supply chains of products.

The required disclosures must be made available with a conspicuous link on your company’s website. If your company does not have a website, you must provide written copies of your disclosure within 30 days of receiving a written request for disclosures from a consumer. Only the California Attorney General has the right to enforce the Act, and the only remedy available for noncompliance is injunctive relief.

If you would like to discuss whether your company falls under this Act, or should your company need help drafting your disclosure as required by California law or otherwise implementing socially responsible policies, please contact Waltz, Palmer & Dawson, LLC at (847)253-8800.

Who created your social media sites (Facebook, Twitter, Linked In, etc.)?  Are they being maintained by an employee?  If so, be careful, as you may not actually own these sites or the site’s “followers”. With more businesses encouraging their employees to use social media as a marketing tool, there is a strong likelihood that litigation over the ownership of social media will increase.

 A pending lawsuit in California and a case recently decided in Pennsylvania are among some of the cases currently looking into this issue and demonstrating that the answer may not be as simple as some would hope.

As a business owner, there are several precautions that you can take to avoid ending up in costly litigation yourself.

             1.         Create and adopt social media policies clarifying who owns the social media accounts and the ownership rights of the accounts when the employee relationship is terminated. These policies should be distributed to employees, and included in an employee handbook if your company has one.

             2.         Enter into written agreements with your employees concerning use of the company’s social media accounts. These agreements should also contain confidentiality provisions, especially if you treat your client lists as a trade secret.

             3.         Enter into written agreements with your employees outlining post-employment rights of both you and your employees regarding social media accounts.

             4.         Act quickly to remove employees from social media accounts when you know that the employment relationship will be ending. This may be as simple as changing the passwords.

             5.         If possible, you should register social media accounts in your company name, or in your own name, the name of a senior marketing person, or the name of a social media manager if the account is required to be registered in the name of a person.

             6.         On social media accounts that allow multiple administrators (such as Facebook), your company should have several administrators (and promptly remove administrators once their employment relationship has ended).

If you need help protecting your trade secrets or otherwise implementing policies and ensuring that your company is the owner of social media accounts, please contact Waltz, Palmer & Dawson, LLC at (847)253-8800.

In a recent opinion, Reliable Fire Equipment Company v. Arredondo, 2011 IL 111871, filed December 1, 2011, the Illinois Supreme Court confirmed the enforceability of covenants not to compete, as well as clarified the standard for determining whether a covenant not to compete (or non-competition agreement) will be enforced.

Before this case the various Illinois court districts disagreed, sometimes dramatically, over whether these covenants could be upheld.  The Supreme Court finally put this to rest, stating that, in Illinois, agreements not to compete will be upheld if they are reasonable. The Court concluded that Illinois has historically recognized, and continues to recognize, that protection of a legitimate business interest is a key requirement.

The court reviewed the three-part test for reasonableness: whether the covenant (1) is not greater than is required to protect the legitimate business interest of the promisee, (2) does not impose undue hardship on the promisor, and (3) is not injurious to the public. The Court characterized this test as a “three dimensional rule of reason,” with no particular inflexible formula to follow.

The Illinois Supreme Court further clarified that there is no particular test or set of factors that are to be used in determining what qualifies as a “legitimate business interest.” The Court rejected tests outlined in previous court cases, and instead stated that the various factors considered in prior case law are “are only non-conclusive aids in determining the promisee’s legitimate business interest, which in turn is but one component in the three-prong rule of reason, grounded in the totality of the circumstances.”

If you need help drafting non-compete agreements to protect your business, please contact Waltz, Palmer & Dawson, LLC at (847)253-8800.

Do you use independent contractors rather than employees for any part of your business? If your answer is yes, an Illinois Department of Employment Security (“IDES”) audit is a very real possibility. The IDES has been cracking down on employers for what the IDES believes to be “misclassification” of workers as independent contractors, seeking reimbursement for unpaid employment taxes and penalties for nonpayment.

If you think you are at risk, review this three part test which is based on the statutory test used by the IDES in its investigations:

(1) has the individual been and will the individual continue to be free from control or direction over the performance of such services, both under his contract of service and in fact?

(2) is the service the individual is performing outside the usual course of your business  or is the service performed outside of all the places of business of the enterprise for which such service is performed?

(3) is the individual engaged in an independently established trade, occupation, profession, or business? 

If you can pass all three factors, you should do well in an audit situation. Keep in mind the “correct” answers to these questions can be very complicated. For example if a worker is performing multiple functions for you, you may need to review the test for each function. The IDES may determine that the individual was in part an employee and therefore assess taxes and penalties due. 

If you feel you are at risk, there are some preventative steps you can take. Carefully drafted independent contractor agreements and prudent monitoring of the activities and responsibilities of independent contractors can help establish the workers’ status as an independent contractor. An experienced attorney can draft these agreements and help set the guidelines for independent contractor behavior.

If you have any concerns or if your company is facing an IDES audit, you should consult with a professional experienced in dealing with IDES audits. Correct answers on the agency’s questionnaire as well as during the interview can go a long way toward proving your case. Should the auditor find a violation, the company can still prevail by protesting the tax assessment levied by the auditor.

It should be noted that this article pertains only to audits by the IDES. There exists a possibility of being audited by the IRS and/or the Department of Labor as well. These agencies use differing standards and tests, with different associated penalties and fees for employers found to have misclassified workers.

If you have been the subject of an audit, or would like to limit your risk and increase the likelihood of success during an audit, please contact Waltz, Palmer & Dawson, LLC at (847)253-8800.

At one time or another, most business owners have received a check from a customer that ends up returned by the bank due to insufficient funds in the customer’s account. That returned check likely represents lost revenue for services already supplied, or goods already sold.

If this happens, first try contacting the customer. The customer may have made an honest mistake and may be willing to correct it and pay any bank fees the business may have incurred.

If the customer is not willing to make good on the check, then you should know the Illinois Criminal Code allows for collection of triple damages (not less than $100 nor more than $1,500), attorney’s fees, and court costs from a person who issues a bad check and fails to pay the amount within 30 days following receipt of a written demand sent via certified mail. So send a written demand to your delinquent customer for payment (but be careful not to run afoul of the Consumer Protection Act). If the customer still fails to pay, you can bring a case in small claims court. The provision for triple damages plus fees and costs make it cost effective to pursue these claims.

If you need help protecting your company’s rights, or have other issues related to your business, contact Waltz, Palmer & Dawson, LLC at (847)253-8800.

One common mistake made by many employers is to consider all commissioned salespeople to be exempt employees. Under the Fair Labor Standards Act (“FLSA”), certain employees who are employed as “outside salespersons” are exempt from the requirements that employers pay a minimum wage and overtime compensation to employees who work more than 40 hours. But if you wrongly classify an employee as an “outside salesperson,” you may open yourself up to claims for unpaid wages and potential lawsuits.

The outside salesperson exemption came about due to the incompatibility of the minimum wage and overtime requirements of the FLSA and the nature of the work performed by outside sales people. However, the term “outside salesperson” is narrowly viewed, and certain requirements must be satisfied in order for an employee to qualify.

First, the salesperson’s “primary duty” has to be either (i) making sales within the meaning of section 3(k) of the FLSA or (ii) obtaining orders or contracts for services or for the use of facilities for which a consideration will be paid by the customer. Section 3(k) defines sales as including the “transfer of title to tangible property, and in certain cases, of tangible and valuable evidences of intangible property” and states that ‘sale’ or ‘sell’ includes any sale, exchange, contract to sell, consignment for sale, shipment for sale, or other disposition.

Second, the salesperson must be customarily and regularly engaged away from the employer’s place or places of business in performing their primary duty. In order for duties to be considered away from the employer’s place of business, the employee must make sales at the customer’s place of business or at the customer’s home if selling door-to-door. If the employee is making sales calls or making sales over the internet from any fixed place, even if it is the employee’s home, the employee will not be considered as performing his/her duties away from the employer’s place of business.

Because the outside salesperson exemption is so narrowly construed, employers should consult an experienced attorney to help ensure that the employee’s actual job duties properly qualify for the exemption, or for any other exemption under the FLSA. For any inquiries regarding classification of your employees, or other questions related to your business, contact Waltz, Palmer & Dawson, LLC at (847)253-8800.

A series limited liability company (LLC) is a newer form of business entity.  The concept is that a single LLC can be formed with separate “series” created within the main LLC. The profits, losses, and liabilities of each series are legally separate from the other series and the main LLC as well.

The main LLC is considered a single legal entity for filing purposes with the Secretary of State.  Each series LLC can have separate members, managers, assets, and economic structures. But if each series has the same ownership as the primary LLC, only 1 tax return need be filed.

A series LLC may be the ideal structure for certain types of business, such as real estate holding companies that own several properties. However, as the series LLC is a newer type of business entity, individuals should be careful and consult a knowledgeable attorney when deciding to form a series LLC. Certain issues, such as federal tax treatment and treatment by other states that don’t offer series LLCs, are not certain, because issues have not had as much time or opportunities to be considered by courts and government bodies.  Series LLC are only available in a few states, including Illinois (also DE, IA, NV, OK, TN, TX, UT, and WI). Businesses that practice in multiple states, particularly those that do not recognize series LLC, should be careful before converting.

A traditional LLC can be converted to a series LLC at any time.  Be careful, however, because to create a series LLC or convert to a series LLC certain requirements and formalities must be met.  Consult someone knowledgeable with setting up series LLCs before making the decision.

If you need help forming your business or have other questions, please contact Waltz, Palmer & Dawson, LLC at (847)253-8800.