Ideas for Businesses and Business Owners Unexpectedly Working From Home Part I

Working from home woman business owner typing and texting.

Well, here we are, at the start of Week 2 of social distancing for Iowa and Minnesota. We are facing restrictions on travel, groups congregating, and operations of businesses. We are advised to stay at least 6 feet away from other people and (say it with me) wash our hands frequently for at least 20 seconds. We are at home with our families and our pets. We have a lot of downtime on our hands—as do our employees.

There is no sugar coating it: this is going to be a very tough time for small and mid-size businesses. Unemployment is up, and sales are down. We recently posted a list of resources for small businesses, including links to a variety of governmental agencies. We will be adding new links and those linked pages will all be updated regularly, so we encourage you to check back regularly. Please also feel free to reach out to us to suggest updates to that list. At the time of this writing, the new Families First Coronavirus Response Act, Public Law No. 116-127, is not yet in effect, and the Department of Labor has not yet provided the details about how it will address the exceptions for businesses with fewer than 50 employees. We will provide information as it becomes available.

While you and your employees are working remotely is a good time to work on some of those long-term projects you’ve been putting off—both personal and business. It may help your business emerge from this crisis in fighting shape. And if you, like so many business owners, have gone online unexpectedly, there are a number of things you may not have had to consider in a brick-and-mortar state that you should start thinking about now. We’ve put together some things to consider working on over the next weeks.

For Businesses Newly Online

If you have never run your business online before, it seems pretty straightforward: build an ecommerce website or move your yoga classes to a Zoom meeting and run with it. But there are a lot of other things to consider when you move online. Here are a few:

  • Sales taxes. If you had only one location and all of your customers came to you before, you needed to pay sales tax only for that location. The calculation changes when your customers are not coming to you. If your business is based in Iowa, look for more information from the Iowa Department of Revenue. If your business is based in Minnesota, look for more information from the Minnesota Department of Revenue. Both states may have special exceptions and updated information as the crisis unfolds, so check regularly for updates. Both states also participate in the Streamlined Sales and Use Tax Agreement, which aims to simplify the sales tax process for online retailers.
  • Website Privacy Policy, Terms of Use, and Terms of Sale. A website’s Privacy Policy explains how the website owner collects and uses data, including personal data, about people who use the website. A website’s Terms of Use are an agreement between the owner of the site and the site’s users. A website’s Terms of Sale are a contract between users who order from the site and the website owner. A Privacy Policy is required by the laws of some states, most notably California, if your website is accessible to users in those states. Terms of Use and Terms of Sale exist to protect the business owner and ensure that both parties know what happens under various circumstances—especially if an item doesn’t arrive, or needs to be returned, a prospect which you may not be relishing at the moment.
  • Liability Waivers. If you are suddenly giving fitness classes online, you have no way of knowing whether the spaces your customers are using are safe. To protect your business, you will want to ensure that your customers understand that they are responsible for ensuring they are using a safe space. If you already have a liability waiver, you may need to update it to reflect the new situation.

If you need assistance with these or any other concerns relating to your unexpected foray into e-commerce, please feel free to contact us.

For Businesses Looking for Things To Do

While it is not for the best of reasons, you and your employees may suddenly have a lot of down time from your regular business work. Especially if you are and/or you have employees scrounging for things to do in the midst of the disruption, this is the perfect time to pursue some of those long-term projects. If you don’t have your own list (or you’ve already worked through it), here are some ideas:

  • Adjust to the times. If your business’s organizing documents require any kind of in-person meeting without exceptions, it’s time to amend those. If you haven’t figured out what video chat software is most compatible with your business model (either free or paid), it’s time to find it. If you haven’t figured out how to work from home with the kids present, or if you have policies in place that make it unreasonably difficult for your employees to do so, it’s time to adjust those.
  • Get organized. Complete the filing. Make sure your electronic records are all in order. If you don’t have a system for managing customers, develop one or find a vendor who supplies one. If you’ve been thinking you’re outgrowing the capabilities of a software program or a vendor you rely on, take some time to do the research and determine what vendor offers the best solution for your business and implement it. If you aren’t there yet but might get there relatively soon, familiarize yourself with the marketplace so you’ll be ready for the transition later.
  • Get ahead. If you have a blog, create some evergreen content (content that will be timely no matter what is going on in the world). If you are a website designer, create some new templates to have ready to go for customers when they are ready to buy. Now is a good time to do any kind of preparatory work that you normally try to get ahead on in the slow times.
  • Take stock of your template agreements. I’ll soon write a post on the neglected Force Majeure clause that everyone is talking about now, but for the moment, this is a great time to evaluate the form contracts you have been using. How have they been working for your business? Do they cover everything that they should? Is there a situation that comes up frequently that isn’t included? Do they match the way your business actually operates? That last one can be a big problem if you just grabbed a form from the internet or if you simply haven’t updated your contracts in several years.
  • Work on legal compliance issues. Sometimes, compliance matters can fall by the wayside, or a new law with a lot of requirements can be too overwhelming to address before it goes into effect. Sometimes, smaller businesses rely on their small size to hope that no regulators will notice their non-compliance. Now is a good time to address the General Data Protection Regulation in the European Economic Area or the California Consumer Privacy Protection Act if you haven’t already.
  • Develop or revisit your trade secret protection regime. A trade secret is a type of intellectual property that creates value for its owner because it is secret. Trade secret protection is used to protect information and/or ideas that: 1) have actual or potential economic value if they are kept secret; 2) cannot be easily ascertained by others who are using proper means; 3) are minimally novel; and 4) are the subject of reasonable efforts to maintain them as secret. A trade secret must be protected in a way that is reasonable under the circumstances—it has to be secret enough to stay hidden, but revealed enough to be useful. Trade secrets should be protected with physical, procedural, and technological means. If you have never created a systematic method of protecting your trade secrets, or if you have but haven’t re-evaluated your method recently, now is a good time to do so.
  • Consider protecting other intellectual property. Registering copyright with the U.S. Copyright Office is not difficult, but is time-consuming. If you aren’t sure how to go about it, we offer copyright registration training remotely, and we’ll get you set up to register your own copyrights going forward. If you already know how to do it, and you suddenly have a lot of free time, now is a pretty good time to get things moving. Registering trademarks with the U.S. Patent and Trademark Office generally takes a little more work and benefits from assistance from an attorney. You can learn more about the benefits of trademark registration from this blog post.

This post is plenty long, so we will stop here; Part II will include suggestions for businesses facing changes, for people contemplating starting a new business, and for helping you to help your business.

If you would like help with any of the legal issues we’ve mentioned above, or any other legal issues, remember, we’re open and able to help with legal issues businesses are facing in this public health crisis. We offer telephone and video chat consultations, including free initial 30-minute consultations. We are also able to work with businesses facing financial hardships at this time. Please feel free to contact us to discuss your business’s options.

Employment Non-Compete Clauses and Liquidated Damages in Iowa

Contracts & Licensing

If you have ever signed an employment agreement, or asked your employees to sign one, it probably had a covenant not to compete with the employer if the employee leaves the business. These clauses are usually called “non-competes.” They typically limit the time and the geographic area within which the former employee can perform the same kind of work and/or work in the same industry. But how enforceable are they? A recent Iowa Court of Appeals decision, Cedar Valley Medical Specialists, PC v. James Wright, M.D., shows both how these clauses are used and what the courts think of them.

Wright, a cardiothoracic surgeon, entered into an employment contract with Cedar Valley Medical Specialists, PC, in Black Hawk County, Iowa. In the contract, Wright agreed that if he left the employment he would not practice medicine within 35 miles of Black Hawk County for a period of two years after leaving. He also agreed that if he did not comply with the restrictions, he would pay as liquidated damages the greater of $100,000 or his last 6 months’ salary with the group.

Wright retired from the medical group and went to work for a local hospital the next day. The medical group sued to enforce the agreement and won in the district court. Wright appealed, and the Iowa Court of Appeals ruled on his case on October 9, 2019. 

The court began its analysis by stating the Iowa law on restrictive covenants, saying:

Because restrictive covenants involve the partial restraint of trade, we construe them against the party seeking enforcement and approve them with some reluctance. We apply a three-pronged test to determine whether an employment contract with a restrictive covenant is enforceable: (1) Is the restriction reasonably necessary for the protection of the employer’s business; (2) is it unreasonably restrictive of the employee’s rights; and (3) is it prejudicial to the public interest?

Cedar Valley Medical Specialists, PC v. James Wright, M.D.

As you can see, the courts do not automatically enforce these contractual provisions, but rather engage in a balancing of interests among the employer, the employee, and the public good. Moreover, the burden is on the employer to prove it is entitled to enforce the covenant.

As to the first prong, the court found the covenant was reasonably necessary to protect the employer. The market for Wright’s specialty was limited; Wright had confidential information about the medical group’s operations; and the group had supported, promoted, and invested heavily in Wright. When he left, the group lost the revenue he would have brought in.

The court next found that the restrictions were reasonable as to time and geographic area.

Wright argued that the public interest favored striking the clause. If he, the only cardiothoracic surgeon within 50 miles, was prohibited from practicing his specialty, there would be none. Lives hung in the balance. The court rejected this argument, noting that there were only three or four emergency cases annually and there were other providers close enough by. Besides, the former employer was not seeking an injunction (that is, it was not trying to prohibit Wright from practicing medicine); it was asking to enforce the liquidated damages provision to make up the losses it suffered when Wright went to work for a competitor. 

The second part of the analysis of this non-compete clause was the reasonableness of the liquidated damages provision. Liquidated damages are damages agreed to when a contract is made that will be paid if a party breaches the contract. They are enforceable if: 1) they were a reasonable estimate, at the time the contract was entered into, of the damages that will be suffered if the contract is breached; and 2) the amount of actual damage is difficult to determine. Given the investment the former employer made in Wright and the lost revenue it would likely suffer if Wright were to compete with them, the court found the clause to be reasonable and enforceable.

If you need assistance with an enforceable non-compete for your employees, feel free to contact us for assistance.

Updating Your Outdated Terms of Use

You just looked at your business website’s Terms of Use and Privacy Policy (I’ll use the word Terms to refer to both of them together) for the first time in ages and realized that they have been in place since the Clinton Administration. It’s time for an update. What do you need to consider?

Don’t copy and paste. Terms should be tailored to your website. Your site will need different terms depending on whether you accept posts from users, how you want users to be able to use the site, what kinds of information you collect from users, whether you wish to allow sharing, and more. If you merely find a website similar to your own and copy its Terms, you risk creating Terms that you do not wish to bind your users, let alone your business.

Follow any requirements for your industry. If you are in an industry that is subject to regulations, you should make sure that your site’s Terms allow you to follow those regulations. For example, some industries are required to keep certain records about customer interactions for a certain amount of time. Make sure that your Terms disclose that you are keeping those records, and for how long.

The FTC regulates privacy policies. The Federal Trade Commission has been very aggressive about enforcement of privacy policies for the past few years, and it updates its regulations fairly regularly. Make sure your attorney looks at the latest regulations in drafting your Privacy Policy.

State laws. If your website is aimed at residents of more than one state, make sure you are complying with the laws of every state you are doing business in. California has generally been the most aggressive state in terms of legal regulation of website Terms.

Consider your timing. Pinterest has recently become a very popular site. If you want to, for example, update your Terms to allow you to share your users’ content via Pinterest, you will have to choose your timing carefully. If your current Terms do not grant the license needed for such sharing, you will need to make sure that your users are bound by your updated Terms before you add a “Pin It!” button or other means of sharing to your site. Otherwise, you may be risking a law suit for facilitating the violation of your users’ copyrights.

Inform your users of the update—email them if you can. It has become more and more common for websites to provide some notice before changes to their Terms go into effect. One might even say it is swiftly becoming a standard practice in the industry, especially for social sites. Facebook has a Site Governance Page where users can learn about and weigh in on changes before they are made. Pinterest gave its users more than two weeks’ notice, both by email and by notice on the Pinterest website, that it was going to make changes to its Terms of Service (and still makes the old terms available on the site in case users want to know how they have changed). Google gave users more than a month to review the changes it made to the Terms for its many services, informing them via pop-up when they visited a Google site as well as via email. If at all possible, you should take similar steps to inform your users of your changes. You don’t want your business to be left behind, if for no other reason than your users will expect this level of service.

Updating your Terms requires some consideration, but can be a painless process with the proper planning.

Cloud Computing Basics for Lawyers

Internet Law - Trade Secret - Protect My Idea

I am a (very!) active member of Minnesota Women Lawyers, so I was pleased when offered a chance to write for the current issue (Volume XXXVI, Issue IV) of the organization’s publication, With Equal Right. I wrote about basic cloud computing concepts for attorneys:
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[box]As technology evolves, law firms’ and legal departments’ use of technology changes, too. The hot topic lately has been cloud computing. You may be familiar with cloud computing but wonder what you can do to protect your business and your clients; or you may wonder what precipitation has to do with computers. This article will give you some basic information to help you get your bearings….Read more[/box]

Pinterest Copyright Questions and Concerns

Pinterest for Business

The Social Networking Nanny, Lanae, and I co-wrote a blog post over at Lanae’s blog:
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“The last few months have been a whirlwind here at Pinterest. It’s hard to explain how it feels to go from a small group of people working on a virtually unknown website, to a slightly bigger team of people working on a service that millions of people use every day.” (Pinterest spokesperson to CBS’s WCCO)

Isn’t that statement the truth! In a busy, busy world who doesn’t love a fast and easy way to share ideas, recipes, fashion and more…hello Pinterest! It sparked our interest, 12 million of us have flocked to it, and for many of us it became an immediate addiction. And then the “fine print” was made bold to us. … Nobody likes reading the fine print, but interpreting this was scary. Could we possibly be violating people’s Copyrights? … Read more

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