Articles Posted in Business Law

In recent times, alternative dispute resolution (“ADR”) is emerging as a favorable option for legal disputes due to rising litigation costs and the strain of growing caseloads for California state and federal courts. While state courts adopted ADR as an option to legal resolution earlier, federal courts are adopting various ADR options now as a means of resolving cases. ADR includes any method of seeking a legal resolution outside of court other than traditional civil litigation, which takes place in court. The various ADR options, include, but are not limited to, early neutral evaluation, mediation, arbitration, and negotiation. As federal courts look to these options to resolve cases, ADR continues to move to the forefront as a viable tool for all types of legal disputes.

What Role Does ADR Play in Federal Courts?

While parties can instigate ADR proceedings on their own, often courts will refer cases to ADR in order to resolve a legal dispute. Indeed, according to a study by the Federal Judicial Center, all federal courts authorize some type of alternative dispute resolution. Today, more than 30% of federal courts allow for various forms of ADR proceedings. Mediation has emerged as the most common form of ADR for federal cases. Courts will refer cases to mediation in an attempt to resolve the conflicting issues outside of court, which also allows a resolution that is mutually-beneficial and less hostile than litigation. Arbitration and Early Neutral Evaluation are also common forms of ADR in federal cases. Most recently, federal courts have adopted ADR programs for pro se litigants, or parties who are not represented by attorneys.

As part of California’s laws against unfair competition, the state provides a remedy to businesses that are victims of trade libel. Trade libel constitutes published false communications regarding the quality of services of products that a business provides, resulting in financial loss to this business. Are you a victim of false representations regarding your products or services? Have you sustained financial damages as a result of these false representations? If you answered “yes” to either question, you may have a claim for trade libel against these false representations! At the Law Offices of Salar Atrizadeh, an attorney with experience and knowledge in business law and trade libel suits can help guide you through the legal remedies.

What Are the Necessary Elements of a Trade Libel Suit?

To maintain a suit for trade libel, a plaintiff must first prove that another party published a false statement. A published statement is not limited to a printed book. Indeed, “published” can include anything from communications over the internet to advertisements. While the specifics of what constitutes “published” is a controversial area of law, courts will generally find that if a third party has access to a communication, that statement is deemed published. Such a communication can be either written or spoken to satisfy this requirement. Next, the statement must actually be false. If a defendant makes a statement about a business that results in financial damages, the business cannot file a lawsuit if the statement was true. Additionally, the defendant must know that the statement is false. While there are remedies available if a defendant negligently makes statements that cause financial harm to a business, to maintain an action for trade libel, the defendant must knowingly make the false statement. The false statement must also cause financial loss to the business. Such a loss can include a loss of reputation if the business can establish that the reputational decline will lead to a loss of future business, and as such, a future financial loss. Finally, a person making a false statement must intend to communicate the statement as a fact, not merely as an opinion. Therefore, a customer who expresses an opinion that a business provides a service of a poor quality is not subject to a trade libel suit.

As of January 1, 2012, under California Corporations Code §§ 2500-3503, traditional business corporations may organize as “Flexible Purpose Corporations.” Whereas previously, corporate directors were bound to manage corporations strictly for economic gain, this new organizational model grants directors the freedom to manage the corporation for social and environmental benefits. This gives corporations the opportunity to organize and operate as socially-aware entities, while preserving their right to maintain a for-profit operation.

What Are the Advantages of Flexible Purpose Corporations?

To qualify as a flexible purpose corporation, a company must operate so as to have a positive effect on one of the following: the community, society, environment, its employers, customers, creditors, or suppliers. Flexible Purpose Corporations also maintain greater freedom because in certain circumstances the company can waive out of extensive annual reporting requirements. Supporters of flexible purpose corporations explain that serving as a shareholder for such a corporation is increasingly beneficial because such shareholders are able to embrace the rewards of serving a greater societal interest.

California entrepreneurs should carefully consider the structure of their new business. There are many ways to organize a business, and their suitability depends on factors like the nature of the business, the number of owners and investors, and even the personalities of the principals. We will examine four business structures and discuss their advantages and the differences: DBA’s (for “doing business as”), C corporations, S corporations, and limited liability companies (LLC). Three major factors come into play in evaluating these business structures: the taxation of income, the liability of the owners for business debts, and the desired level of formality versus flexibility in running the business.

DBA (“Doing Business As”)

A DBA, also known as an assumed business name or a sole proprietorship, is the simplest business organization, because there is no organization. It is simply a business name used by an individual to transact business. The owner pays taxes on business income with a Schedule C attached to a federal income tax return. A major pitfall of a DBA is that it provides no liability protection for the owner whatsoever, since the business is not a separate legal entity. In terms of flexibility, any recordkeeping requirements would depend on the nature of the business. Any requirements imposed on DBA’s in general are minimal.

C Corporation

A C corporation, named for the subchapter in the Internal Revenue Code governing corporate taxation, is a very common business structure, providing a high level of liability protection for its owners. Owners in a corporation are called shareholders, and they are usually not liable for the business’ debts. Income in a C corp is subject to “double taxation,” meaning that the business entity pays income tax on its revenue, and then shareholders pay income tax on dividends distributed to them by the company. The C corp requires a high degree of formality, with regular shareholder and director meetings, minutes, and annual financial reports required by law.

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An effective employee manual is an essential tool for any business or corporation that employs workers. It is a valuable way for businesses to communicate a company’s expectations to its employees. A well written employee manual will outline company procedures, policies, and expectations. A poorly written manual can create both legal and personnel headaches for your business.

The following policies are important for any employer to consider when writing or revising an employee manual:

• Each employee manual should include a disclaimer which states that the publication is not an employment contract. This can protect a business from terminated workers filing breach of contract claims against the business.

• An employee manual should successfully communicate company objectives and the organization’s mission statement. By doing so, the manual can foster each employee’s understanding of business goals and provide them with an enhanced sense of purpose.

• An effective employee manual will state your business has a zero tolerance policy for any kind of discrimination or harassment. The manual should also explain how to identify and report harassment. A company’s employee manual should also specifically prohibit discrimination based upon sexual orientation.

• Employee leave and termination policies should always be addressed in an employee manual. Any leave eligibility differences or restrictions based on job functions or employee status should also be addressed. A well written manual will also remind employees that any discrimination based on disability will not be tolerated, and also discuss the Family Medical Leave Act.

• An employee handbook should define worker misconduct and discuss the company’s disciplinary process. A disciplinary policy should be flexible and include a disclaimer which states misconduct is not limited to behaviors specifically outlined in the manual.

• A well written employee manual will describe the process for raising workplace issues and filing a formal complaint or grievance. This is important because it shows workers the company will take employee concerns seriously.

• Because no one should feel threatened at work, each employee manual should provide workers with guidance regarding how to address and respond to workplace violence and other conflicts. An employee handbook should also include a zero tolerance policy for workplace bullying.

• Finally, as the use of social media such like Facebook and Twitter becomes more common, it is essential for businesses to address employee use or misuse of social networking websites. An employee handbook should discuss what sort of workplace-related communications are inappropriate and remind workers that disseminating confidential or proprietary information is prohibited. A social media policy should also address disparaging or harassing the company or fellow employees.

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