The Morton Memo July 2012

Just published a newsletter. Articles on estate planning and telecommunications.

Click here for The Morton Memo July 2012

Indemnification Clauses - legal boiler plate that can hurt you!

I recently finished litigating a case in which my client had to provide a defense for another party. This situation arose from an indemnification clause in the contract between my client and the other party (the owner of a large project) in a construction contract. When a third party sub-subcontractor sued the owner, my client had to provide a duty to provide a complete defense and indemnify. Needless to say, this was very expensive for my client. Furthermore, my client wasn't aware that this indemnification clause was in their contract until my client received a demand for defense from the owner.

While indemnification clauses are common in construction contracts, they are also found in many other types of agreements. Indemnification clauses are often found in intellectual property agreements such as license agreements.

I have seen several in my career and they can be a serious trap. Often companies will slip indemnification clauses into contracts they draft. The terms can be egregiously one-sided.

I have read indemnification clauses that provide that one party must indemnify the other party for any legal action and arises from or is related to the contract or the subject of the contract. This means that if any third party sues the party that drafted the contract, then the other would be obligated to hire attorneys to defend that first party and pay any court costs and judgments - even if the indemnifying party had nothing to do with the legal action.

We always change those clauses to read that our clients only have a duty to indemnify if the legal action is something they caused. Furthermore, we always change the terms so that the duty to indemnify is mutual. The other party must also indemnify if the fault is that party's.

If you are signing contracts that have extensive legal terms, there is a good chance that one of those terms is an indemnification clause. Have an attorney review those contracts before you sign.

What business owners should know before going online - Spreecast

Had a great time today with my old friend Mitch Jackson on a Spreecast broadcast about the legal implications of going online.  We discussed websites, privacy, social media, protecting copyrights and avoiding copyright infringement. 

May 2012 Newsletter

Our latest newsletter, including an article on what business owners need to do and know for the websites and changes to our firm. The Morton Memo May 2012.

Website Legal Checklist

A company’s website is a valuable asset. For Internet based companies, it is often its most valuable asset.

Business owners often are plagued by problems resulting from their websites. These problems primarily result from business owners’ lack of knowledge of the fundamental things they should have and know about their website.

With hardball trademark tactics and copyright trolls, the Internet has become an often perilous place for business owners. The following is a checklist of information that a business website owner must have.

1. The business should own the domain. Not a partner individually, someone’s spouse, etc. But, the corporation, LLC, or partnership must own the domain.

2. Possess all access information for your domain. You, personally, should have the username and password for the account that manages your domain – e.g. the GoDaddy account with which you bought your business’s domain.

3. Own all domains around your main domain. If your primary domain is xyzwidget.com, then buy xyzwidget.biz, xyzwidget.net, xyzwidget.org, xyzwidget.xxx, xyz-widget.com, xyz-widget.net, xyz-widget.org, etc. Spend some money and buy them all up

4. Use a reputable website designer. Not a friend or a relative or employee. They’ll make mistakes and break the law.

5. Have a contract with the designer. You must have a written contract with your web designer. The contract should spell out the services and the price and contain two terms:

a. The designer’s work is “work for hire”. You will own the content, not the designer.

b. All stock art, photos, content will be licensed. There should be a line item in the contract for the cost of getting licenses for stock photos. Do not allow your designer to put someone else’s pictures, art or photos on your website without a license or permission.

6. Protect your trademarks. If you do not register your trademarks, unscrupulous persons might try to take them away from you – particularly now that you are broadcasting them to the Internet.

7. Post terms and conditions of use and a privacy policy on your website. If you will be doing business on the website, you must have terms and conditions of use and a privacy policy.

8. Know your host. You need to know who is the company that is hosting your website (and probably providing you email service) and you should be in direct contract with that company.

9. Have your FTP information. You must also have the FTP (File Transfer Protocol) information and any other information that will allow you full access to the site and transfer the site to another server.

10. File your copyrights. Once your site is complete, file a copyright registration for its content.

This post is not so much informational as a checklist to be referred to by a business owner when starting a company’s website. If you need any help with any of the above items, please contact me. We have extensive experience with each of these areas.

New Consequences for Misclassification of Independent Contractors

California has severely increased the penalties for misclassification of employees as independent contractors. All business owners who hire independent contractors need to pay attention to this change in the law.

The following is from the California State Bar's Corporation's Committee of the Business Law Section.

As of January 1, 2012, the State of California enacted legislation imposing heightened penalties on employers that misclassify employees as independent contractors. SB 459 added Sections 226.8 and 2753 to the California Labor Code. As a result, California now imposes a civil penalty ranging from $5,000 to $15,000 for each willful violation and from $10,000 to $25,000 where the employer has engaged in a “pattern or practice” of willful misclassification, in each case in addition to back pay and wages owed to misclassified workers. Under California Labor Code §226.8(a)(1), a willful misclassification is one that is “voluntary and knowing.”

In addition to the heightened monetary penalties, the new law also requires any employer found to have violated the law to place a notice on such employer’s website for one year, accessible to both employees and the general public, containing a statement that: (a) the employer has committed a serious violation of the law by willfully misclassifying employees; (b) the employer has changed its business practices to prevent future violations; (c) any employee who believes he or she is misclassified may contact the California Labor and Workforce Development Agency at the mailing address, e-mail address, or telephone number of the agency, as provided in the notice; and (d) notice is being posted pursuant to a state order.

Note also that under Section 2753, a person who, for money or other consideration, knowingly advises an employer to treat an individual as an independent contractor to avoid employee status for that individual shall be jointly and severally liable with the employer if the individual is found not to be an independent contractor. The foregoing does not apply to persons providing advice to their employers or attorneys authorized to practice law in California or another United States jurisdiction who provide legal advice in the course of the practice of law.

December 2011 Newsletter

We just published a newsletter with articles on year end to do items, social media issues and estate planning.
December 2011 Morton Memo