Perspectives

Filing a lien is a powerful tool for securing payment, especially in industries with complex credit transactions like construction, manufacturing, and large equipment leasing. However, errors during the lien filing process can invalidate your claim and put your payment at risk. Avoid these common pitfalls with our checklist to keep your lien rights intact.

1. Understand Your State’s Deadlines: Lien laws vary by state, and missing deadlines can void your claim. Familiarize yourself with each state’s specific timeline for filing a Notice of Intent, the lien itself, and any additional notices.
2. Send Preliminary Notices: Many states require you to send preliminary notices before filing a lien. Ensure you send these on time, or your lien claim may be invalid. Even when not required, a preliminary notice can remind customers of payment obligations.
3. Files Against the Correct Party: Identify the property owner and parties in charge of payments. Filing against the wrong party can delay the process or invalidate your lien.
4. Double-Check Contract Details and Amounts: Include accurate information in your lien claim, including contract amounts, dates, and any unauthorized changes. Overstating or misstating your claim amount can raise legal issues, jeopardizing your lien.
5. Prepare Complete Documentation: Gather all supporting documentation, including contacts, change orders, and proof of delivered services or goods. Detailed records not only strengthen your lien but are crucial if your claim goes to court.
6. Avoid DIY Errors-Seek Legal Help for Complex Filings: Liens in specialized industries may require additional steps or filings. Partnering with legal professionals who understand industry specific nuances ensure compliance and strengthen your lien rights.

By following this checklist, credit, and finance professionals can mitigate risks and increase the likelihood of successful lien filings, ultimately protecting your company’s cash flow and ensuring timely payments.

The National Labor Relations Board’s (NLRB) General Counsel, Jennifer Abruzzo, recently issued a memo declaring that many stay-or-play provisions in employment contracts, which often take the form of Training Repayment Agreement Provisions (TRAPs), likely violate workers’ Section 7 rights under the National Labor Relations Act (NLRA). These provisions, designed to recoup costs like training or sign-on bonuses if an employee leaves their job within a specified period, have long been used by companies- but are now under heightened scrutiny.

Why Stay-or-Pay Provisions Violate Section 7 Rights

At the heart of the issues is the way these provisions restrict employee mobility. TRAPs make it financially difficult for employees to resign, effectively coercing them into staying in roles they might otherwise leave. This can discourage employees from engaging in activities protected under Section 7, such as organizing, advocating for improved working conditions, or seeking new employment.

The NLRB’s General Counsel argues that these provisions interfere with worker’s rights by increasing the fear of job loss if they engage in protected concerted activities. Employees might be reluctant to quit or challenge workplace conditions if doing so would trigger a significant financial penalty, making it harder for them to exercise their legal rights.

Types of Stay-or-Pay Agreements Covered

The memo covers a wide range of provisions beyond traditional TRAPs, including:

• Educational reimbursement or repayment agreements
• Quit fees or liquidated damages clauses
• Sign-on bonuses or relocation stipends tied to a mandatory stay period

These provisions typically require employees to pay back costs or face penalties if they leave their job voluntarily or are terminated for reasons other than cause within a certain period.

What is Still Permissible?

The NLRB memo does not ban all forms of stay-or-pay agreements. Employers can still use repayment provisions, but they must be narrowly tailored to avoid interfering with Section 7 rights. Specifically, agreements are more likely to be considered lawful if they meet the following criteria:

1. Voluntarily Entered: Employees must freely choose to enter the agreement, with no undue financial or employment consequences if they decline. For instance, repayment terms tied to optional training or benefits, like elective educational opportunities, are generally permissible.
2. Reasonable and Specific Repayment Amount: The repayment amount must reflect the actual cost to the employer for the benefit provided. If the amount is higher than the actual cost, the provision is likely intended to restrict employee mobility, making it unlawful. Further, the amount of the repayment must be clearly communicated to the employee at the time the agreement is entered into.
3. Reasonable Stay Period: The length o f the required stay should be proportional to the benefit. For example, if the employer provides a costly relocation stipend, the stay period might reasonably be longer than than it is for less expensive benefits, like a sign-on bonus.
4. No Repayment if Terminated with Cause: Employees should not be required to repay amounts if they are terminated without cause. Otherwise, they might fear engaging in protected activities, worrying they could be fired and forced to pay.

60-Day Deadline to Modify Nonconforming Agreements

Employers currently using TRAPs or other stay-or-pay provisions should note that they have a 60-day window from the memo’s issuance to modify any nonconforming agreements. This essentially creates a December, 6, 2024, deadline to comply. Failure to do so could result in enforcement action by the NLRB, including the rescission of the provisions and potential financial liability for any financial harm caused to employees. It is critical for HR professionals and management to promptly review and revise any existing agreements to ensure compliance with the new guidance.

What this Means for Employers

Employers should carefully review their contracts and policies involving TRAPs or other stay-or-pay provisions. While the goal of retaining talent is valid, these provisions cannot come at at the cost of violating worker’s rights. HR teams and company management should ensure that any stay-or-pay provisions comply with the criteria stated above. Businesses should take note of these developments and ensure their policies are compliant within the 60-day window, focusing on creating retention strategies that respect employees’ legal rights and promote a healthy, motived workforce.

In light of these developments, it’s essential for employers to stay ahead of compliance issues by reviewing their stay-or-pay provisions and ensuring they align with the NLRB’s guidance. By taking proactive steps to modify agreements and protect workers’ rights, businesses can mitigate risks and foster a positive workplace culture. For tailored advice and support in navigating these changes, we recommend reaching out to your trusted legal advisor or contacting the Employment and Labor team at Wagner, Falconer & Judd to ensure your policies are fully compliant and designed to protect both your company and its employees.

In light of recent extreme weather events, it’s crucial for businesses to ensure their contracts include a Force Majeure clause. This provision protects parties from liability or obligations when unexpected events beyond their control prevent the fulfillment of contractual duties.

What Does Force Majeure Cover?

A Force Majeure clause typically applies to situations such as:

• Natural Disasters: Hurricanes, floods, wildfires, or other severe weather events.
• Government Actions or Regulations: Unexpected regulations, travel bans, or other state-imposed restrictions.
• Labor Strikes or Civil Unrest: Disruptions in operations due to strikes or protests.
• Pandemics or Public Health Emergencies: Events similar to the COVID-19 pandemic that impact business operations.

Why Force Majeure Clauses Matter?

Including a Force Majeure clause in contracts is essential for businesses to mitigate risks, provide flexibility, and avoid breach of contract when unforeseen events occur. Here’s why:

Mitigates Risk: A Force Majeure clause reduces potential liabilities by freeing parties from obligations when events beyond their control-like natural disasters or pandemics-disrupt operations.

Provides Contract Flexibility: This provision allows for the adjustment or suspension of obligations during disruptive events, ensuring businesses can adapt without facing penalties.

Avoids Breach of Contract: By acknowledging the impact of unpredictable events, a Force Majeure clause helps prevent breaches and protects relationships between parties.

How This Plays Out in Practice

In real-world scenarios, Force Majeure clauses are invaluable when dealing with:

Supply Chain Disruptions: When extreme weather or other factors interrupt supply lines, the clause provides relief from penalties.

Service Interruption: If a company cannot perform services due to uncontrollable circumstances, it avoids liability by invoking the Force Majeure provision.

By including this clause, businesses can protect themselves from undue risks and financial burdens when events outside of their control occur. It’s a proactive step that provides flexibility and helps manage unforeseen disruptions effectively.

If you’re looking to strengthen your contracts or need guidance on incorporating Force Majeure clauses, our legal team at WFJ is here to assist.

The Corporate Transparency Act (CTA) is fast approaching its critical deadline of January 1st, 2025. This law, designed to enhance transparency and combat illicit financial activity, requires certain business entities to report beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN). If your business falls under this new mandate, now is the time to act. (Learn more about the CTA in our previous blog post: here.)

Why the Deadline Matters

Failing to comply with the CTA by the January 1 deadline could result in severe penalties, including fines of up to $10,000 or imprisonment for up to two years. Compliance isn’t optional, and businesses that miss the mark could face significant risks. Preparing now ensures your business remains compliant and avoids unnecessary complications.

Is Your Business Ready?

Many businesses, including corporations, LLCs, and other entities formed under state law, must submit reports identifying their beneficial owners-individuals who own or control at least 25% of the company or exercise substantial control over it. Even if you’re not sure whether your business is required to report, it’s essential to seek legal advice to determine your compliance obligations.

How Can WFJ Help?

• Assessment and Planning: We’ll help you assess whether your business must report under the CTA and develop a plan to gather the required information.
• Accurate Reporting: We’ll guide you in accurately identifying and documenting your beneficial owners, ensuring your filings meet FinCEN’s standards.
• Ongoing Support: The CTA isn’t just a one-time requirement; reporting obligations may change as your business evolves. We offer ongoing support to keep your business compliant beyond January 1, 2025.

Don’t Wait-Act Now

Time is of the essence. The January 1, 2025, deadline will arrive sooner than you think, and preparation is key. Partner with WFJ today to ensure your business is ready and compliant. Our experienced team is here to provide the legal support and guidance you need, so you can focus on what matters most-running your business.

Contact us today to schedule a consultation or take the first step towards meeting your compliance obligations. 

Developing a Robust Compliance Program Can Protect from Litigation from Internal Sources

Developing and maintaining a robust compliance program is critical for businesses to protect themselves from potential litigation arising from internal sources, such as employees or management. Understanding the importance of a comprehensive compliance program is essential to safeguarding a business’ financial and legal interests, ensuring that operations are conducted in accordance with relevant laws and regulations.

The Role of a Compliance Program

A compliance program is a structured set of policies, procedures, and practices designed to ensure that companies and their employees adhere to legal and ethical standards. A robust compliance program serves as a first line of defense against internal risks by promoting a culture of accountability and transparency within the organization. It helps prevent misconduct, detect violations early, and respond effectively to any issues that arise, thereby reducing the likelihood of litigation.

Key Components of a Robust Compliance Program

1. Clear Policies and Procedures: The foundation of any compliance program is a set of well-defined policies and procedures that outline the company’s expectations for ethical behavior and legal compliance. These should cover a wide range of areas, including workplace safety, anti-discrimination, harassment prevention, data privacy, and financial reporting. Policies should be easily accessible to all employees, written in clear language, and regularly updated to reflect changes in laws or business practices.
2. Training and Education: Regular training programs are essential to ensure that employees understand their responsibilities under the compliance program. This includes not only initial onboarding training but also ongoing education on topics such as regulatory updates, ethical conduct, and specific risks relevant to the company’s operations. Training should be tailored to different roles within the organization, ensuring that all employees, from front-line workers to senior management, are equipped to comply with applicable laws and policies.
3. Internal Reporting Mechanisms: A key aspect of a compliance program is the establishment of effective internal reporting mechanisms. Employees should have a clear and confidential way to report concerns or potential violations without fear of retaliation. This can include anonymous hotlines, secure online reporting tools, or direct access to compliance officers. Encouraging employees to report issues internally allows the organization to address problems early, before they escalate into legal disputes.
4. Monitoring and Auditing: Regular monitoring and auditing of compliance activities are crucial for detecting potential issues and ensuring that the program is being implemented effectively. This includes conducting internal audits of financial transactions, reviewing adherence to safety protocols, and assessing the effectiveness of training programs. Audits should be conducted by independent personnel or external experts to ensure objectivity and thoroughness.
5. Enforcement and Discipline: A robust compliance program must include clear enforcement mechanisms for dealing with violations. This means having a consistent and fair disciplinary process in place that holds employees accountable for misconduct. Disciplinary actions should be well-documented and applied uniformly across the organization to prevent claims of unfair treatment or discrimination, which can lead to litigation.
6. Leadership Commitment: The success of a compliance program depends heavily on the commitment of the organization’s leadership. Senior management must lead by example, demonstrating a strong commitment to ethical conduct and compliance with laws and regulations. This includes allocating sufficient resources to the compliance program, regularly communicating its importance to employees, and actively participating in compliance initiatives.

Benefits of a Robust Compliance Program

Implementing a comprehensive compliance program offers several key benefits that can protect companies from internal litigation:

• Litigation Prevention: By proactively addressing potential issues and promoting a culture of compliance, companies can prevent internal disputes from escalating into costly litigation. Employees are more likely to resolve concerns internally if they trust that the organization takes compliance seriously.
• Legal and Financial Protection: A strong compliance program helps ensure that everything operates within the bounds of the law, reducing the risk of legal violations that could result in fines, penalties, or lawsuits. This not only protects the company’s finances but also its reputation.
• Improved Employee Morale and Retention: A workplace culture that prioritizes ethical behavior and compliance fosters a positive work environment, leading to higher employee morale and retention. Employees who feel valued and respected are less likely to engage in misconduct or file lawsuits against the company.
• Enhanced Operational Efficiency: Compliance programs help streamline operations by establishing clear procedures and reducing the likelihood of disruptions caused by legal disputes or regulatory investigations.

Ongoing Maintenance and Review

A compliance program is not a one-time initiative but an ongoing process that requires regular maintenance and review. Internal teams should work closely with legal counsel and compliance officers to continually assess the program’s effectiveness and make necessary adjustments. This includes staying informed about changes in laws and regulations, updating policies and training materials, and addressing any new risks that arise.

Developing and maintaining a robust compliance program can create a solid foundation for legal and ethical operations, significantly reducing the risk of litigation from internal sources and protecting long-term success.

To ensure your compliance program is comprehensive and tailored to your company’s unique needs, the Employment and Labor group at Wagner, Falconer & Judd is here to help. Our team of experienced attorneys and HR Professionals can work with you to assess, develop, and enhance your compliance strategies, providing the legal expertise needed to protect your business from internal risks. Contact us today to take your compliance program to the next level and safeguard you from costly litigation.

Addressing defaults and outlining remedies within contracts is crucial for protecting businesses from financial risk. For finance teams, it is essential to ensure that these provisions are robust and clear, providing them with the necessary tools to respond effectively in the event of a customer’s default.

A default occurs when a party fails to fulfill its contractual obligations, such as making timely payments or or adhering to the terms of a lease or purchase agreement. To mitigate the financial impact of a default, contracts should include late or missed payments, failure to maintain insurance, or unauthorized use of equipment. By clearly defining what constitutes a default, the dealer can act swiftly and decisively when a breach occurs.

Once a default is established, the contract should provide a range of remedies to protect the businesses’ financial interests. Common remedies include the right to repossess any equipment, acceleration of payment obligations (where the full amount due becomes immediately payable), and the imposition of late fees or interest on overdue payments. The right to terminate the contract and recover damages, including the cost of retrieving and refurbishing the equipment, should also be clearly articulated.

To further strengthen these protections, finance teams should ensure that contracts include provisions for legal fees and costs, allowing the dealer to recover expenses incurred in enforcing the contract or pursuing legal action. Additionally, contracts should specify that any waiver of a default or delay in enforcement does not constitute a waiver of the dealer’s rights under the contract, preserving the dealer’s ability to enforce the agreement in the future.

It is also important to include dispute resolution mechanisms, such as arbitration or mediation, which can provide a more efficient and cost-effective means of resolving conflicts without resorting to lengthy litigation. These mechanisms should be clearly outlined in the contract, along with the steps required to initiate them.

Finally, finance teams should work closely with legal counsel to ensure that default and remedy provisions are tailored to the dealership’s specific needs and are compliant with applicable laws. Regular review of contract templates and updates in response to changes in the law or business practices is essential for maintaining effective protection.

On January 1, 2024, the Corporate Transparency  Act (CTA) came into effect, marking a significant step in the fight against money laundering, tax fraud, and terrorism and funding. This new law mandates the collection of beneficial owner information (BOI) for over 30 million small businesses across the United States. Here’s a breakdown of what the CTA entails and how it affects your business.

What is the Corporate Transparency Act?

The CTA is a federal law aimed at enhancing transparency in corporate ownership. By requiring a business to report information about their beneficial owners, the CTA seeks to prevent seeks to prevent illicit activities such as money laundering, tax evasion, and financing of terrorism.

Key Definitions

Reporting Company- This refers to any corporation, limited liability company, or similar entity that is created by filing a document with a secretary of state or any similar state office.

Beneficial Owner- An individual who owns at least 25% of the reporting company or has substantial control over the reporting company.

Company Applicant- The person who filed the document to create the reporting company. If multiple people were involved, it includes the person primarily responsible for directing the filing.

Reporting Requirements

Existing Companies- If your reporting company was created before January 1, 2024, you are required to provide information about your beneficial owners.

New Companies- For companies created on or after January 1, 2024, you must report information about your beneficial owners and company applicants. However, a reporting company created after January 1,2024, does not need to report its company applicants.

Identification of Company Applicants- Companies required to report must always identify at least one company applicant, but no more than two.

Filing BOI Reports

All companies subject to the CTA musts file a BOI report with the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of Treasury.

Penalties for Non-Compliance

Non-compliance with the CTA carries severe penalties:

Civil Penalty: $500 for each day the violation continues

Criminal Penalty: Up to two years of imprisonment and a fine of up to $10,000 for providing false information or failing to comply with the CTA.

Exemptions for Large Operation Companies

Some companies are exempt from the CTA requirements. To qualify for exemption, an entity must meet all the following conditions:

• employ more than 20 full-time employees in the United States
• have an operating presence at a physical office within the United States
• Filed a federal income tax return in the U.S. for the previous year showing more than $5 million in gross receipts or sales

The CTA introduces important changes for small businesses, aiming to foster greater transparency and accountability. It’s crucial for businesses to understand these new requirements and ensure compliance to avoid significant penalties. For more detailed guidance or assistance with your BOI report, please contact Wagner, Falconer & Judd.