Perspectives

Strong contracts are the foundation of every successful business relationship. Without proper protections, businesses can face significant financial risk, disputes, and the possibility of non-payment. To minimize these risks, it’s essential to include specific provisions in every contract. Here are the key clauses that should be present in your contracts:

Payment Terms

What: Defines payment schedules, methods, penalties and consequences for late payment.

Why: 

• Ensures Cash Flow
• Reduces Financial Risk Against Late or Missed Payments
• Sets Clear Expectations

Key Elements:

• Payment Terms
• Late Payment Penalties
• Security Interests
• Dispute Resolution

Limitation of Liability

What:

• A contract provision that caps the amount and types of damages one party can recover from the other.
• Protects businesses from excessive claims and financial exposure in the event of disputes or equipment failure.
• Sets a maximum financial responsibility for the business.

Why: 

• Avoid exposure to excessive damages from customer claims.
• Help dealers estimate and manage their potential liability in worst-case scenarios.
• Protects businesses from liability from unseen circumstances.

Examples:

• Monetary Cap
• Exclusion of Certain Damages
• Time-based Limits

Indemnity Clauses

What: Contract provision where one party agrees to compensate the other for certain damages or losses.

Why:

• Mitigates Financial Risks
• Avoids Liability from Damages Caused by Misuse
• Coverage for 3rd Party Claims

Key Elements:

• Scope of Indemnity
• Types of Claims
• Geographical & Temporal Limits

Insurance

What: Contract provision requiring one or both parties to maintain specified insurance coverage.

Why:

• Transfers Risk from the dealer to an Insurance Company
• Ensures Financial Protection for Both Parties in Case of Loss or Liability

Key Types: 

• General Liability
• Property
• Product Liability
• Worker’s Compensation

Price

What: Cost for goods/services-protects against misunderstandings, unauthorized discounts and potential financial losses.

Why:

• Avoids Disputes
• Adjustment Clauses (Price Adjustment Mechanisms for Raw Material Price Changes or Fuel Surcharges.)
• Escalation Clauses (Allows for Gradual Price Increases.)

Key Components:

• Fixed vs Variable Pricing
• Payment Terms
• Currency & Exchange Rates

Performance Dates

What: Deadlines for:

• Delivery of Equipment
• Completion of Service
• Payment Milestones

Why:

• Establishes clear timelines to avoid misunderstandings
• Holds parties responsible for meeting their contractual obligations
• Prevents delays that can lead to operational disruptions or financial losses

Key Protections:

• Delay Clauses
• Extension Provisions
• Force Majeure

Security Agreement & Repossession

What: Legal document that grants a lender a security interest in the equipment sold, ensuring the right to repossess the equipment if the buyer defaults.

Why:

• Reduce risk if buyers fail to meet obligations
• Provides strong negotiation power if a customer defaults or requests an extension
• Outlines precise legal remedies available to the dealer, ensuring smoother enforcement

Key Components:

• Collateral Identification
• Obligations of the Buyer
• Default Conditions
• Right to Repossession

Warranty

What: 

• Contractual promise by the seller regarding the condition, performance, or lifespan of the equipment sold
• Express Warranties: Assurances made about the product
• Implied Warranties: Automatically applied under the law

Why:

• Limits Disputes

Strategies:

• Define Terms Clearly-specify duration, coverage limits, and conditions for repair
• Exclude Certain Warranties-use disclaimers to avoid unintended implied warranties
• Set reasonable limitations

Force Majeure

What: 

• Contract provision that frees parties from liability or obligation for events beyond their control
• Natural disasters
• Government actions or regulations
• Labor strikes or civil unrest
• Pandemics or public health emergencies

Why:

• Mitigates risk
• Provides contract flexibility
• Avoids breach of contract

In Practice:

• Supply chain disruptions
• Service interruption

By including these key provisions in every contract, your business can reduce financial risk, avoid disputes, and protect itself from non-payment. Ensuring that contracts are thorough and well-structured is essential for long-term business success. If you need assistance drafting or reviewing contracts, working with experienced legal counsel is a proactive way to safeguard your business interests.

If you have questions about contract provisions or need legal support, contact WFJ today. Our team of experienced attorneys can help you create robust contracts that help protect your business from risk and ensure your financial stability.

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. 

Employers have a duty to engage in the interactive process when an employee requests accommodations for a disability. This collaborative process ensures that reasonable accommodations are provided, allowing employees to perform their job effectively.

Steps in the Interactive Process:

1. Acknowledge the Request

When an employee requests an accommodation for a disability, the employer must respond promptly. This step is critical not only to comply with the Americans with Disabilities Act (ADA) but also to show the employee that their request is taken seriously.

• Best Practices: Employers should have clear procedures in place for handling accommodation requests. This includes training managers and HR staff on recognizing requests, even if they are informal or don’t explicitly use the term “accommodation”. It is vital to avoid unnecessary delays, as failing to respond in a timely manner can be seen as a violation of ADA requirements.
• Legal Implications: If an employer ignores or delays a response, it may lead to claims of discrimination or non-compliance under the ADA.

2. Gather Information

Once the request has been acknowledged, the employer must gather relevant information to understand the employee’s disability and the type of accommodation needed. This step often involves open dialogue with the employee to better understand their specific limitations and job requirements.

• Best Practices: Ask open-ended questions to fully understand the employee’s situation, while being mindful of privacy and confidentiality. Involving HR, supervisors, or external experts, such as medical professionals, may help in identifying appropriate accommodations.
• Legal Considerations: Employers may request documentation about the employee’s disability from a healthcare provider, but this should be limited to confirming the need for accommodation, not an invasive inquiry into the individual’s medical condition.

3. Explore Accommodation Options

After gathering information, the employer should research and evaluate potential accommodations. Under the ADA, employers are not required to provide the exact accommodation the employee requests, but they must consider reasonable alternatives that allow the employee to perform their essential job functions.

• Best Practices: Collaborate with the employee to brainstorm accommodation options that work for both parties. Common accommodations might include modifying work schedules, restructuring job duties, or providing assistive technologies.
• Reasonableness Standard: Employers should keep in mind that accommodations are considered “reasonable” if they don’t create an undue hardship for the business. Factors like the cost of accommodation, the size of the business, and its overall resources are all considered in determining undue hardship.

4. Implement Accommodations

Once an agreement on the appropriate accommodation is reached, it’s time to implement it. This may involve making physical adjustments to the workplace, providing new equipment, or altering work schedules or duties.

Best Practices: Ensure all stakeholders, including the employee’s supervisors, are informed of the accommodation so it can be integrated smoothly. It’s important to document the accommodation process and provide any necessary training or support for the employee to effectively use the accommodation.

Potential Challenges: Sometimes accommodations require adjustments to work processes, which may cause initial disruption. Clear communication is key to minimizing confusion or frustration from both the accommodated employee and the broader team.

5. Monitor and Evaluate

After accommodations are implemented, employers must continue to monitor their effectiveness. Disabilities and job demands may evolve over time, making it crucial to check in with the employee regularly to ensure the accommodation remains suitable.

Best Practices: Set regular follow-up meetings to review how the accommodation is working and address any concerns or adjustments that may be needed. Keep communication open so that the employee feels comfortable discussing if their needs change.

Documentation: It is important to document these evaluations and any changes to the accommodation to protect the company in case of future disputes or claims of non-compliance.

By following these steps, employers can not only support employees with disabilities but also demonstrate a commitment to an inclusive and compliant workplace. The interactive process should be seen as a continual dialogue between the employer and employee, fostering collaboration to find effective solutions. Moreover, compliance with the ADA protects businesses from legal risks while promoting a positive work environment that values diversity and equal opportunity.

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.

Wage and hour compliance is an essential aspect of operating a business. It’s not just a legal obligation but a critical component of maintaining a fair and equitable workplace. Failure to comply with wage and hour laws can lead to significant financial penalties, damage to your company’s reputation and costly litigation. This post will provide an overview of wage and hour compliance, focusing on the Fair Standards Act (FLSA) and state laws like the Minnesota Fair Labor Standards Act (MFLSA).

Federal Standards: The Fair Labor Standards Act (FLSA)

The FLSA is the cornerstone of federal wage and hour regulations. It sets the baseline standards for several key areas, including:

Minimum Wage: The FLSA establishes a federal minimum wage, which is currently $7.25 per hour. However, many states, including Minnesota, have set higher minimum wages. For instance, Minnesota’s minimum wage is higher than the federal standard, and employers in Minnesota must pay the state rate. (Always be sure to review your local and state laws.)

Overtime Pay: The FLSA requires that non-exempt employees receive overtime pay at 1.5 times their regular rate for any hours worked over 40 in a workweek. This standard applies across the country, but states can impose stricter rules.

Recordkeeping: Employers are required to maintain accurate records for employee’s hours worked and wages paid. This includes details like the employee’s full name, social security number, address, birth date (if under 19), gender, occupation, time and day when workweek starts, hours worked each day, and total hours worked each week.

Youth Employment: The FLSA also sets restrictions on the employment of minors, limiting the hours they can work and the types of jobs they can perform. These provisions are designed to protect the educational opportunities of minors and prohibit their employment in jobs under conditions that may be detrimental to their well-being or health.

State-Specific Standards: The Minnesota Fair Labor Standards Act (MFLSA)

While the FLSA sets the baseline for wage and hour laws, state laws like the MFLSA can impose additional requirements. Employers must comply with both federal and state regulations and apply the standards that are most favorable to employees.

Overtime Pay: Unlike the FLSA, which requires overtime pay for hours worked over 40 in a workweek, the MFLSA mandates overtime pay for hours worked over 48 in a workweek. However, this does not mean that employers can ignore federal overtime requirements. If an employee is covered by both the FLSA and the MFLSA, the employer must pay the employee according to the standard that benefits the employee the most.

Minimum Wage: You state’s minimum wage may be higher than the federal minimum wage and vary depending on the size of the business. Employers must pay the higher state minimum wage if they are subject to both federal and state laws.

Additional State Requirements: Be aware that state’s also may have additional specific requirements. For example, Minnesota law requires meal and rest breaks, payment of wages upon termination, and protections for certain types of leave. Specifically, MN law requires that employees be given enough time to eat a meal during a shift that is eight hours or longer. Employers must be aware of the nuances to ensure full compliance. We recommend working with trusted legal counsel to ensure your follow all city, state, and federal laws.

The Importance of Compliance

The consequences of non-compliance with wage and hour laws can be severe. Employers who fail to meet these obligations may be subject to:

Back Wages: Employers may be required to pay employees any unpaid wages that were owed under law.

Liquidated Damages: In cases where violations are found to be willful, employers might be liable for liquidated damages, which can double the amount of back wages owed.

Attorney’s Fees and Court Costs: Employers found in violation may also be responsible for paying the employee’s attorney’s fees and court costs.

Reputational Damage: Beyond the financial impact, wage and hour violations can seriously damage an employer’s reputation, making it difficult to attract and retain top talent.

Staying Compliant: A Proactive Approach

Given the complexities of wage and hour laws, especially when considering both federal and state requirements, it is crucial for employers to take a proactive approach to compliance. This includes:

Regular Audits: Conduct regular audits  of your payroll practices and recordkeeping procedures to ensure compliance with all applicable laws.

Employee Training: Ensure that your HR team and management are fully trained on wage and hour laws and understand the importance of accurate recordkeeping and fair pay practices.

Staying Informed: Wage and hour laws are subject to change, so it’s important to stay informed about any updates to federal or state laws that may affect your business.

Consulting with Legal Counsel

Navigating the complexities of wage and hour laws can be challenging, especially for businesses that operate in multiple states or industries with specific regulations. To ensure compliance and protect your business from potential liabilities, it is highly recommended to work with trusted legal counsel who can provide expert advice tailored to your specific situation.

Your legal counsel can help you understand your obligations under both federal and state laws, identify potential areas of risk, and implement best practices to mitigate those risks. By partnering with experienced employment law attorneys, you can confidently navigate the complexities of wage and hour compliance, allowing you to focus on what matters most-growing your business.