Is the Arbitration Provision in Your Employment Contract Enforceable?

Many employers require their employees to execute employment agreements, often containing confidentiality and non-compete clauses, which contain provisions requiring arbitration of any claim which an employee might file against the employer.  However, unless these provisions are carefully drafted, the arbitration provisions may be found unenforceable.

In Caldwell v. Unifirst Corp, et al. issued on October 27, 2020, the Missouri Court of Appeals, Eastern District, upheld a decision by an arbitrator holding the arbitration clause at issue there to be unenforceable due to a lack of consideration.  The Court in Caldwell agreed with the arbitrator that the arbitration clause in the employment agreement Caldwell signed with Unifirst was invalid for lack of mutual consideration because the employer had reserved the right to seek injunctive relief in court in the event the employee violated his non-compete obligations.  Thus, while the employee was required to arbitrate all claims he might have, the employer would not be required to arbitrate its claims for breach of the non-compete clause, the type of claim most likely to be pursued by the employer against a former employee.  As a result, the arbitrator (and the Court) held that the consideration offered by the employer was illusory, such that the agreement to arbitrate was void. Continue reading »

What is The Best Franchise Model For You?

Today, approximately 35 percent of franchises are owned solely or co-owned by women and that percentage is steadily increasing. Women’s superior relationship skills shine in service businesses and women gravitate toward more female oriented franchise models such as hair salons, weight loss centers, flower shops, cosmetic companies, etc. Driven by the desire to start a small business in order to create more flexibility and control over their time and to be their own boss, the franchising model is an exciting lure. Caution, however, speed bumps abound. Your entrepreneurial zeal should be tempered with a reality knowledge check which includes due diligence performed by you, number crunching services performed by your accountant and perspective and legal advice provided by your attorney.

What to Expect from Franchise System

Although the franchise model is no guarantee, the model may increase your chance of staying in business. The Small Business Administration, however, has consistently found that franchises have the same success rates as independent small businesses. Businesses fail for many reasons, some of which the franchise model cannot fix.  A good franchisor should eliminate, control, or manage many of the common mistakes a starting small business makes.  At the minimum for the initial investment and recurring costs of royalty and marketing monthly fees, a franchisee should receive brand recognition (trademarks, advertising and promotion), quality control, site selection and opening support, continuing training and operational guidance, stability, and value for the investment.

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Department of Labor’s Updated Regulations for FFCRA

The Department of Labor (DOL) published new guidelines on September 16, 2020 that revise and clarify portions of the Families First Coronavirus Relief Act (FFCRA). The new guidelines were issued following a ruling by a New York District Court that declared certain previously issued regulations invalid. These updated regulations relate to the following:

• The requirement of “work availability,”
• The requirement of employer approval for FFCRA leave to be intermittent,
• The definition of “health care provider,” and
• Requirements for notice and documentation.

The new regulations went into effect at the time they were published and will remain in effect until December 31, 2020 when the FFCRA is set to expire.

Work Availability Requirement

The DOL clarified that the work availability requirement applies to all qualifying reasons to take leave under the FFCRA. Thus, the leave may only be taken if the employer has work for the employee. The qualifying reason must be the actual reason the employee is unable to work, rather than not having work to do regardless of whether the qualifying reason occurs. Previously, the work availability requirement was only explicitly applicable to three of the six possible qualifying reasons for leave.

Intermittent Leave Requires Employer Approval Continue reading »

Changes to the Missouri Merchandising Practices Act and Claims for Punitive Damages

Governor Mike Parson recently signed Missouri SB 591, which brings significant changes to the Missouri Merchandising Practices Act (MMPA) and claims for punitive damages. The statute also adds new evidentiary and pleading requirements that will make it more difficult to prevail on a claim under the MMPA and to obtain punitive damages generally. The changes apply to lawsuits filed on or after August 28, 2020.

Changes to the Missouri Merchandising Practices Act

The MMPA (Section 407.010 RSMo., et seq.) is a broad consumer protection statute designed to safeguard the public against dishonest business practices. Under the MMPA, it is unlawful to engage in any deception, fraud, misrepresentation, or unfair practice in connection with the sale or advertisement of any merchandise in commerce, or solicitation of funds for a charitable purpose. While the act charges the attorney general to police the marketplace, it also provides for a private cause of action for those who have been victimized. Attorneys’ fees are recoverable under the statute, and it has proven to be a popular tool in suits against businesses. However, SB 591 adds several new requirements that a plaintiff must satisfy to prevail on an MMPA claim.

• Reasonableness is Required

Continue reading »

Temporary Residential Eviction Moratorium Order from the CDC and HHS Announced

The Centers for Disease Control and Prevention (CDC) and Department of Health and Human Services (HHS) issued an Agency Order effective September 4, 2020 announcing a temporary moratorium on residential evictions in attempts to limit the spread of COVID-19. The agency order was issued shortly after the White House announced an order barring evictions for renters would likely be issued as negotiations in Congress for renewal of CARES Act provisions have stalled.

The order is effective through December 31, 2020 and goes further than previous moratorium measures outlined in the CARES Act based on the number of citizens who could seek help if circumstances so require. In support of this measure, the CDC and HHS cited that eviction moratorium-like measures enable members of the public to have shelter in which to quarantine, isolate, and practice social distancing resulting in an effective and beneficial public health measure to prevent the rampant spread of COVID-19.

Under the order, a landlord, owner of residential property, or ‘other person’ with legal rights to pursue evictions or a possessory action (“landlord”) is not permitted to evict a ‘covered person’ (“tenant”) from a residential property^[1] until the order expires at the end of the year. Therefore, almost any person or entity who leases a residential property to another must comply with the order. (Note: ‘Covered person’ includes any tenant, lessee, or resident of residential property. ‘Other person’ includes corporations, companies, associations, firms, partnerships, societies, and joint stock companies, as well as individuals.) Continue reading »

August 2020 Federal and State Extensions of Foreclosures and Eviction Moratoriums

The Federal Housing Administration (“FHA”) announced another extension of its foreclosure and eviction moratorium through December 31, 2020 for homeowners with an FHA-insured single-family mortgage covered under the CARES Act.

This extension means the FHA has now provided more than nine months of foreclosure and eviction relief to FHA-insured homeowners. As this is a continuation of the moratorium put in place in March of this year, the protections continue to apply to homeowners with FHA-insured Title II Single Family forward and Home Equity Conversion (“reverse”) mortgages.

As a refresher, the moratorium requires mortgage servicers to:

1. Halt all new foreclosure actions and suspend all foreclosure actions currently in process for FHA-insured single-family properties, excluding legally vacant or abandoned properties; and
2. Cease all evictions of persons from FHA-insured single-family properties, excluding actions to evict occupants of legally vacant or abandoned properties.

According to HUD, “homeowners with FHA-insured mortgages should continue to make their mortgage payments during the foreclosure and eviction moratorium if they are able to do so, or seek mortgage payment forbearance pursuant to the CARES Act from their mortgage servicer, if needed.”

Under the CARES Act: Continue reading »

Guidance Released on Deferring Employee Social Security Taxes

The IRS released guidance for employers regarding President Trump’s August 8, 2020 memorandum on withholding, deposit, and payment of employee Social Security taxes for the period of September 1, 2020 through December 31, 2020. Secretary of the Treasury Steven Mnuchin has since confirmed the deferral as voluntary and that employers may choose to continue to withhold and deposit employee Social Security taxes under the normal schedule.

The guidance clarifies that employees eligible for deferral are those with wages (for FICA purposes) of less than $4,000 per bi-weekly pay period or an equivalent amount for other pay periods. The deferral of eligibility determination must be made on a payroll-by-payroll basis. Any compensation not considered wages for FICA purposes does not count when making the determination of eligibility. It is also important to remember that ‘wages’ considered are not based on gross pay but are based on the amount of wages after nontaxable deductions. Continue reading »

Deadline Extended for Main Street Lending Program Loans

The Federal Reserve’s Main Street Lending Program (MSLP) recently expanded to include two new loans specifically for nonprofit organizations. In addition to this further explanation, all the loan facilities offered under MSLP received a deadline extension.

Now all five facilities will see the SPV cease making purchases of participations in Eligible Loans after December 31, 2020. Of course, this is subject to change should the Federal Reserve and Department of the Treasury decide it is necessary to extend the facilities.

All our blog posts on this topic have been updated (see below) and term sheets and forms are available at Continue reading »

The Trucking Industry is on the Road to Clarity for Driver Classification Issues

The trucking industry has commonly used the owner-operator model for interstate commerce.  Whether individual state labor laws, which typically require labor protections such as minimum wage, sick leave, and unemployment and workers’ compensation benefits, apply to truck drivers generally depends on their status as employees or independent contractors.  California attempted to provide a mandatory test for determining whether a driver is an employee or independent contract in its Assembly-Bill 5 (“AB-5”).

For three decades prior to the enactment of AB-5, California courts relied on a test based on the decision in S.G. Borello & Sons, Inc. v. Dep’t of Indus. Relations that considered the following factors when determining whether a worker was an employee or independent contractor: (a) the right to control work; (b) whether the worker is engaged in a distinct occupation or business; (c) the amount of supervision required; (d) the skill required; (e) whether the worker supplies the tools required; (f) the length of time for which services are to be performed; (g) the method of payment; (h) whether the work is part of the regular business of the principal; and (i) whether the parties believe they are creating an employer-employee relationship.^[1] In April of 2018, the California Supreme Court replaced the Borello classification test with the “ABC test,” by its decision in Dynamex Operations West v. Superior Court.^[2]  The AB-5 test essentially codified the “ABC test” established by Dynamex.

However, on December 31, 2019, the day before AB-5 was set to take effect, the Southern District of California granted a temporary restraining order in California Trucking Association, et al v. Attorney General Xavier Becerra, et al., temporarily enjoining the State of California from enforcing AB-5 as to any motor carrier operating in California. ^[3] Continue reading »

Loan Relief for Nonprofit Organizations Through the Main Street Lending Program Expansion

UPDATED 11/9/2020

The Federal Reserve’s Main Street Lending Program (MSLP) has expanded to include two new loans specifically for nonprofit organizations: The Nonprofit Organization New Loan Facility (“NONLF”) and the Nonprofit Organization Expanded Loan Facility (“NOELF”). Nonprofit organizations will now be able to receive support from relief efforts similar to those available to for-profit entities. Many of the basic eligibility, certification, and fees track those already in place for for-profit counterparts.

How the Program Will Operate:

• Nonprofit organizations can access the Loan Participation Agreement form, borrower and lender certifications and covenants, and other required form agreements on the Federal Reserve Bank of Boston’s Main Street Lending Program Forms and Agreements website.
• Lenders are encouraged to begin making loans immediately upon successful registration.
• The NONLF and NOELF Special Purpose Vehicle (SPV) will purchase 95% of each eligible loan submitted if the required documentation is complete and transactions meet the relevant program facility’s requirements.

Program Definitions NONLF and NOELF Loans:

• Eligible Lenders – The same eligible lenders provided for for-profit MSLP facilities.
• Eligible Borrowers – Eligible Borrowers are nonprofit organizations:
  • Created or organized in the U.S. or under the laws of the U.S. with significant operations in the U.S. and a majority of its employees are based in the U.S.;
  • In continuous operation since January 1, 2015;
  • That are not an ineligible business[i];
  • With fewer than 15,000 employees or $5 billion or less in 2019 annual revenues;
  • With a minimum of 10 employees;
  • With an endowment under $3 billion;
  • With total non-donation revenues of at least 60% of expenses from 2017-2019[ii];
  • With a ratio of adjusted 2019 earnings of at least 2% before interest, depreciation, and amortization (EBIDA) to unrestricted 2019 operating revenue[iii];
  • With a ratio of at least 60 days of liquid assets[iv] at the time of loan origination to average daily expenses over the previous year;
  • With, at the time of origination, a ratio greater than 55% of unrestricted cash and investments to existing outstanding and undrawn available debt, plus the amount of any under the Facility, plus the amount of any CMS Accelerated and Advance Payments;
  • That are not a participant in another MSLP facility or the Primary Market Corporate Credit Facility; and
  • Have not received specific support under the Coronavirus Economic Stabilization Act of 2020 (Subtitle A of Title IV of the CARES Act).

Continue reading »