Category Archives: Business

Keeping up Formalities: Protecting Assets Across Commonly Owned Companies

By Andrea Jacobs, Esq. 

strangscott2015-15A recent Massachusetts Bankruptcy Court decision should serve as a clear reminder to business owners that, in order to enjoy the benefits that limited liability entities afford, one must respect established corporate formalities and comport business accordingly. Briefly, in In Re: Cameron Construction & Roofing Co., Inc. the  Bankruptcy Court held that the assets of a Massachusetts limited liability company, closely related to a Massachusetts construction business subject to Chapter 7 bankruptcy proceedings, could be reached to satisfy the claims of the creditors of the construction business. 

The two separate entities shared a common owner yet were formed as distinct enterprises. In this case, however, the Court determined that the owner controlled both the non-debtor LLC and debtor construction business and had allowed for the intermingling of assets. Further, the Court noted that the common owner “was thinly capitalized, and the two entities observed only minimal corporate formalities by filing separate tax returns and Annual Reports.” Thus, the Court held that ‘substantive consolidation’ was the appropriate remedy- effectively disregarding the sovereignty of the separate entities and combining their assets as a means to satisfy the liabilities of one.  Had the owner resected the separate corporate forms of his commonly owned entities in his everyday operations he likely would have been in a better position to shield assets held by the  non-debtor LLC from creditor access.

Sports Bar Liable for Wrongful Death in Patron’s Fall Down Stairs

By J. Jordan Scott

    The Massachusetts Court of Appeals recently affirmed a lower court ruling that held a sports bar liable for the death of a patron who entered a door marked “Employees Only” and was subsequently killed falling down a flight of stairs, in Bernier, et al. v. Smitty’s Sports Pub, Inc. (MA Appeals Court 14-P-1967). The bar, Smitty’s Sports Pub, Inc. (“Smitty’s”), argued that the deceased, Roger Leger, was a trespasser and thus not subject to a negligence claim. The trial court disagreed.

    On the night of the incident, Mr. Leger went to find the bar’s restroom. Three adjacent doors, marked “Gentlemen,” “Ladies,” and “Employees Only” were the same color and similarly marked. The “Employees Only” door opened into an unlit stairwell, with an over two-foot drop to the stairs, and while it was normally locked during business hours, the door was not locked on this particular night. Mr. Leger accidentally used the “Employees Only” door, fell down the stairs, and succumbed to injuries two weeks later.

     Mr. Leger’s estate filed a wrongful death lawsuit against Smitty’s. Smitty’s argued that because Mr. Leger had no right to open a door marked “Employee’s Only” and enter the basement area, he was a trespasser and thus not entitled to a duty of reasonable care. The jury ultimately found that Smitty’s was negligent in maintaining the property, and that negligence caused Mr. Leger’s injuries (although the ultimate damage award was reduced by 20%, the amount of negligence the jury attached to Mr. Leger).

    The crux of the matter here is that Mr. Luger was lawfully on the premises, and that he accidentally went through a door marked “Employees Only” does not make him a trespasser. Because he was lawfully on the premises, Smitty’s, like any landowner (especially those open to the general public), owed Mr. Luger a duty of care to act reasonably and maintain the property in a reasonably safe condition. At trial, Smitty’s had testified that the unlocked “Employee’s Only” door created a dangerous condition for anybody not knowing what lay on the other side, and that it was foreseeable that a patron may accidentally open that door, given its proximity and similarity in appearance to the restroom doors.

     This case contains some important lessons for bar and restaurant owners, and the hospitality industry generally. All patrons are owed a duty of care that the establishment be reasonably free of hazards. Especially where alcohol is served, owners should expect that customers may wander around the premises and may not read every posted sign. Areas that are off-limits to customers should be very clearly noted, if not locked or otherwise physically inaccessible. Smitty’s ran into problems here because a door that should have been locked was not, and that door’s proximity to the restrooms, areas patrons are expected to go, was not reasonable given the hazard behind the door. All business owners should review the layout of their establishments and ensure that patrons may only access areas they are permitted to enter.

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Strang Scott Prevails on Summary Judgment in Case Involving Falsified Payroll Reports on Federal Construction Project

     In the case of United States for the Use and Benefit of Metric Electric, Inc. v. CCB, Inc. and the Hanover Insurance Company, Civil Action No. 15-11934, in the United States District Court in Massachusetts, the court ruled in favor of Strang Scott’s motion for summary judgment, dismissing all of the plaintiff’s claims.

     The case arose over construction work in the John F. Kennedy Federal Building in Boston. The electrical subcontractor submitted periodic certifications that it paid its employees for work performed on the project. These statements turned out to be false. Six of the subcontractor’s employees brought suit against it for failure to pay wages over several months.

     The general contractor terminated the subcontract shortly thereafter. The electrical subcontractor brought suit against the general contractor and its payment bond surety, claiming an unpaid subcontract balance was due. The claims were brought under the Miller Act, as well as for breach of contract, quantum meruit, and violations of M.G.L. c. 93A (the Massachusetts law governing unfair or deceptive business practices).

     Attorney Christopher Strang argued that intentionally submitting false certified payroll documents constitutes a material breach of contract, justifying termination and also extinguishing any right to further payment. The judge agreed, finding “[i]ts failure to pay its employees in a timely fashion as required by state and federal law (as well as by the terms of the Subcontract), compounded by Sampson’s filing of perjured certifications of payment, bars Metric from entering any chamber of equity.”

     Contractors should use caution when submitting certifications on public, or any, construction projects. Making false statements on these documents can preclude any future recovery of contract payments. Concerned contractors should contact an experienced Massachusetts construction attorney.

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Massachusetts Commercial Lease: Additions and Alterations to a Leased Premises 

By Jennifer Lynn

     Tenants will often want to make alterations to the premises they have leased to fit their specific business needs. Before entering into a lease, the landlord and tenant must determine what kind of consent is needed for different types of alterations, how alterations or additions will be paid for and completed, and who retains the benefit of those improvements after the lease ends.

Prerequisite for Landlord Consent

      Sometimes commercial leases prohibit any change to the premises without the landlord’s express consent. A strict restriction may be desirable where the term of the lease is relatively short, the space has been recently renovated at the landlord’s expense, or the premises already contains specialized fixtures. However, landlords will often agree to a more relaxed level of oversight for changes to the premises. It can be burdensome for a landlord to strictly monitor any change to the premises and therefore practical for the tenant to be allowed to make minor changes (e.g., repainting the walls) without receiving the landlord’s express consent, while still requiring written consent for more robust changes (e.g., moving interior walls or relocating stairwells). For major additions or alterations, commercial leases often contain a provision requiring the parties to enter negotiations regarding the specific addition at the time the tenant desires to make the change.

     All good contracts avoid ambiguity, and a common way to separate minor alterations from major ones is to list distinguishing characteristics for when the landlord’s express permission is or is not needed. “Minor” alterations often includes changes that (1) do not significantly impact other tenants in the building, (2) do not adversely affect the value of the property or will not affect the landlord’s future ability to rent the premises, (3) do not require permits or variances to complete, (4) do not impact common areas or external portions of the building, (5) do not impact the structural integrity of the building, and (6) do not impact the usable square feet of the premises. Distinguishing between minor and major premises alterations relieves the landlord of some tenant oversight burden while still protecting the landlord’s property, while the tenant enjoys some level of freedom to customize their space without having to obtain the landlord’s consent.

    Determining whether a tenant may alter a rental property leads to a fundamentally important question: who is paying for the alteration?

Tenant Improvement Allowance

     One method of paying for premises alterations is a “tenant improvement allowance,” a set sum provided by the landlord for this purpose. Under this type of provision, the tenant is only responsible for costs that go beyond the stated limit. Limitations on the allowance are stated as either a cost per-foot or a flat cap for a certain dollar amount. When the tenant requests an improvement, the landlord will then directly pay the costs up to the predetermined limit.

     In addition to determining the amount of the allowance, the parties will need to negotiate how the tenant may use the allowance, including what types of work will be covered by the allowance and what happens in the event part of the allowance is left over after alterations are completed. The overall costs for the tenant can vary dramatically if the allowance is limited to use for only direct construction costs, or if it can be applied towards architect’s fees, permits, moving or storage costs, zoning variances, or related legal fees. Likewise, the parties should be aware if the provision calls for any unused portion of the allowance to be credited towards future rent.

Build-Out Allowance

     Build-out allowances are another type of incentive whereby the commercial landlord offers “building standard” fixtures or furnishings for the premises with the option for upgrades at the tenant’s expense. Build-out allowances are usually offered only for new buildings, as the landlord has easy access to the necessary materials and construction services at that time. When negotiating this type of provision, the parties should take notice of who is responsible for completing any upgrades, the landlord or the tenant. The tenant should weigh the convenience of having the landlord complete any upgrades against the overall cost of the project, as it may be more cost effective for the tenant to have their own contractor come in to complete the work, or the tenant may require or want upgrades the landlord is not offering. However, if the landlord is the party responsible for the upgraded finishes, the tenant can avoid cost overages and expenses due to time delays because the landlord would be responsible for completion of the work.

Expansion Rights

     A less common right that the parties may negotiate is the right of the tenant to expand their operation after entering into the lease. Tenants commonly seek this right in hopes that their business will succeed to the point of needing more space. In order to secure that right, the tenant will need to negotiate the right to build out their space so they have the option to expand when needed. This can be done by reserving other space owned by the landlord for a set period of time, in either the building the tenant is currently in or elsewhere. In order to be effective, expansion options should list an accurate description of the space the tenant wants to reserve a right in, the rental amount for that additional space, and the terms and dates under which the tenant may exercise the option. The option to expand only takes effect when the tenant affirmatively exercises the option; if that need does not arise, the tenant is not obligated to act on it.

     Use of this right is understandably limited. In competitive real estate markets, landlords are much less likely to agree to an expansion right because it reserves real estate and restricts the landlord’s ability to rent their buildings without restriction (i.e., being unable to rent reserved space during the time it is set aside under the expansion provision). Landlords must also be aware of inherent logistical concerns. In buildings with multiple units, giving even a few tenants expansion rights would create a confusing and inconsistent situation for the landlord.

Title to Improvements

    Landlords will generally want to retain title to all material additions or alterations within the premises. Where changes are made to floor plans, utility lines, equipment, or fixtures, the landlord will insist on retaining them after the tenancy terminates and the tenant vacates because those changes are considered material improvements to the premises that have become part of the premises and removal would be damaging or costly to the landlord. Tenants are often permitted to retain alterations which are more minor in nature, not considered fixtures, and represent the tenant’s personal property. Commercial leases will often specify the categories of alterations that are retained by each party. In addition to addressing the right to retain improvements, this provision will usually contain a clause requiring the tenant to keep all improvements and alterations free from any mortgage, lien, or other encumbrance. These restrictions ensure that construction of additions and alterations do not affect the landlord’s overall rights as the owner of the property.

The above is a simplified summary of different options for improving or altering a commercial premises under a written lease. Each commercial lease negotiation will present a unique situation and often different landlords and tenants will have differing “standards” for how a commercial lease should be structured. As such, it is critical for both landlords and tenants speak with a Massachusetts commercial real estate attorney before executing a commercial lease.

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Due Diligence in Business Transactions

By J. Jordan Scott

            Business revolves around transactions. Most transactions occur in the ordinary course of business, such as selling products and services to clients. Some transactions are less common, but may fundamentally alter the business itself:  mergers and acquisitions. A merger is a combination of two or more companies, while an acquisition involves one company buying the stock or assets of one or more other companies. These transaction structures, along with related structures like share exchanges, can provide great opportunities for businesses to consolidate operations, shore up weaknesses, and open new lines of business. The businesses themselves, after agreeing to enter some sort of transaction, are usually eager to hit the ground running. However, the process known as “due diligence” is vitally important for the future of all parties.

            Due diligence is the process of exchanging information, often non-public information, in order to understand as much of the other company as possible before consummating the transaction. Any competent transaction lawyer will request a variety of information, and businesses should be prepared to work with their attorneys (and often accountants and chief financial officers) to deliver the requested information and review the same. Although the specific diligence requests can vary from deal to deal, many aspects are similar, and preparing for the process can save all parties time and money. What are some common due diligence topics?

Entity Organization. Most businesses involved in a merger or acquisition are corporations or limited liability companies. Each of these companies is supposed to be properly formed and maintained in its home state, and it is necessary for transaction attorneys to verify that the business does in fact exist. While that may seem silly, for how can an operating business not really “exist,” the legal details do matter and can hold up the deal itself or any business financing. Any corporate clean-ups (such as a company not being in good standing with its home state) should be cleaned up before the transaction.

Authority. All entities are governed by a set of documents that list the individuals or businesses that have control over the company: for corporations, that includes the board of directors and the stockholders, and for limited liability companies, that includes the managers and members. It is very important to make sure that a sufficient number (based on the entity’s organizational documents) have formally authorized the transaction. If that does not happen, then the aggrieved owners may be able to unwind the transaction through a costly and complicated lawsuit.

Titles, Liens. A merger or acquisition is often planned because one company wants access to the products or property of another company. Thus, it is necessary to ensure that the company with the goods has complete ownership of the goods, meaning that they are not subject to a lien or something else that could prevent the acquiring company from actually taking possession of the goods it targeted.

Intellectual Property. Intellectual property is increasingly important in today’s world, and many businesses acquisitions occur merely to acquire patents or technology. Does the company fully own its intellectual property? Are there any outstanding licensing agreements that may affect the transaction? Depending on the deal structure, the brand or technologies of the acquired company may be central to the deal and these questions must be answered as early as possible.

Taxes. Everyone is familiar with the truism that there is no escaping basic tax obligations. Depending on the structure of the transaction, a business may be acquiring both the assets and the liabilities of the other business. The last thing anybody wants to see is a surprise tax bill (or worse, tax lien) because the acquired company failed to meet its IRS obligations.

Litigation. Litigation is a part of life for most businesses. However, litigation can be a costly endeavor that lasts for several years. It is necessary for companies to determine their potential litigation exposure: what lawsuits are ongoing, but also what lawsuits are threatened. Litigation may be of particular concern in the technology sector, as a patent infringement suit can bankrupt some companies. Some lawsuits are also employee based, from nonpayment of wages to discrimination cases. Knowing what is out there is vital to managing risk.

Real Estate. Many commercial leases contain a clause that states the lease cannot be assigned without the landlord’s consent. If the acquiring company intends to run the acquired company as-is, maintaining its current office or facility is important. A merger or acquisition often meets the definition of “assignment,” in a lease, and breaching a commercial lease may trigger substantial penalties. Landlords will often provide their consent, especially if the acquiring company will assume the full lease obligations, but none of that can happen if nobody takes the time to find and review the lease.

The foregoing list is by no means exhaustive, and is intended merely to illustrate some of the matters businesses should be prepared to consider when entering into a substantial transaction like a merger or acquisition. Minimizing and controlling risk is essential to business endeavors, and it is impossible to control what you do not know. Any Massachusetts business contemplating a merger or acquisition should consult with a qualified business transaction attorney to ensure that the business is properly protected.

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“Culture of Profanity” or a Hostile Work Environment? Massachusetts Court Issues Ruling on Permissible Use of Expletives in the Workplace

By Jennifer Lynn

     Hostile work environments exist when an employer’s statements, actions, and behavior make it impossible for an employee to perform their job. Massachusetts law protects employees against discrimination and hostile work environments by prohibiting an employer, or its agents, from refusing to hire an individual, discharging an employee, or discriminating on the basis of a protected class status.  Protected class status exists based on an individual’s “race, color, religious creed, national origin, sex, gender identity, sexual orientation, genetic information, or ancestry.” 

     Recently, in Griffin v. Adams & Assoc. of Nevada, et al., the United States District Court for the District of Massachusetts determined that a former employee sufficiently presented evidence to bring a hostile work environment claim based on sexually derogative terms directed at him by his former supervisor and others.

     In Griffin, a former employee filed suit for discrimination based on his sexual orientation, harassment, and retaliation against his former employer and his former supervisor.  In defense, the employer argued that the employee failed to establish a hostile work environment claim because the conduct directed at him was not “of a sexual nature” and was not a comment on the employee’s gender or sexual orientation.  In making this argument, the employer relied on a prior Massachusetts Appeals Court case, Prader v. Leading Edge Products, Inc., which held that use of “crass garden-variety expletives” in a workplace, which are not sexual commands or lurid innuendos, may only evidence a “culture of profanity” in the workplace and would be insufficient to establish a sexually hostile work environment.

     The District Court’s summary judgment decision in Griffin, dismissed the employer’s Prader argument.  The Court determined that the comments directed at Mr. Griffin went beyond “garden-variety expletives” (such as those commonly used with or without meaning or reference to a sexual connotation), making it reasonably possible to construe the statements as sexual innuendo that “could suggest discriminatory animus.”  The District Court held that the specific nature of the statements, when viewed with consideration to previous statements (derogatory comments about the former employee’s attire and mannerisms being “feminine,” describing his office décor as “flamboyant,” and using derogatory terms based on his sexual orientation), went beyond statements “tinged with offensive sexual connotations” and could be reasonably viewed as discrimination based on sexual orientation and gender stereotypes.

     The Griffin decision allowed the employee’s hostile work environment and retaliation claims to survive summary judgment, permitting the employee to proceed with those claims against the defendants toward trial.  While the Griffin decision did not determine whether the employer’s actions actually violated Chapter 151B, it should serve as a stern reminder to employers that protected-class discrimination and hostile work environments are not tolerated under Massachusetts law.  While the use of common profanity may be a recognized element of a work environment, that may not excuse the employer from liability where profanity with offensive connotations is targeted toward particular employees.  Employers must work with their human resources staff and employment counsel to create and maintain policies that promote healthy work environments and prohibit discriminatory conduct.  Should you have questions or concerns regarding Massachusetts’ anti-discrimination laws, hostile work environments, or your company’s practices, consult a Massachusetts employment attorney.

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Massachusetts Enacts Equal Pay Law

By J. Jordan Scott

     On August 1, 2016, Massachusetts governor Charlie Baker signed the equal pay law, a law that has been working through the legislature since 1998. The law takes effect on July 1, 2018.  The law bars discrimination on the basis of gender in the payment of wages, including benefits and other compensation, for “comparable work.”  The statute defines comparable work to mean work that requires substantially similar “skill, effort and responsibility” and is performed under similar working conditions. The law allows variation in wages based on:

  • seniority;
  • merit;
  • productivity as measured by quantity or quality of sales or production;
  • geographic location;
  • education, training, or experience reasonably related to the job; or
  • regular travel.

 

     The law provides several direct remedies for violations with a three-year statute of limitations.  Aggrieved employees can bring a lawsuit on behalf of themselves and similar situated employees, and recover the amount of wages underpaid, as well as an additional amount of wages underpaid as liquidated damages (amounting to double damages), plus reasonable attorney’s fees.  Employers also face liability for retaliation under the law.

     An employee’s previous wage or salary history may not be used as a defense, but the law does provide employers with one affirmative defense:  if, within the prior three years and before a lawsuit is brought, employers complete a good faith self-evaluation of its pay practices and demonstrate that reasonable progress has been made towards eliminating pay differentials based on gender, liability under this law can be avoided. Employers may design their own self-evaluations, if they are reasonable in detail and scope in light of the employer’s size.

    Finally, this law makes illegal some common practices.  Employers may not bar employees from discussing their own wages or the wages of fellow employees.  Further, employers may not screen job applicants based on salary history or even ask about prior wages or salary history.  However, prospective employees may provide written authorization for a prospective employer to confirm prior wages, but only after the prospective employer makes an employment offer.

     The attorney general is empowered to bring its own lawsuit based on equal pay violations and may issue regulations interpreting this law, which can include templates for employer self-evaluations.  Although gender discrimination has long been illegal in Massachusetts, this law provides employees with new avenues for relief and places additional restrictions on employers. Employers should consult with Massachusetts employment attorneys to confirm that hiring practices will comply with the law and to ensure that potential liability is limited through self-evaluations.

Contractors Beware:  OSHA Penalties Set to Increase on August 1, 2016

By Corey N. Giroux

            On August 1, 2016, the Occupational Health and Safety Administration (“OSHA”), will raise the limits of its maximum penalties for the first time in nearly twenty-six years.

           Current maximum penalties for “serious,” “other than serious” and “posting requirement” penalties will increase from $7,000.00 per violation to $12,471.00 per violation.  Penalties for failure to abate hazards or violations will increase from $7,000.00 to $12,471.00 per day for each failure to abate the condition subsequent to the abatement date.  Finally, the maximum penalties for “willful” or “repeat” violations will increase from $70,000.00 to $124,709.00 per violation. 

            All contractors, and especially those with a history of violations or alleged violations with OSHA, would be wise to insure that all personal protective equipment, tools and equipment are OSHA compliant in advance of the changes in maximum penalties.  If your firm hasn’t recently revisited its safety procedures, practices and documentation, now is the time to review your firm’s safety program in order to avoid exposure to increased maximum penalties for OSHA violations set to take effect. 

           For contractors in states that operate their own, state run, “mini-OSHAs,” OSHA has required that those agencies adopt maximum penalties that meet or exceed those imposed by OSHA.  Accordingly, contractors operating in states with “mini-OSHA” agencies should be mindful to consider whether they’re subject to penalties for any violation that may exceed the penalty that OSHA might impose for any similar violation.  

          Of course, the best way to avoid an increased OSHA penalty for a violation is to refrain from committing any violation.  As a practical matter, violations frequently occur despite your firm’s best efforts and dedication to providing a safe and compliant work environment.  If OSHA requests to inspect your work site or office, you’d be well-advised to immediately contact an attorney experienced in OSHA practice to help guide your firm through the process and to achieve best results.

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Considerations for the Effective Use of Email in Connection with Construction Projects

By Corey N. Giroux

            Email is an indispensable tool for contractors that can streamline communication regarding the many facets of a construction project that aren’t strictly found in a project’s plans and specifications, or in the relevant contract documents.  When used well, email can be invaluable to document the course of a project.  When it’s disregarded or treated haphazardly, email can fail for its essential purpose – meaningful communication – or worse still it can be used to turn your own words against you.  The following are several considerations when using email to communicate regarding your construction project.

            Who is my audience? 

            This isn’t a trick question, but it is more nuanced than it might initially seem.  In the first, instance, the obvious audience for each email is its addressees.  Those addressees, however, may be only the first audience for your email.  If a dispute arises regarding your project, you should anticipate that the audience for your email might grow exponentially to include corporate principals, engineers, architects, attorneys, arbitrators, judges or juries.  As a result email correspondence regarding your project should be limited to professional matters, focused on the subject matter to be addressed and as clear as possible regarding the subject matter being addressed.  When developing your email practices, it’s important to remember that your audience could extend beyond the initial addressees.  This should help you to focus your message on the relevant considerations for your communication and help you avoid sending emails that you’ll later need to explain.

              Why am I sending this email?          

             If you can answer this question succinctly, you’re off to a good start in drafting an effective project email.  The “high-level” answer to this question generally should be reflected in the subject line of your email.  The details that follow in the email should be limited to addressing the matter(s) in the subject line.  Discussion of matters unrelated to the expressed subject should be avoided and saved for another email, letter or conversation.  Consider writing a new email, with a new subject line, when your message no longer addresses matters in the subject line, rather than continuing a chain of email that has gone off point.  If you follow this practice, you’ll help the recipient to quickly identify the reason for your email, prioritize your email among the many received on a given day and help both you and your recipient to refer back to the email, or chain of emails, later regarding the particular issue(s) addressed.  As a side benefit, you’ll appear focused, organized and professional in your communication regarding the project.

           Conversely, if you can’t answer this question, whatever you intend to write is probably best left unsaid, or at least, unrecorded.  Among the reasons you should avoid sending a project email are anger, annoyance, personal reasons, sarcasm or humor.  Nobody like a humorless person, but email is tone-deaf or worse – susceptible to multiple tones.  Like a diamond, email is forever.  Once you’ve pressed “send,” it’s safe to assume that your email will be part of the project record forever.  And like a diamond, it’s for “better or worse.”

              When is an email (or letter) absolutely necessary?

              There are instances when it’s critical to communicate to another party with email or a letter.

              Deviations from plans, specifications or the contract:  Each time you’re asked or told to do something beyond the scope of work or that differs from the plans, specifications or your contract, you should confirm what you’re asked or told to do in writing.  An email confirming your prior communication(s), your understanding of what’s been requested and your intended resolution of that matter is critical to documenting your project accurately and favorably.  An email or letter addressing these matters achieves at least three important objectives; it provides a contemporaneous record of the event, it provides the requesting party notice of your intentions and it provides the party receiving your correspondence the opportunity to respond, to object or to further clarify the information you’ve provided. 

            Particularly with respect to change directives from an owner or general contractor, often it will not be enough to correspond with the opposing party regarding the change, and other steps will need to be taken.  It is important, however, to use the email as a means to establish the circumstances of the change request, your understanding of what has been requested and how and when you intend to address the request.  These matters can significantly affect the likelihood that you’ll be compensated for change requests later if a dispute regarding your performance arises.      

           Disputes:  Because your project communication is a significant piece of the overall record of a project, it’s critical to fill in details regarding matters of dispute with your communications.  For the reasons previously noted, your email communications can be used to reflect and confirm oral communications between parties whose positions and recollections may differ and change over time.  An email confirming the contents of a recent discussion, particularly regarding matters in dispute, can prove invaluable to establishing the circumstances, your actions and your position if a dispute ripens into arbitration or litigation.  Your contemporaneous email correspondence can serve as a powerful and credible tool to establish your version of the events regarding any dispute.

           Setting the Record Straight:  For the same reasons that the record of events created in your email can be used to support your version of events, it is vital to respond to inaccurate recitations of conversations or events from another party.  In the long hindsight of a project, inaccuracies that go unchallenged by simple omission become more difficult to discredit.  This is not to say that you must respond vigilantly to each and every minor inaccuracy.  Rather, it is important that you do not let another party’s version of events control the written narrative of the course of the project.  Long before any matter becomes contentious, you’re well served by addressing, in writing, significant inaccuracies in another party’s written narrative of events that are important to explain your actions or address historical inaccuracies.  Sometimes it will be important to make sure the record is accurate as to whether something was done on a Monday or Tuesday, but more often than not, it’s more important to know in what sequence a particular task was performed or whether a certain discussion took place before or after certain work was performed. 

            It’s not essential that you resolve whose version of events are correct:  generally, you’ll be able to verify what happened by other means as well.  It is crucial, however, that your version of events exists in the written record so as to avoid the scenario where only your testimony is left to challenge the other party’s testimony and their unchallenged written version of events that you failed to address contemporaneously.  Under those circumstances, it is significantly more difficult to establish your version of the events or challenge the credibility of another party whose testimony is corroborated by a written record of the events.       

            Developing consistent email practices can be a powerful, if underappreciated tool in the contractor’s toolbox.  In addition to developing clear and credible records of your projects, you’ll be prepared to address questions regarding the performance of your work in a consistent and compelling way.  Better still, you may limit or avoid disputes through consistent application of your good email practices.  And for those disputes that can’t be avoided, when you sit down with your construction attorney to discuss the matter and review your records of the project, it’s likely that you will have a better prepared project file than your opposing party.

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Defend Trade Secrets Act – Employment Implications

By J. Jordan Scott

     President Obama recently signed the Defend Trade Secrets Act (“DTSA”), which provides a federal private right of action for the misappropriation of trade secrets. Previously, trade secret claims were handled only at the state level. The DTSA does not preempt state law, but instead provides another avenue for recovery. Trade secret owners may pursue federal claims including property seizure (to prevent dissemination of trade secrets), injunctive relief, and damages for actual loss and unjust enrichment. Property seizure is not lightly granted, and the DTSA provides a detailed framework for when and how property may be seized. Further, if the trade secret is willfully and maliciously misappropriated, courts may award double damages and attorney’s fees.

     In the employment context, employees are immune from liability under the DTSA (and arguably state laws as well given the DTSA’s specific wording) for disclosing trade secrets that are made in confidence to a government official or attorney for the purpose of reporting or investigating a violation of law. Employees are permitted to use trade secret information in a lawsuit alleging retaliation by an employer for reporting a trade secret violation, as long as any court document containing trade secrets is filed under seal.

     Although the DTSA provides a powerful cause of action for employers, the DTSA also contains some employee protections. Employers must now provide notice to employees of the immunities contained in the DTSA in agreements with employees (such as nondisclosure agreements), which may be handled by including a cross-reference to a company policy containing notice of the immunity. Failure to provide such notice prevents employers from receiving multiple damages or attorney’s fees under the DTSA. While injunctions are available under the DTSA, any injunction may prevent actual or threatened misappropriation but must not prevent the employee from entering into an employment relationship or conflict with state laws concerning the restraint of trade.

     In sum, employers may now bring a civil action against employees who misappropriate trade secrets that can lead to damages and injunctive relief including seizure. However, to receive the full benefits of the DTSA, employers must update their nondisclosure and similar agreements to inform employees of the immunities available under the DTSA.  The DTSA’s effect on the technology, biotechnology and pharmaceutical industries almost certainly will be far-reaching.  As a result, the DTSA is of particular importance to businesses in greater Boston, Cambridge and other emerging technical hubs in Masshachusetts and throughout New England.  Both employers and employees should contact a Massachusetts employment attorney to update their agreements and confirm their duties.  

Attorney Jordan Scott