Drama Driven Lawyer Advertising

I was at a seminar recently, and one of the presenters was a business lawyer that likened plaintiff lawyers to a hungry lion and businesses to raw steaks.  If you turn on the television, you will see ad after ad of lawyers re-enacting car accidents, watch brightly colored numbers flash across the screen, and see loud, emphatic lawyers promising they will fight to get every dollar.  It's gotten to the point that advertising for lawyers is louder and more dramatic than automobile commercials.  Fear and drama are powerful, and a lot of lawyers are using these emotions to get business owners concerned about litigation and disputes.  Drama aside, businesses should be concerned about complying with new laws and avoiding/resolving claims and disputes.         

The goal of these advertisers is to get business owners worried, and motivate them to pick up the phone and call.  However, I don't agree that it takes drama driven advertising to motivate business owners to seek to comply with the law, avoid disputes, and stay focused on opportunities and business.  We all know it is far cheaper and easier to take proactive steps to avoid disputes than it is to react to them down the road.  Trying to get the cow back in the barn takes more effort and resources than making sure the barn door is closed to begin with. 

There are many areas business can benefit from experienced counsel.  For example, having good corporation formation documents and agreements can minimize or avoid disputes among owners/partners down the road.  Having well drafted contracts can minimize or avoid disputes with customers and vendors.  Having counsel review human resource (HR) policies, overtime, drug testing, and other internal business issues can also help to minimize or eliminate a lot of common disputes.  When disputes arise, good counsel can evaluate the merits of the dispute, evaluate the claimant's best and worst possible day in court or arbitration, and assist business leaders in making good, informed decisions about how to defend or resolve the dispute. 

Business leaders, in my opinion, do not need drama driven legal counsel.  There is enough drama involved with running a business.  Experienced, level-headed counsel used proactively can save business resources, money, and time.  Our firm's goal is to get our clients back to business without the drama, and we take that goal seriously.    

The Lawyer's Role in Advising Businesses and Entrepreneurs

We represent businesses and entrepreneurs in a multitude of different matters, including corporate setups and formations, contract negotiations and drafting, joint venture and business mergers and transactions, avoiding and defending overtime and wage claims, and a variety of other matters.   We also act as affordable in-house counsel for smaller companies that don't need full time services but do need the ability to get priority attention.  In all of these roles, our clients are surprised that our approach is different from many other lawyers.  A business that invests in evaluating and assessing risks before taking action is in a far better position to anticipate and respond to contingencies down the road.  A "look before you leap" approach saves business resources and money down the road.  An ounce of prevention is worth a pound of cure, and advising businesses is no exception.   

Businesses seek to avoid risk.  We hear from our clients that lawyers are nay-sayers, and want to be decision makers in the client's business.  They feel this over-steps the boundaries business clients want from their attorneys.  We believe that our role as lawyers is, instead, to identify and assess levels of risk for our clients.  How much risk a business or entrepreneur is willing to accept in moving forward is a business decision, not a legal decision.  We look for ways to accomplish the goals and objectives of our business clients, while assessing varying risks and contingencies for each possible path that can be taken forward.  In knowing what my lie ahead, and where pitfalls are, businesses can make good, informed decisions.  They can plan for contingencies before they arise, and in this way, be prepared to work to eliminate them quickly and with far less resources than would be required for unexpected liabilities. 

Risk cannot be eliminated completely.  Business leaders and entrepreneurs frequently tell us they want to move forward with a project and want to eliminate all risk.  For example, let's say one of our clients is creating a new position within the company, and wants this person to be an independent contractor.  The client wants an independent contractor agreement to ensure there are no wage/overtime claims down the road.  Legally, whether the person in this position will qualify as employee or independent contractor status is subject to a multitude of factors under the Federal Fair Labors Standards Act (FLSA), and other laws, none of which are by themselves dispositive.  An independent contractor agreement, by itself, may not provide the client with an acceptable level of risk in moving forward with making the new hire an independent contractor.  If the client desires to know what else can be done to enhance the likelihood this person would qualify for independent contractor status, we may suggest the client could refine or enhance the position's responsibilities and its job description to better accomplish the client's goals.  We would work with the client so the client is in a position to understand the factors that go into evaluation of independent contractor status.  The client would understand which factors are met by the current position, and whether the position's duties should be refined.  Ultimately the client will be in a position to decide how it wants to proceed, understanding risks and options available.   

Or, a client may present us with a proposed lease for some new space the client is looking to acquire.  The client wants to know if the lease is acceptable to sign.  Every lease agreement is different, and places obligations and duties upon both the landlord and the tenant.  Whether it is acceptable is a business decision the client makes once it understands the risks and contingencies the lease contains.  It may be acceptable to the client as is, or it may need some negotiation of the terms.  Whether to accept the lease, or negotiate the lease, is the client's decision once it understands the obligations and duties the current lease imposes. 

Lawyers serve and assist business leaders and entrepreneurs.  Decisions are left to the client, and lawyers that know their role and understand their client's needs can be valuable assets, saving the business substantial resources and funds over the long term.  Business clients generally tend not look to lawyers to be decision makers, business partners, or business advisers.  They look to lawyers to assess and advise regarding risk and possible paths to accomplish the business' goals.  I often tell my business clients that I am not the President, only the general.  I present the client with possibilities and options to accomplish the client's goals, and the risks and benefits of each.  The client is the President and makes the executive decisions.  We are honored to serve.       

Some Basic Information About Construction Contracts

A construction contract or agreement is actually made up of several instruments in addition to the contract.  Construction agreements are governed by the contract, written change orders, and the plans/specifications for the project.  It is important to know that these instruments are reviewed together in confirming all agreements between the contractor and the property owner.  The construction contract should have the basic understandings between the parties.  It should set out the contractor's scope of work, which describes the labor, materials, and services the contractor is to provide and perform.  It should set out the pay arrangements and draw schedules so there is no confusion about payment amounts and timing.  A well drafted contract may also contain provisions for dispute resolution, work stoppage in the event of a dispute, damage limitations, and other obligations/duties of the contractor and the owner.  For example, when we are retained to draft construction contracts, we typically recommend the contract include a provision that the contractor's warranty is not effective until all payments have been made by the property owner.  We also work to make sure the contract complies with Texas Property Code requirements so that the contractor has the ability to lien the property if necessary.  It is important that both parties read and understand their obligations, rights, and duties under a construction contract.

Change orders are also a part of the contract documents.  A change order is a written agreement between the contractor and the property owner that alters or adds to the construction project.  For example, let's say the property owner decides a wall needs to be moved, or decides to add a fountain to the construction project.  The contractor and property owner should draw up a written change order that will set out the added/changed work scope, added/changed material and labor costs and payment deadlines, as well as any deadlines and changes to the overall construction project/critical path changes.  A written change order is the industry standard for changes in construction, so that there is little to no confusion about what should be done, how much it will cost and when that will be paid, and how the changes will impact the project.

The plans and specifications detail specifically what work is to be done on the project.  They contain important information about the project.  By way of example, these documents will specifically show where walls are to be located, confirm that setbacks from property lines are correct, etc..  They vary widely depending upon the type of construction/improvements being made, and provide needed detail about where construction elements will be located. 

Construction projects, for both contractors and property owners, represent a substantial investment of both time and money.  It is well worth the investment in good, experienced counsel in drafting or reviewing construction contract documents.  It is also important to know what happens in the event of a dispute during or after construction.  A contractor may file a mechanic's and materialmens' lien (or M&M lien) against the owner's property if payment has not been made by the property owner, the deadlines to do so have not expired, and the requirements of the Texas Property Code have been met.  You can find a link to the Texas Property Code on the construction page of my website at http://www.drewmccallum.com/.   

Powers of Arbitrators

When parties agree to arbitrate disputes, the law is not settled as to what powers an arbitrator has.  For example, do arbitrators have the power to enforce witness subpoenas, compel parties to comply with the arbitrator's orders, issue injunctions, or hand down sanctions?  Additionally, if discovery is needed from third parties does the arbitrator have the authority to compel compliance with third party discovery requests or depositions?  An arbitrator's powers generally derive from the agreement to arbitrate, and the law is not settled on the powers parties may agree to bestow on arbitrators.  If the agreement is silent on these issues, many arbitrators will not rule on these types of issues.  How then do parties handle these issues?  We often suggest clients in this situation initiate a lawsuit in conjunction with demanding arbitration, and then seek to agree with the opposing party(s) to abate the lawsuit, save and except those issues the arbitrator does not have the power, authority, or jurisdiction to resolve.  This allows the parties to seek judicial relief on those issues the arbitrator's power or authority is questioned.  It also provides the needed avenue to reduce the arbitrator's award to judgment once arbitration is concluded.  Again, this also speaks to the importance of the arbitration agreement, and the critical importance of knowing what you're agreeing to when these provisions appear in contracts.  Experienced counsel in negotiating these agreements, and enforcing them, is well worth the investment.        

Business Mediation

Why should businesses look at mediation to resolve disputes?  When a dispute arises, business leaders first turn to counsel to evaluate the risk, time, and resources a dispute may require to resolve.  Litigation or arbitration may cost legal fees, expert fees, require hundreds or thousands of hours of employee time, and require time and attention of business decision makers.  All of this results in lost business opportunities by devoting these resources in a reactive manner to a dispute instead of a proactive manner to ongoing and future business.  More often than you think, early mediation can result in resolution cheaper, easier, and faster than any other dispute resolution process. 

Mediation is an empowering process for both sides.  First and foremost, it is confidential.  Anything said or discovered at mediation cannot be used outside of this forum.  This confidentiality gives everyone freedom to communicate which is necessary to get to the heart of the dispute. 

For the side that feels aggrieved, mediation gives that side an opportunity to vent, to be heard, and to air grievances to someone that listens and is there to help bring resolution.  This opportunity can be harnessed and utilized to then bring these issues to the other side's attention.  Often, there is a complete misunderstanding about what is really driving the dispute, and this forum gives the parties a private and confidential opportunity to openly communicate.  Once the dispute is out in the open, both parties can work with the mediator to craft a solution that is very often far more beneficial to both sides than a money damages verdict given by a judge, jury, or arbiter.

For example, a dispute may arise between two businesses that own adjoining real property.  Business A may be developing its property and construction may be underway.  Business B discovers that there has been a loss of lateral support and erosion to the boundary between its property and Business A's property.  The two, through mediation, could craft a solution to this issue that would involve stabilization of the boundary and remediation of the eroded property.  If the case were tried, the only relief a judge, jury, or arbiter can give is money.  Business B may spend thousands of dollars in legal fees, experts, and time/resources and may not make those investments back in the judgment it receives.  By mediating, the two parties could work to craft a solution that results in prompt stabilization of the boundary, remediation of the erosion, and gets both sides back to business.

Back to business is the desire of everyone in business.  Business leaders want to know "what's next," not "what now?"  Get your business back to business, and consider business mediation as an early response to your disputes.  

Employer Searches of Workplace Areas

Employers often ask when it is permissible to search a desk, locker, or an employee's person.  Employers have often found themselves the subject of lawsuits for invasion of privacy, assault, public disclosure of private facts, and other claims for unlawful searches.  Employers should establish and follow some simple principles in developing policy and conducting searches in the workplace.  By way of example here, we will use the example hypothetical - can an employer search an employee's desk? 

Generally, an employee must show an expectation of privacy in an area the employer searches before a court will find that the employer has committed an unlawful intrusion.  Courts will consider the conduct of the employee, the employer, and company policy in looking at whether a reasonable expectation of privacy exists.  So, in our example, if the employees are allowed to place a lock on their desk drawer that they bring from home, or if the employee has the only key to the desk, this would weigh in favor of a finding that the employee has a reasonable expectation of privacy.  If the employer's company policy states that no employee has privacy with respect to employee desks, furniture, computers, etc., this weighs in favor of no finding of an expectation of privacy.  Also, if the employer conducts searches of employee desks, and this proposed search is in conformity with previous employer practice, this also weighs against a finding that the employee had a privacy expectation.  Consequently, best employer practice is to establish a company policy that employee desks, furniture, computers, etc. are subject to search by employer, and periodically employer should search or inspect these areas to establish a pattern of company conduct.  If the area is not secured by the employee and the employee is aware that supervisors, co-workers, or subordinates have ready access, then no expectation of privacy will likely be found.

Employer's best practices on this issue are to have written policies that advise workplace areas are not private and may be subject to search.  These policies can be in an employee handbook as well as notices placed around the workplace or in a break room.  Employers should also have employees sign an acknowledgement of receipt of the employee handbook and affirmation the employee has read and understood the content of the handbook, and that any questions the employee had were answered to the employee's satisfaction by employer.

Basics of the Noncompete Agreement or Convenant Not To Compete

Employers invest a lot in their employees, and this investment includes trust with the employer's business interests, goodwill, trade secrets, customer or vendor lists, and other confidential information.  Employers have two avenues to protect this investment.  The first is a written employment contract which contains restrictions that protect the employer and prevent competition.  The second is Texas common law.  Common law rights offer far less protection than an employment contract with confidentiality provisions and a covenant not to compete or noncompete agreement.  An employee that leaves a company is not prohibited by common law from using knowledge gained during employment from competing with the employer or doing business with the previous employer's customers or vendors. 

To increase protections of the employer's investment in the employee, many employers utilize employment contracts with confidentiality provisions as well as covenants not to compete or noncompete agreements.  In order to be enforceable, a covenant not to compete (or noncompete agreement) must:

• be part of an otherwise enforceable agreement at the time it was made (an employer cannot enforce a stand-alone noncompete agreement);
• protect a legitimate business interest;
• be reasonable on the limit of the scope of the restrained activity;
• have reasonable geographic restrictions; and
• have a reasonable time limit.

The noncompete agreement and the ancillary agreement must be made at the same time.  So if the employment agreement is made, and then a week later the employee signs a noncompete agreement, the noncompete is likely unenforceable - the agreements should be made at the same time.  A recent ruling by the Texas Supreme Court also says the employer should provide the employee access to trade secrets or confidential information and should enter into a non-disclosure or confidentiality agreement that extends beyond the termination of employment for a nondisclosure agreement to be enforceable.  There was some question as to when the employer had to give the employee this information.  In a 2006 decision, the Texas Supreme Court ruled that an enforceable noncompete agreement existed where the employer gave the employee access to confidential information at some time after the noncompete agreement was signed.  Employers that want to make sure their noncompete agreements are enforceable should provide the employee with confidential or proprietary information at the time the agreement is signed or as soon as possible thereafter.  It is also the better employer practice to include the noncompete agreement within the employment contract, rather than creating two separate documents.

In order for confidential or proprietary information to constitute a "legitimate business interest," the employer must take steps to protect the confidentiality of the information.  If there is no effort to keep the information secret, it is unlikely to satisfy this requirement.  General knowledge or skills acquired during employment do not constitute protectable business interests.  Thus, it is unlikely an employer can enforce covenants not to compete with employees in unskilled positions.  Best practice is to recite the protectable business interest in the agreement

Texas public policy and laws generally disfavor an employer's attempts to restrict a former employee's activities.  Consequently, this portion of the noncompete must be as narrowly drawn as possible.  For example, Texas courts have disappoved language which restricted a former employee from employment in the "employment agency business."  Best employer practice is to draft the noncompete so that it is no broader than the scope of the actual business conducted by the employer, or the specific business engaged in by the employee if the employer engages in numerous businesses.  The noncompete should also prohibit employee contact only with customers or vendors the employee dealt with, not all customers or vendors the employer has done or may do business with in the future.  It is important for the lawyer drafting this agreement to be familiar with the employer's business and if possible the specific work the employee will be doing.

The geographic scope of the agreement must also be reasonable and specific.  This restriction must be reasonable as to the employer's business and the employee's work.  To be enforceable, the employer must show that its need for the covenant outweighs the harm to the employee or the public and the covenant is no broader than necessary to protect the employer's legitimate interest.  Industry-wide or nationwide restrictions have been held to be too broad and have been struck down.  Restrictions as to a single city or town are more likely to be enforceable.  Likewise, restrictions defined by miles from the employer's principal place of business have been held enforceable provided the distance is not too great and does not encompass an area greater than the territory in which the employee worked.

Texas courts have shown an unwillingness to enforce noncompete agreements whose duration exceeds the time the employee was employed.  A noncompete that restricts former employees for an indefinite time is unenforceable.  Best employer practice is to make the duration specific.

Noncompete agreements with current employees require new consideration, or in other words payment, training, access to previously undisclosed confidential information, promotion, bonus or pay increase, or other independent consideration for the agreement.  It is important to seek the advice of good legal counsel in drafting these agreements.        

Basic Agreed Divorce Process Overview

One of the most frequent questions I get asked by those considering divorce is, "What does the process involve and how long will it take?"  The "process," in it simplest form, depends upon how the divorce is going to be approached.  There are several ways to approach divorce, and which process is best depends upon the spouses.  If the divorce is agreed and the spouses are generally amicable, then the divorce can be apprached as agreed or uncontested.  This simply means the parties want to work together to get through the process.  The spouses can also look at mediating issues they're not able to resolve themselves, or look at the collaborative process.  There is more information about these processes on my website, so I won't get into a lot of detail here. 

Presuming an agreed divorce, the process usually involves the filing of a petition for divorce with the approriate court.  The non-filing spouse receives a copy of the file-stamped petition and a Waiver.  There is some confusion about what a Waiver is.  In this circumstance, a waiver should generally state that:

• the non-filing party has received a file-stamped copy of the petition for divorce;
• the non-filing spouse does not want to be served with process by a constable or process server and the requirement of service is waived;
• the Waiver should state that the non-filing spouse enters an appearance in the divorce; and 
• states the non-filing spouse's mailing and physical addresses so the Court knows where to send any notices. 

Thus, the Waiver only waives formal service.  It should not waive any other rights the non-filing spouse has, such as the right of notice of hearings.  Non-filing spouses should read any proposed Waiver carefully to make sure no other rights are waived.  If the Waiver is acceptable, the non-filing spouse can sign the waiver and usually the filing spouse will file it with the Court and provide the non-filing spouse with a file-stamped copy so the non-filing spouse knows it has been filed with the Court.

Once the petition is filed, there is a mandatory 60 day period that must pass from the date of filing before the Court can enter a divorce.  During this period, the spouses work to exchange information regarding their property and debts, and work out details of conservatorship, possession, and support for any minor children they have.  Once an agreement is reached, the parties draw up a proposed form of agreed divorce decree that accurately reflects the agreements the parties have reached.  Both spouses, and their attorneys if they have attorneys, sign the decree and file it with the Court.  A hearing is then set with the Court to "prove up" the divorce.  This is usually a short hearing where the Court receives evidence from one of the spouses that confirms the legal requirements for divorce are met, that the parties have reached acceptable agreements regarding their property and debts, and the agreements regarding conservatorship, possession, and support of any minor children comply with the law and are acceptable to the Court.  Usually only one spouse needs to attend the prove up hearing; both spouses are certainly entitled to attend but only one is usually needed to prove up the divorce if both have signed the decree.  If everything is proper and the Court is in agreement, the Court will grant the divorce and will usually sign the decree at the hearing.

If there are aspects of the divorce the parties cannot agree upon, such as division of some assets or debts or some aspects of possession or support for the children, tools (such as mediation or collaboration) are available to assist the spouses in reaching agreement.  If agreement cannot be reached, the decision can be placed in the hands of someone else, such as an arbitrator, judge or jury.  One of the most common disputes we see in agreed divorces involves child support.  Texas law mandates that both parents must support their children, and imposition of child support is mandatory in almost every divorce case with minor children.  There are very few, very limited exceptions to this rule.  A spouse generally cannot escape child support because he/she is currently unemployed or experiencing financial hardship.  In these circumstances, most Courts may allow some time before a child support obligation begins, or require child support be calculated at minimum wage, or may entertain other requests from the parties appropriate for the parties' financial circumstances.  However, the Court will not (in most circumstances) sign a decree that does not provide for child support in some amount.  Many spouses come to us with this proposal: dad will agree mom can be the primary conservator for the children, and dad will agree to the standard possession order, but will do so only if mom doesn't get child support.  Courts will not approve this agreement, even if both spouses are in agreement.  Courts will not let a party contract away his/her obligation to support a child.  Child support must be awarded in all but a very limited set of circumstances.  Parties to a divorce should understand this is a Court requirement, not a bargaining tool, and should take this into consideration in negotiating their divorce. 

Another question we are frequently asked is, "How long will this take?"  Texas is a no-fault state.  Anyone that wants a divorce can get one.  That being said, a divorce generally moves at the speed of the slowest participant.  That is not to say that a spouse that does not agree with a divorce can postpone it indefinitely.  If a spouse is obstructing the process, then litigation, arbitration, mediation, or the collaborative process can be used to keep the case moving.  For example, temporary orders can be secured that establish support, conservatorship, possession, use of the family home, use of vehicles, and other matters during the pendency of the divorce case.  These tools are available to keep the process moving, but add time and cost to the divorce.  We therefore encourage parties to try to work together and come to agreement on as many issues as possible.  This allows us to focus the resources on those contested disputes that can't be resolved.  If agreement cannot be reached, then formal relief such as arbitration or trial are available so the parties can stay on track toward finalizing the divorce.

Another very popular question we get about agreed divorce, especially involving children, is "Why does it cost so much?  We're in agreement so there's not a lot for a lawyer to do, right?"  Divorce, whether agreed or contested, is a complex, time-intensive process.  The decree has to be correct, it has to be specific, and it has to address all of the parties' property and debts as well as the children.  For instance, if the decree fails to award a credit account and its corresponding debt to one spouse, this can create issues down the road if the other spouse uses the card and incurs debt.  This is also true for vehicles, and there may be issues with establishing ownership of a vehicle down the road if the decree fails to adequately address ownership and possession.  Similarly, where children are involved, the decree has to specifically set out the rights/duties/obligations of the parents.  It has to set out very specifically when each parent has rights of posession of the children.  It also has to set child support, medical support, the obligation to insure the children, deal with tax issues regarding the children, and other duties/obligations of the parents.  Every decree is different, because the property, debts, and needs of each couple are different.  A divorce decree has to be correct and specific or it may not be enforceable.  Once the Court signs it and grants the divorce, it can be very difficult and expensive to correct mistakes or make changes to the decree.  There are also some aspects of the decree that cannot be changed until a specific period of time passes.  It is also relied upon by the Texas Attorney General in enforcing child support oblgiations.  Creditors and other third parties may also rely upon the decree down the road.  Failure to spend proper time and attention to the deatils of the decree can have significant ramifications.  It is well worth the cost of a good attorney to make sure this is done right the first time.