As I’ve stated in previous blog postings, business divorce or oppression cases usually end with one side buying the other out. Hence, valuation of the subject company is often one of the central issues in the case. Clearly, the coronavirus has negatively impacted a lot of closely held companies. Coronavirus has and will likely affect the valuation of the small businesses that are often ripe for disputes between the shareholders, partners, or members.
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Computer Related Offense Act Protects Individuals and Companies
If you are reading this blog post, it is extremely likely that you are reading it on a personal computer at home, on your office computer, on your smart phone, or on all of the above. It is without question that the invention of computers has changed our lives. What was impossible even five years ago is now considered “normal.” For example, I have written this very blog post while seamlessly working remotely from home because my law firm, Stark & Stark, has provided me with the tools and resources to do so. Thankfully, I am able to utilize this technology while my firm protects me and my colleagues from COVID-19.
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Business Divorce Cases Often Involve Complex Non-Corporate Issues
Business break-up cases require a complex, interdisciplinary approach to solving problems associated with the fractured relationships between the owners of a closely held company. A business divorce attorney must have an in-depth knowledge of corporate, employment, contract, and business tort law. It is important when selecting an attorney to represent you or your company in a shareholder or member oppression case that you select someone who knows more than simply corporate divorce law.
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Termination of Employees with Restrictive Covenants Could Negatively Affect Enforcement
Terminating an employee who is subject to a restrictive covenant may void that agreement in states that permit and enforce them. For example, New York law provides that an employer cannot enforce a restrictive covenant if it terminated the employee. See, Buchanan Capital Markets, LLC v. DeLucca, 144 A.D. 3d 508 (N.Y. App. Div. 2016).
The law in New Jersey is unsettled at this time, but if the employer terminates an employee because of the coronavirus, I believe it is likely that New Jersey courts will not enforce the agreement at this time. An employee’s covenant not to compete is enforceable only if it is reasonable under all the circumstances in a particular case. Maw v. Advanced Clinical Commc’ns, Inc. 179 N.J. 439, 447 (2004).
Will the Coronavirus Be Deemed a Force Majeure Event and If So, How Will That Effect You?
Contract law offers contracting parties a defense against performing under a contract where the fulfillment becomes impossible due to unforeseen events outside the parties control. These unforeseen events are often called “force majeure” or “acts of god.” With each passing day, the government, in response to COVID-19, is imposing more restrictive containment measures. These measures are likely to affect the parties’ workforce and supplies needed to perform the contract.
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House Passes Bill to Address Coronavirus – Now It’s Our Turn to Do Our Part
The House of Representatives passed legislation aimed at mitigating the economic impact of the coronavirus by providing financial assistance to businesses and individuals. Assuming the bill is passed by the Senate early next week and signed into law by President Trump, the law would ensure that workers can take paid or sick leave. The bill also bolsters unemployment insurance and guarantees that all Americans receive free diagnostic testing for coronavirus.
The potential economic fallout from coronavirus is unknown at this time.
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Employee vs. Independent Contractor? Important, Yet, Sometimes Confusing Distinctions
There is legal significance if is a person is deemed to be an “employee,” as opposed to an independent contractor. That determination is likely to be significant for a number of reasons, including: tort liability under respondeat superior; payroll taxation; workers’ compensation insurance; benefits; and statutory employee protections. Employers are required to protect their employees from workplace discrimination under the New Jersey Law Against Discrimination. Moreover, they are required to pay their “employees,” in accordance with the Wage Payment Law, the Wage and Hour Law, and the Unemployment Compensation Law. Independent contractors, on the other hand, are not subject to the same.
Proposed New Jersey Legislation Aimed at Combating Workplace Bias and Sexual Harassment
On February 18, 2020, New Jersey Governor Phil Murphy unveiled a sweeping proposal that significantly strengthens the New Jersey Law Against Discrimination. The proposed legislation was the result of a two year study of workplace employment discrimination and sexual harassment conducted by the New Jersey Division on Civil Rights. It also mirrors the current societal shift in attitudes about workplace discrimination and sexual harassment. Employers need to be cognizant of these proposed changes and the current climate.
If enacted, New Jersey would require all employers to provide anti-discrimination and anti-harassment training. The New Jersey Supreme Court held that trial court should consider whether or not an employer made training available to supervisors and all employees when deciding whether or not an employer has been negligent in preventing sexual harassment. This proposed change would require training.
Employers Must Be Extremely Wary of Retaliation Claims
Over the past decade, the Equal Employment Opportunity Commission (“EEOC”) has reported that retaliation is the most common issue alleged by federal employees and the most common discrimination finding in federal sector cases. Nearly half of all claims made to the EEOC are retaliation claims.
The EEOC found that other employers retaliated in violation of the law in greater than 40% of the reported claims, a fact which employers must be aware of. The same is likely true under the anti-retaliation provisions as set forth in the New Jersey Law Against Discrimination. Hence, it is essential that employers take affirmative remedial steps to prevent retaliation. Moreover, employers must immediately and effectively address retaliation if it is reported.
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Disrespectful & Unfairly Dispropriate Treatment of a Female Shareholder by Male Majority Shareholders in Closely Held Corporation Constituted Oppression
An Erie County, New York Supreme Court Justice recently held that the disrespectful and unfair dispropriate treatment of a female shareholder based upon her gender in a closely held corporation constituted oppression. In re Matter of Diane M. Straka, Index No. 807308-2017 (citing, Bus. Law. §1104(a)-(1).
In that case, the Plaintiff, Ms. Straka (a 25% shareholder in a closely held New York corporation) was able to prove at trial that she was subjected to disrespectful treatment based upon her gender. The other three shareholders were men. The Court found among other things, that:
- When she first met one of the other shareholders, he asked Ms. Straka “…are you the one who makes the coffee;”
- One of the shareholder’s posted a cartoon on his door that was deeming to women;
- The Plaintiff stopped eating in the lunchroom because she was subjected to offensive comments; and,
- One of the male shareholder asked if he could sit in her lap.