Month: August 2019

4 Steps to Ensure the Enforceability of E-Signatures – Intrepid Law

More and more, transactions between small businesses and their customers, vendors, and service providers occur online rather than on paper. Yet some feel uneasy about the enforceability of these electronically-signed documents. Is an electronic signature as valid as a conventional handwritten signature?

Under state and federal law, e-signatures are recognized as valid and enforceable: Most states have adopted the Uniform Electronic Transaction Act, and at the federal level, the E-Sign Act, which grants electronic signatures the same legal status as conventional handwritten signatures for most transactions. Although the statutes do not require a specific type of technology or process to be followed, there are several steps necessary to ensure that your e-signatures are enforceable in the event a dispute arises.

What Is an Electronic Signature?

An electronic signature is defined as an electronic sound (for example, the tone from pressing a number on a telephone), symbol (such as an alphanumeric code), or process (like typing the sender’s name at the end of an email message or using a mouse to click an “I agree” button) that is attached to or logically associated with an electronic contract or record.

Steps to Ensure Enforceability

Several practices should be implemented to ensure that your business’s electronically-signed agreements are binding.

  • Demonstrate the validity of the e-signature by showing the signing party’s clear intention to sign electronically. This intention can be shown by the inclusion of language in the document requiring the signer to expressly consent to or decline signing the document
  • Obtain the signing party’s consent to do business electronically. Intent to be bound by an electronic signature can be shown by the signing party’s express consent, prior to their signing, to do business electronically. In addition, a clause in the electronic document giving the signer the opportunity to opt out of signing the contract electronically and instead sign a paper document, if expressly declined, will be strong evidence of the signer’s consent.
  • Implement a reliable method of verifying the identity of the signing party. Electronic transactions are complicated by the fact that the parties to the agreement may never have met face to face, which increases the risk of forgery. Verification of the signing party’s identity can occur by having them establish a password-protected login, a PIN number, or by using a third-party service provider that has a verification process of its own.
  • Maintain all records required by statute. The electronic document and signature should be kept in a secure archive that preserves its integrity by preventing unauthorized changes and maintaining the completeness of the agreement. In addition, a record of all the events and transactions related to the agreement should be kept.
  • Ensure the electronic agreement is furnished to the other parties in a form that is retainable and easily accessible: The signing party should be provided a copy of the final completed agreement or at least permitted to download a copy of it.

Caution: Certain documents, including testamentary documents, documents conveying real property, court documents, notices of cancellation of insurance, and eviction notices, are typically not permitted to be signed electronically.

Conclusion

If you are interested in learning more or are concerned about whether your business’s online transactions are legally binding, please give us a call. As business law attorneys, we can help ensure that your digital processes comply with the electronic signature statutes, and help you avoid litigation by ensuring that all your contracts, paper or electronic, are well drafted and enforceable.

Cybersecurity: Protecting Your Business – Intrepid Law

Cybersecurity is a growing concern for businesses, and small businesses are not immune from the threats posed by cybercriminals. Don’t be complacent because your business is small: Almost half of all cyberattacks in the U.S. are directed at small businesses. In recognition of this serious problem, in August 2018, President Trump signed into law the NIST Small Business Cybersecurity Act, requiring the federal government to provide resources to assist small businesses in reducing their vulnerability to cyberattacks.

What Should You Do?

It is important for you to take steps to protect your business’s data, reputation, and customer and employee information. The following actions are among the most important for small businesses to consider:

  • Establish easily accessible cybersecurity policies for your company, include them in your employee handbook and offer periodic employee training on what you As an aside, employees should be required to take any necessary steps to protect customer and business data. Some additional common practices include:
    • separate user accounts for each employee,
    • strong passwords for all laptops, tablets, and smartphones, that are changed every three months,
    • prohibiting the installation of any software on to company computers without permission, and
    • limiting administrative privileges to key employees and IT staff.
  • Restrict employee access solely to the business’s information and systems needed to do their jobs. When an employee leaves the organization, make sure he or she no longer has any access to this information.
  • Make sure your software, web browsers, and operating systems are updated regularly to defend against viruses, malware, and other online threats. Also, install hardware and software firewalls on all of your computers and networks, even if you use a cloud service provider or virtual private network.
  • If employees use mobile devices that can access the business’s network or confidential information, require them to password-protect their phones, encrypt their data, and install security apps to safeguard information when the phone is on a public network. Reporting procedures should be put in place for instances in which mobile devices are lost or stolen.
  • Frequently backup all of your business’s important information and store copies in a separate location or in the cloud.

Avoid Liability

Proactive steps to guard against cyberattacks are not only important to protect your business’s financial welfare, they are also necessary to avoid liability under data privacy laws. If your customers’ or employees’ personal information is obtained by unauthorized parties, you may be vulnerable to civil liability if your business did not take the steps required by state law or steps reasonable under the circumstances to protect their information.

In addition, if a data breach occurs, you could also be liable for civil penalties or claims brought by affected individuals if you don’t act to mitigate the harm or remedy the situation, for example, by providing notice to those whose personal information was affected, even if your business initially took the proper steps to avoid such a breach.

We Can Help

Are you concerned that your business is vulnerable to cyberattack and the liability that may arise if your business is affected by one? Every business is different, and your cybersecurity strategy should take the nature of your business into account. We can help you evaluate your individual situation and take the necessary steps to protect your business. Please give us a call today to set up a meeting.

Health Savings Accounts: What Are the Benefits for Businesses? – Intrepid Law

With the rising cost of health insurance, employers and employees alike are looking for the best ways to save money on medical expenses. One option that can be beneficial to both small business owners and their employees is the health savings account (HSA), which is available when an employee selects a high deductible health plan offered by the employer.

What Is a Health Savings Account?

When employees choose a high deductible health plan (deductible must be at least $1350 for individuals or $2700 for families) from their employer’s health plan offerings, they can establish a health savings account. The HSA is an employee-owned savings account that employees can use to save money for out-of-pocket medical costs such as doctor visits and prescriptions, as well as to save for medical expenses that will be incurred after retirement. In 2019, the maximum contribution allowed for individuals is $3500 (although those 55 and older can contribute an additional $1000) and the maximum for family coverage is $7000. In addition to the amounts contributed by the employees themselves, any amounts contributed by employers to their employees’ accounts count toward that maximum.

What Are the Advantages for Employers?

The most obvious benefit for employers is that by offering HSA-eligible high deductible health plans, they can save a substantial amount on the health insurance premiums they must pay each month for employee coverage.  The downside of these plans is that employees must pay higher amounts for their medical costs out of pocket until their deductible is met.

However, if employees establish an HSA, employers are permitted to make contributions to those plans that can alleviate some of those extra costs for their employees. The employer can take a federal income tax deduction (and in most states, a state tax deduction) for the full amount of the employer’s contribution, which is considered a business expense.

HSA fees are low, and HSAs are uncomplicated for employers to establish. In addition, it is easy to move from one insurance carrier to another, as there are no penalties associated with changing insurance carriers.

In addition to the savings on taxes and insurance premiums, HSAs enable employers to attract and retain good employees by offering an enticing benefit. As discussed below, HSAs are appealing to employees as well as employers.

What Are the Advantages for Employees?

In addition to the tax deduction for employers, HSAs provide several tax benefits for employees. When an employee contributes to an HSA through a payroll deduction, the full amount of the contribution is pre-tax. In other words, it reduces the employee’s taxable income.

Note: Special IRS rules apply to business owners such as LLC members, partners in partnerships and 2% or greater owners of S corporations, precluding the business from giving those owners tax-free contributions to an HSA. Those contributions are considered taxable income to the owner but are tax deductible to the business.

In addition, funds contributed to an HSA grow tax-free and belong to the employee for life, even if the employee subsequently changes jobs. The funds contributed by the employer vest immediately, becoming the property of the employee. Unlike some other types of accounts, employees do not have to worry that unused amounts will be forfeited at the end of the year.

Employees may withdraw amounts from an HSA to pay for qualified medical expenses tax free. However, funds withdrawn from a 401(k) to pay medical bills will be taxed, so some employees use HSAs as an alternative type of retirement account to save for future medical expenses.

Conclusion

Choosing the best health plans for your business can involve a confusing maze of IRS and ACA rules and regulations. As part of our legal services for businesses, we can help you understand the legal requirements and tax implications of your choices. We invite you to call us today to schedule a meeting.

LLC Operating Agreement: Should I Include a Non-Compete Clause? – Intrepid Law

You and several friends start a new business and decide to operate it as a limited liability company (LLC). Now that you’ve completed the first step—choosing a business entity—it is now important to prepare an operating agreement. The operating agreement is a contract which governs the operations of the LLC and sets forth the arrangements made among the members, including their rights and responsibilities upon the withdrawal of a member.  Although departure from the business may be the last thing on anyone’s mind, it is important to plan ahead. A non-competition, or non-compete, clause can help protect the company from harm inflicted if a former member decides to form a competing business.

What Is a Non-Competition Clause?

A non-compete clause protects business assets like goodwill, confidential information, and trade secrets by preventing the former member from using the knowledge gained while participating as a member of the LLC to compete against the LLC.

If the operating agreement contains a non-compete provision, a former member can be precluded from engaging in a similar type of business directly or indirectly in competition with the LLC. If the operating agreement does not contain such a clause, the former member is free to compete with the LLC.

In addition, the non-compete clause may prevent the member from soliciting the LLC’s clients or customers for business. Usually, such provisions take effect after the relationship has ended, although they sometimes may preclude members from competing with the LLC during their membership in the LLC.

Because non-competition provisions place restrictions on the former member’s ability to secure future employment, they will only be enforced if they are not unduly burdensome. Consequently, they must only restrict competition for a reasonable period of time and in a reasonable geographic area, Additionally, the scope of the services the former member may provide in a competing business must not be unduly restricted.

  • Note that the standards for the enforceability of non-compete clauses vary from state to state, so it is important to work with an experienced business planning attorney to ensure your non-compete clause and LLC operating agreement are enforceable. For example, in some states, the LLC statute imposes a duty not to compete on managers and members that must be explicitly waived in the operating agreement to avoid applicability.

Does My LLC Really Need One?

Members of LLCs often have intimate knowledge of the business, such as its trade secrets, confidential information, and customer lists. If  members are permitted to compete with the business immediately after they withdraw, and in the same geographical location, the financial success of the original business could be jeopardized.

Although many LLCs are formed by small groups of friends or family members who get along well and trust each other in the beginning, you cannot ignore the possibility of a dispute arising in the future. Circumstances can change, and it is important to try to prevent disagreements from undermining the success of your business. Including a non-compete clause in your operating agreement will help ensure your business is protected against a preventable harm.

We Are Here to Help

If you are interested in protecting your new or existing LLC, we can help you draft or amend your operating agreement to include key provisions such as a non-compete clause, as well as others specifically tailored to meet your business’s needs. Please give us a call today to set up a consultation.

Employment Verification: What You Need to Know about the I-9 – Intrepid Law

Immigration isn’t just a hot topic in the news—it has real impact on employers. All employers, including small businesses, are required to complete and retain a Form I-9 Employment Eligibility Verification for every person they hire to work inside the U.S. for pay or any other type of compensation. Failure to comply could result in severe penalties.

What Is the Form I-9?

Federal immigration law prohibits employers from hiring and employing, or continuing to employ, anyone the employer knows is not authorized for employment in the U.S.  Employers must complete the Form I-9 to verify the identity and employment authorization of all individuals they hire, including U.S. citizens.

Filling Out Form I-9

The Form I-9 has three sections: The employee must complete Section 1, and the employer must fill out Section 2, and when applicable, Section 3.

Section 1. In Section 1, the employee must provide his or her name, address, and date of birth. In addition, the employee must attest to his or her status as a U.S. citizen, a noncitizen national of the U.S., a lawful permanent resident, or an alien authorized to work for a specified period of time. This part of the form must be completed no later than the first day of work for pay.

Section 2. To comply with Section 2, the employer must physically review documents supplied by the employee to verify both the employee’s identity and work eligibility. The Form I-9 contains three lists of acceptable documents. List A includes documents such as a U.S. passport or permanent resident card that can be used to verify both identity and work eligibility. List B contains documents for verifying identity, such as a driver’s license or state issued ID card, and List C identifies documents can be used to verify work eligibility, such as a social security card or state issued birth certificate. If the employee doesn’t provide a document from List A, one document from List B and one from List C must be supplied.

Only valid, original documents that reasonably appear on their face to be genuine and related to the employee presenting them may be used for complying with Section 2. The employer should verify that the information on the documents matches the status attested to by the employee. If the documents do not appear to be genuine or related to the person presenting them, the employer must not accept them. In that case, the employer must ask if the employee can provide other documents that would satisfy Form I-9.

Upon receiving satisfactory documentation, the employer must enter the employee’s name, the document’s title, the issuing authority, the document number and expiration date, the date the employee will begin to work for pay, the name of the person completing Section 2, and the employer’s business name and address.

Warning: Form I-9 contains an anti-discrimination notice prohibiting discrimination based on citizenship or national origin. It does not allow employers to specify which documents they will accept from any employee. If an employee asks which documents are needed, the employer should provide the Form I-9, which includes Lists A, B and C.

Warning: The employee must provide the required documents within three business days of the date of hire or be terminated. Otherwise, the employer may be subject to penalties.

Section 3. If the employee has supplied work authorization documents that have an expiration date, the employer is required to fill out Section 3 to update the information on or before their expiration to include a new document expiration date. The U.S. Immigration and Customs Enforcement (ICE) suggests that employers remind employees of the expiration date and the need to provide a new document from either List A or List C at least 90 days prior to the expiration date. Once the employee provides an unexpired document, the employer must examine it to ensure that the document appears to be genuine and relates to the employee.

Be Careful to Ensure Accuracy and Completeness

ICE imposes heavy penalties for non-compliance with Form I-9 paperwork ranging from hundreds to thousands of dollars per Form I-9. The fines vary depending upon the nature of the offense, with lower, though still harsh, penalties for oversights such as the employee failing to fill in information like date of birth or date of hire. Substantive violations such as an employer’s failure to check an employee’s personal identification documents can result in more onerous fines, particularly if the employer knowingly hired or continued to employ an unauthorized alien.

We Can Help

As part of our services for small business owners, we can provide you with guidance about how to meet your obligations under Form I-9 as well as other questions about the daily operations of your business. Please call us today to schedule a meeting.