On March 8, 2013, the U.S. Citizenship and Immigration Services published a new I-9 Employment Eligibility Verification form. The form is used to comply with the Immigration Reform and Control Act of 1986, which requires employers verify newly-hired employee’s identify and legal authorization to work in the United States. Businesses and its newly-hired employees must complete the form within three days of the start of work, and employers must ensure it is done timely and properly. After May 7, 2013, all businesses must use the new, revised I-9 form.
Changes to the form have made the I-9 more user-friendly and easier to read. Employees must complete the first page with their personal information, and the revised form now gives room for employees to provide their email address and phone number (however, it is optional). Businesses must retain an I-9 for all employees for three years after the date of hire or one year after the date employment ends, whichever is later.
Employers need to be attentive when completing these forms. Recent developments under the Obama Administration show that both the U.S. Department of Labor and Homeland Security have increased their budgets for worksite enforcement – indicating the Federal Government is stepping up their efforts in audits of I-9s. Businesses face an array of punishments (from fines to significant civil and criminal penalties) for any violations.
Employers should take notice that the Internal Revenue Service (IRS) has announced a standard business mileage reimbursement rate of 51 cents per mile for 2011. The business mileage reimbursement rate is used by many employers for computing the appropriate employee reimbursement amount in instances where an employee uses a personal vehicle for a work-related purpose. The new mileage reimbursement rate, which takes effect on January 1, 2011, represents a slight increase from the rate set by the IRS in 2010 of 50 cents per business mile driven.
Employers with an established personnel policy should update their employee handbooks by year-end to reflect this change. Those employers who do not have an established policy for reimbursing employees for business miles traveled in personal vehicles should consider instituting a mileage reimbursement policy for 2010 and adopting a good mileage log reimbursement form for employees.
Employers should consult the IRS website for more information on the mileage reimbursement guidelines.
A Fairfax County Circuit Court has found in favor of an employee and his new employer who were sued for misappropriation of trade secrets, among other claims, when the employee went to work for a direct competitor and took a customer list and vendor contact sheet with him. In the case of Tryco Inc. v. U.S. Medical Source, et al., Brian Thomas (“Thomas”) worked for the Plaintiff (“Tryco”), which was in a niche government contracting industry selling dental and medical supplies to the U.S. government under a Decentralized Blanket Purchase Agreement (“DBPA”). Thomas’s sister-in-law decided to get a DBPA and she started a company which sold dental and medical supplies to the government. Thomas left Tryco and went directly to work for his sister-in-law’s new company, U.S. Medical Source (“USMS”).
Upon leaving to work for the new company, Thomas did not tell Tryco that he was going to work for a direct competitor, and when he downloaded a number of personal items from his work computer onto a flash drive, he copied a contact list and vendor list along with his personal files. Tryco sued everyone involved, including Thomas, USMS, Thomas’s sister-in-law and Thomas’s brother who helped out at USMS from time to time.
After a four day bench trial, the Court found in favor of all the Defendants. Specifically, the Court found that neither of the lists taken by Thomas had independent economic value because:
- The customer list was mostly outdated, and the information on the list (names and telephone numbers of government contracting officers) could be readily obtained through legitimate means – such as using the list of contacts provided to the Defendants by the government; and
- The names and contact information for the companies on the vendor list could be readily obtained simply by looking up the companies on the internet. Therefore, the Court found that Plaintiff could not meet its burden under the Virginia Uniform Trade Secrets Act (“VUTSA”).
In addition, the Court found Thomas’s testimony to be credible that he inadvertently took the two files at issue, rather than misappropriating them for some improper means. This finding was bolstered by the fact that Thomas returned the entire flash drive as soon as he was notified of the issue by Tryco’s counsel, and just days after leaving Tryco’s employ; that he did not disclose any of the information to his new employer; and that, as a factual matter, Thomas knew all of the information on the two documents given that he had interfaced with the government contracting officers and the various vendors routinely as part of his work for Tryco.
At this point (if it had not occurred to you sooner), you may be asking why the employer just did not sue Thomas for breach of his non-competition agreement since he went directly from his employment with Tryco to work for a competitor. The answer is that Thomas was never required to sign a non-compete agreement; so he was free to compete and did so accordingly.
Even If Not Subject To Federal Law, Virginia Small Businesses May Still Be Prohibited From Discrimination Under Virginia Law
Although employers with less than 15 employees are generally not subject to federal discrimination statutes such as Title VII and the Americans with Disabilities Act, Virginia small businesses may still find themselves subject to Virginia’s discrimination laws even if they have fewer than 15 employees.
The Virginia Human Rights Act, which applies to Virginia businesses with more than 5 but less than 15 employees, makes it unlawful for a Virginia employer to discharge an employee on the “basis of race, color, religion, national origin, sex, pregnancy, childbirth or related medical conditions,” or age (if the employee is over 40). An employee may file a lawsuit against an employer for an alleged violation of the Virginia Human Rights Act in either a general district court or a circuit court, provided the employee files the action within 300 days from the date of termination. (If the employee files a complaint with a human rights agency or commission within 300 days of the termination date, then the employee may bring a court action within 90 days from the date the commission or agency has rendered a final ruling on the complaint.) Employers who are found to have violated the Virginia Human Rights Act may be liable for the employee’s attorneys’ fees and up to 12 months of back pay with interest.
Under the Virginians with Disabilities Act, it is unlawful for employers of all sizes to “discriminate in employment or promotion practices against an otherwise qualified person with a disability solely because of such disability.” To comply with the Virginians with Disabilities Act, an employer must make a “reasonable accommodation to the known physical and mental impairments of an otherwise qualified person with a disability, if necessary to assist such person in performing a particular job, unless the employer can demonstrate that the accommodation would impose an undue burden on the employer.” Under Virginia disability law, whether an accommodation would impose an undue burden on an employer depends on a variety of factors such as potential hardship on the employer, the size of the facility where the employment occurs, the nature and cost of the accommodation, and safety and health considerations. (For Virginia employers with less than 50 employees, any accommodation that would exceed $500 is presumed to impose an undue burden.) Employers who are found to have violated the Virginians with Disabilities Act may be subject to an injunction (to enjoin the violation) or ordered to pay the employee compensatory damages and attorneys’ fees.
Virginia business owners should visit the Virginia Human Rights Council’s website for more information regarding the Virginia Human Rights Act and the Virginia Department of Rehabilitative Services' website for additional information pertaining to the Virginians with Disabilities Act.
Virginia SCC Adds Annual Filing and Payment Options for Corporations to Growing List of eFile Services
As previously noted on the Virginia Business Law Update, the Virginia State Corporation Commission (SCC) is in the process of rolling out a new suite of electronic filing capabilities on its SCC eFile website. The latest enhancement is a welcome addition to all Virginia corporations -- the ability to file corporate annual reports and pay corporate annual registration fees online.
Over the coming months, the SCC plans to further expand the services available on its SCC eFile website. Specifically, Virginia corporations and limited liability companies will be able to submit organizational documents electronically and pay associated fees on the SCC eFile website. Additionally, Virginia businesses will be able to file Uniform Commercial Code (UCC) documents and pay UCC filing fees online.
Small businesses with Federal contracts have to be especially mindful of ensuring compliance with equal employment opportunity (EEO) requirements. The failure to comply with the EEO guidelines set forth in Executive Order 11246 (which prohibits employment discrimination by Federal contractors and subcontractors as well as federally-assisted construction contractors and subcontractors) may very well result in the cancellation of a contract, termination, suspension (in whole or in part), or the debarment of the contractor. As the Office of Federal Contract Compliance Programs (OFCCP) requires contractors to engage in their own internal EEO compliance analysis, small businesses often run afoul of satisfying their obligations under Executive Order 11246.
To ensure compliance with the basic EEO requirements imposed by Executive Order 11246 -- and to avoid the wrath of the OFCCP – contractors should adhere to the following OFCCP guidelines:
Don’t Discriminate! Contractors must refrain from engaging in workplace employment discrimination on the basis of race, color, religion, sex, or national origin. Although most people think of intentional discriminatory acts, employment discrimination can also arise when a neutral policy or practice has an adverse impact on the members of any race, sex, or ethnic group.
Post an EEO Poster. Federal contractors must post OFCCP’s EEO poster in a location that is easily seen (e.g., a lunchroom, break room, or locker room).
Include an EEO Tag Line in Employment Advertising. Contractors should include a sentence in all solicitations and advertisements for employment stating that “all qualified applicants will receive consideration for employment without regard to race, color, religion, sex or national origin.”
Keep Records. Contractors must maintain their personnel records and employment records including job descriptions, job postings, job offers, applications and resumes, interview notes, tests and test results, written employment policies and procedures, personnel files, and time-keeping records.
Develop and Maintain an Affirmative Action Program. Contractors with 50 or more employees and a contract of $50,000 or more must develop and maintain a compliant affirmative action program (AAP).
Small businesses with Federal contracts should regularly review their EEO policies and procedures to ensure that they are compliant with Executive Order 11246. Certainly, given the potential penalties, it is better to be safe than sorry!
For any Virginia business owner who has attempted to navigate the State Corporation Commission’s (SCC) website, the news of a more user friendly experience is certainly reason to rejoice! According to an article in Virginia Lawyers Weekly, the SCC has launched the first wave of a “suite of electronic filing capabilities.”
Although the new “eFile” functionality is currently limited to changing registered agent information, Virginia businesses can expect several additional changes in the coming months. For instance, businesses will soon be able to eFile Uniform Commercial Code (UCC) financing statements, corporate annual reports, and corporate formation documents. Eventually, businesses will be able to pay filing fees online.
In addition to launching the eFile initiative, the SCC is also revamping its antiquated Clerk’s Information System. When complete, the new system will significantly improve user experience by making it easier to conduct name searches and obtain information about existing Virginia businesses.
These changes are long overdue but, thankfully, the SCC will soon join the rest of us in the 21st century!
As a lawyer with a small business clientele in Virginia, I am frequently asked about Buy-Sell Agreements. Although most small business owners are generally familiar with the concept of a Buy-Sell Agreement, I find that most do not truly understand the purpose of a Buy-Sell Agreement or the form in which these contracts typically exist. Accordingly, here is a brief primer on Buy-Sell Agreements in Virginia.
What is a Buy-Sell Agreement?
A Buy-Sell Agreement is a contractual arrangement between the owners of a business (e.g., a corporation, limited liability company, or partnership) that sets forth the process by which an ownership interest can be sold upon the occurrence of certain triggering events (e.g., retirement, divorce, bankruptcy, disability, death, or a third-party offer) as well as the price or formula for such sale.
Is a Buy-Sell Agreement a stand-alone contract?
Not necessarily. A Buy-Sell Agreement can either be a stand-alone contract or a series of provisions that are incorporated into the governing documents of a business (e.g., By-Laws for a corporation or the Operating Agreement for a limited liability company).
What are the advantages of having a Buy-Sell Agreement?
By having a Buy-Sell Agreement in place, the owners of a company can completely control the disposition of an ownership interest in the business as well as control the composition of the ownership group. In a closely-held company (such as a small, family-owned business), the ability to restrict the transfer or sale of an owner’s interest in the company is an extremely important consideration as it keeps outsiders from assuming a share of the business.
What are the types of Buy-Sell Agreements?
There are three types of Buy-Sell Agreements:
- Redemption Agreement: The selling owner must either sell his ownership interest to the company or provide the company with a right of first refusal. In essence, the company is “redeeming” the shares of the owner.
- Cross-Purchase Agreement: The selling owner must either sell his ownership interest to the remaining owners or provide the remaining owners with a right of first refusal.
- “Hybrid” Agreement: A Hybrid Agreement is simply a blend of a Redemption Agreement and a Cross-Purchase Agreement.
How is a purchase funded under a Buy-Sell Agreement?
Many small businesses do not have the capital reserves to fund the purchase of an ownership interest. As such, a common approach (utilized by businesses and individuals alike) is to purchase and maintain an insurance policy from which the proceeds (upon the disability, death, or retirement of an owner) are used to purchase the available ownership interest. Other funding options include installment plans and loan arrangements.
For one reason or another, every small business is eventually confronted with the loss of an owner. As such, whether you have a startup company or an existing small business, it is of critical importance that you have a well-drafted Buy-Sell Agreement in place to maintain business continuity and to proactively limit any issues relating to the departure of an owner.