Employee Classification and M&A 12/02/2013Posted by Morse, Barnes-Brown Pendleton in Corporate, New Resources, Public Companies.
Tags: boston globe, DOL, new england media group, red sox, worcester telegram
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By: Mark Tarallo
A Massachusetts Superior Court judge recently held up the sale of The Boston Globe (and related entities) to Red Sox owner John Henry, as a result of a restraining order filed against the Worcester Telegram & Gazette, part of the New England Media Group along with The Boston Globe. While the injunction was eventually dissolved and the sale completed, it did create some tense moments in the process. The suit was filed by a class of newspapers carriers, claiming that they were misclassified as independent contractors when they should have been treated as employees. While the actions that gave rise to the suit happened several years ago, employee classification issues are back in the spotlight. The United States Department of Labor budget for 2014 includes a line item of $10 million for grants to the states to investigate worker misclassification and recover additional taxes. States that are looking to generate additional tax revenue will be quick to take advantage of these grants.
While most M&A transactions include representations from the seller regarding employee classification issues, parties considering an M&A transaction must place a renewed emphasis on spotting and dealing with any issues prior to the closing. Liabilities for misclassified workers can travel with the target, leaving the buyer to pay taxes and penalties that it did not anticipate, and indemnity claims may not completely resolve the problem. Sellers that cannot properly document their classification of employees run the risk of seeing their purchase price reduced, or deals fall apart completely, if buyers cannot get comfortable with the classification of the seller’s workers. Both sellers and buyers must work to identify and fix these issues prior to closing, to avoid having an unwanted third party (the DOL or a corresponding state agency) in their transaction.
For more information on this topic, please feel free to contact Mark.
Tags: CBP, DOL, DOS, government shutdown, immigration law, USCIS
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On October 1, 2013 MBBP published a new Immigration Alert: The Effect of The Government Shutdown on Immigration Matters. As a result of Congress being unable to agree to fund the government, it has been “shutdown” until the funding has been secured. This will have a major effect on government services that are not fee-based. For those services, all non-essential employees must stay home. The only exception where non-essential employees can work is to protect life or property. Essential employees will continue to work. Fee-based government services will be mostly unaffected. We strongly encourage any HR or hiring officials to read this in its entirety to ensure that they understand what compliance obligations will continue, and what will be suspended. The major government agencies that will be affected are:
- U.S. Citizenship & Immigration Services (USCIS)
- Customs & Border Protection (CBP)
- Department of Labor (DOL)
- Department of State (DOS)
Tax Alert: Massachusetts Sales and Use Tax on Computer and Software Services – New Law Effective July 31, 2013 07/31/2013Posted by Morse, Barnes-Brown Pendleton in New Resources, Taxation.
Tags: computer software, massachusetts department of revenue, sales and use tax
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MBBP recently published a Tax Alert discussing a new law recently enacted by the Massachusetts Department of Revenue in Technical Information Release 13-10. The law states that certain “computer/software services” performed on or after July 31, 2013 will be subject to the Massachusetts sales and use tax.
Please read our full Tax Alert which summarizes the Department’s initial guidance found in the Technical Information Release.
NEW VC Spotlight Features 2012 VC Data, Dilution, Crowdfunding, and Non-Compete Legislation 03/20/2013Posted by Morse, Barnes-Brown Pendleton in Client News, Corporate, Industries, Legal Developments, New Resources, Venture Capital & Private Equity.
Tags: crowdfunding, dilution, VC spotlight, vc transactions
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Each quarter, MBBP compiles a comprehensive database of venture capital transactions that have closed within New England, New York and New Jersey. In our most recent VC Spotlight, MBBP presents the 2012 First Institutional Rounds – Deal Terms in the chart seen below.
Further data analysis can be found in this quarter’s VC Spotlight Newsletter.
Other articles featured include:
- The Price of Growth – The Lifecycle of a Company from a Founder’s Dilution Perspective
- What Every Startup Should Know About Crowdfunding
- New Proposed Massachusetts Non-Compete Legislation Focuses on Duration of Restrictions
The full newsletter is available here.
Tags: payment frequency, wage and hour
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Did you know that an employer who does not pay its non-exempt employees every two weeks may technically be violating Massachusetts law? Read February’s Wage & Hour Tip for more information on payment rules.
Please feel free to contact MBBP’s Employment Law Group with any questions.
What Is a Legal Holiday in Massachusetts? 12/20/2012Posted by Morse, Barnes-Brown Pendleton in Client News, New Resources.
Tags: holiday pay, holidays, wage and hour
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MBBP has released a new Wage & Hour Tip of the Month which discusses the legal holidays in Massachusetts. Massachusetts law specifies the kind of work that is permitted on a holiday, and the type of establishment which can operate on a holiday. Generally, employers cannot operate on any legal holiday except New Year’s Day, Martin Luther King Day, President’s Day, Evacuation Day, Patriots Day, Bunker Hill Day, Columbus Day after 12 noon or Veterans Day after 1 p.m. However, employers may be able to operate on an otherwise restricted holiday if they come within one of the 55 statutorily proscribed exemptions.
To read the full Wage & Hour Tip of the Month, please visit our resources page.
Tags: FDA, LifeScience Alley, MDIC, medical device
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The FDA issued a press release December 3, 2012 announcing its role in a new public-private partnership aimed at expediting medical device review and approval by improving the regulatory science underlying medical device development, assessment and review. In particular, the biomedical science trade association LifeScience Alley (LSA) created the Medical Device Innovation Consortium (MDIC) as an independent, nonprofit corporation that will garner input from stakeholders, including industry, government, and other nonprofit organizations to better understand the regulatory science needs of the medical device industry and provide funding for projects that will simplify medical device design and market approval. The FDA plans to collaborate with MDIC on its supported research and projects.
For additional information, please contact David A. Fazzolare.
A Guide to Employment Applications in MA 07/16/2012Posted by Morse, Barnes-Brown Pendleton in Employment, Legal Developments, New Resources.
Tags: employment law
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Some employers view employment applications as simple, standard forms used to obtain only basic background information from job candidates. Others see them as a tool to obtain more extensive information used to evaluate and potentially screen out prospective employees. Massachusetts employers need to know that there are some very specific requirements regarding both what must be contained in application forms and what is prohibited. Further, we believe employers also should use employment applications to establish and protect employer rights.
What may be asked in an employment application is heavily regulated. Read this edition of the Employment Law Advisor to learn how you can use employment applications to establish and protect your legal rights. And of course, we’re always here to help – feel free to contact a member of our Employment Team!
Tags: ela, national labors relations act, nlrb
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MBBP has released a new Employment Law Alert (ELA) which discusses a recent ruling by the U.S. Court of Appeals for the District of Columbia Circuit that temporarily blocked the National Labor Relations Board (NLRB) from implementing and enforcing a rule published by the NLRB on August 30, 2011. The rule was set to go into effect on April 30, 2012, and requires employers to post a notice to employees informing them of their rights under the National Labor Relations Act, including rights to act together to improve wages and working conditions, to form and join a union, and to bargain collectively.
To learn more on the decision, please read the full alert.
Tags: crowdfunding, JOBS Act, SEC
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By: Carl F. Barnes
Crowdfunding – in which entrepreneurs and start-ups raise capital in small amounts from large numbers of ordinary investors – became a reality on April 5, as President Obama signed the Jumpstart Our Business Startups Act, known as the JOBS Act. Well, almost – the Securities and Exchange Commission has been given until the end of the year to write the regulations necessary to implement the Act.
Once those regulations are adopted, entrepreneurs will be permitted to raise up to $1,000,000 in any 12-month period from ordinary investors. The amount any one person can invest in any one company will be limited to the greater of $2,000 or 5% of the investor’s income or net worth – or up to 10% of the investor’s income or net worth (subject to a cap of $10,000) if the investor’s income or net worth equals or exceeds $100,000.
Companies taking advantage of the crowdfunding rules must use either a securities broker or a “funding portal” to find investors. Companies won’t be permitted to advertise the terms of their offering, but they will be permitted to publish notices and use the internet to direct prospective investors to the intermediary. Both the company and the intermediary will be required to make significant disclosures to prospective investors and to the SEC, both before and after the offering. And both companies and their directors and officers had better be careful, because they will all be liable for material misstatements and omissions in their disclosures.
Whether the JOBS Act will satisfy the dreams of the entrepreneurial community by providing efficient and low-cost access to capital or whether the burdens of complying with the Act and the forthcoming regulations will mean that the crowdfunding rules are little-used remains to be seen. Even without the regulations in hand, though, there is much that entrepreneurs who think they will want to try crowdfunding should consider. For a detailed description of the Act and a discussion of those considerations, please click here.
For more information on crowdfunding and private placements generally, please contact Carl Barnes.
MBBP Q1 2012 VC Spotlight: Seed Convertible Note Discounts; Superior Court Ruling on Noncompetition Agreements 04/04/2012Posted by Morse, Barnes-Brown Pendleton in MBBP news, New Resources.
Tags: convertible note discounts, noncompetition agreement, VC spotlight
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Seed Convertible Note Discounts: Reconciling “Stock” and “Liquidation Preference” Premiums
By: Jonathan Gworek
Convertible notes have become the security of choice for early stage startups looking to raise seed capital. Convertible notes are perceived to be a simpler alternative to preferred stock. When a convertible note converts, it typically does so at a discount to the price paid in the next round. As a result, the promissory note will convert into a number of shares that reflects a premium level of stock ownership. But there is a second and lesser appreciated premium often associated with convertible notes. When notes convert into the next round of equity at a discount, not only does the noteholder get more equity per dollar invested as described above, but the noteholder may also get the benefit of an aggregate liquidation preference that is associated with that premium number of shares.
It is important to recognize this distinction between the “stock ownership premium” and the “liquidation preference premium” that results from the conversion of notes at a discount. There are approaches that can be used to eliminate the liquidation preference premium if that is not the intended result of the discount. For a full discussion of the differences between the stock ownership premium and the liquidation preference premium resulting from the conversion of notes, and the alternatives that are available for dealing with the liquidation preference premium, please click here.
Superior Court Rules Start-up Can Enforce Former Executive’s Noncompetition Agreement
By: Scott Bleier
Over the past four years, there has been ample legislative discussion and speculation amongst lawyers regarding the enforceability of noncompetition agreements under Massachusetts law. During this time, multiple bills have been filed with the Massachusetts House of Representatives which, if passed, would substantially limit – and, in some cases, abolish – the enforcement of most noncompetition agreements. Notwithstanding this ongoing dialogue and a perceptible shift towards disfavoring noncompetition agreements in Massachusetts, a recent Superior Court decision illustrates that properly drafted noncompetition agreements continue to be enforced judicially in the Commonwealth and further serves to remind established and start-up companies alike of the need to be mindful of the impacts of these contractual restrictions. For more on this development, please click here.
Visit MBBP to view our full VC Spotlight.
Massachusetts Supreme Judicial Court Upholds Right to Enforce Employment Arbitration Agreements 09/16/2011Posted by Morse, Barnes-Brown Pendleton in Attorney News, Employment, Legal Developments, MBBP news, New Resources.
Tags: arbitration agreements, mcad, supreme court
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MBBP Employment Attorney Bob Shea has written an article titled “Massachusetts Supreme Judicial Court Upholds Right to Enforce Employment Arbitration Agreements“. The article discusses a recent decision by the Massachusetts Supreme Judicial Cuort (“SJC”), Joulé, Inc. v. Simmons, 459 Mass. 88 (2011), in which the SJC upheld an employer’s right to compel an employee to arbitrate her gender and pregnancy discrimination claims while the Massachusetts Commission Against Discrimination (“MCAD”) processed her complaint. In so doing, the SJC refused to give the MCAD primary jurisdiction over the claims and instead ruled that, assuming the arbitration agreement was valid, the employer was entitled to proceed with arbitration of the dispute. The article analyzes the SJC’s rulings and the practical implications for employers.
To read the full article, please visit our employment resources page.
Tags: Dodd-Frank Act, proxy access, SEC
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On July 22, 2011, a three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit unanimously struck down Securities and Exchange Commission Rule 14a-11, also known as the Proxy Access Rule. The court vacated the Proxy Access Rule holding that the SEC failed to adequately consider the rule’s effect on efficiency, competition and capital formation as required by both the Securities Exchange Act of 1934 and the Investment Company Act of 1940.
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act (enacted July 2010), the SEC was authorized but not required to establish rules governing access to proxy statements. On August 25, 2010 the Proxy Access Rule was adopted by the SEC. The proposed Proxy Access Rule would have required a company, subject to proxy rules under the Securities Exchange Act of 1934, to include in its proxy materials, the name of a person or persons nominated by a qualifying shareholder or group of shareholders for election to the board of directors.
To learn more, please see the full article.
Basic Considerations for Determining Whether to Rely on Patents or Trade Secrets to Protect Your Intellectual Property 01/31/2011Posted by Morse, Barnes-Brown Pendleton in New Resources.
Tags: Intellectual Property, IP Licensing, trade secrets
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Patents and trade secrets both protect valuable information and technology, though each has distinct advantages and disadvantages. A patent grants the owner the right to exclude others from practicing the claimed invention for a limited time (in the U.S., 20 years from filing), in exchange for teaching the public how to make and use the claimed invention. Trade secret laws, on the other hand, protect information that derives value from not being generally known to the public. A decision of whether to rely on patents or trade secrecy must be made carefully, strategically and in consideration of business objectives. The decision will dictate enforcement rights and remedies, and may be scrutinized by business partners, investors and competitors. Several important factors should be considered.
One obvious consideration is whether the technology or information represents patentable subject matter and, if so, whether the likely scope of any patents that may issue will afford meaningful protection. This analysis may be informed by evaluating the closest prior art or by surveying the types of patent claims which competitors are relying upon to protect their intellectual property. To the extent that the anticipated scope of patent protection will be very narrow or allow competitors to easily design around the patent, patent protection may not be ideal.
Timing is also a critical consideration, especially for rapidly evolving technologies. Patent applications are formally examined and, although the time to issuance varies with the jurisdiction, the pendency of a patent application may approach four years or more in the United States depending on the technology. In contrast, no formal approval or examination is required for trade secret protection; rather, the owner need only maintain the secrecy of the information. Although there are mechanisms by which the prosecution of a patent application may be expedited, if the technology may become obsolete within a short period of time, patent protection may not be the best protection.
A fundamental premise of trade secret protection is that the information is not publicly known and that the information remains subject to reasonable efforts to maintain it in confidence. Trade secret laws will not prevent a third-party from independently developing the information or from reverse engineering publicly available products to learn the underlying information, nor will trade secret laws prevent the subsequent exploitation of information which was properly discovered. Accordingly, to determine whether trade secret protection is useful, one should consider the ease with which the information can be kept secret, as well as of the resources that must be devoted to maintaining its secrecy. Generally, reasonable efforts to maintain the secrecy of trade secret information includes restricting access to only those individuals who need to know the information to perform their duties, implementing appropriate employment agreements and security measures, and avoiding disclosures of the information except under appropriate non-disclosure agreements. To the extent that it is impractical or difficult to maintain the secrecy of the information, trade secret protection alone may not suffice.
The above factors (and others that your IP counsel can explain) should be considered in developing a comprehensive strategy to protect your company’s valuable technologies, processes and information. Often, a successful strategy will integrate both patents and trade secrets, as well as copyrights and trademarks. The early development of an intellectual property strategy and the periodic reassessment of that strategy in light of changing business objectives are key to protecting the valuable intellectual property assets of any company.
For more information on this topic, please contact Stan Chalvire.
Tags: Dodd-Frank Act, Sarbanes-Oxley, whistleblower
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MBBP Attorneys Joseph Marrow and Mark Tarallo offer two articles discussing recent provisions to the Dodd-Frank Wall Street Reform and Consumer Protection Act:
- “Enhanced Whistleblower Provisions Under Dodd-Frank Act” written by Joe Marrow, discusses the expansion of protections for whistleblowers originally created under the Sarbanes-Oxley Act (SOX) under Dodd-Frank. Joe provides information on the new private right of action, the expansion of whistleblowers liability under SOX, and responses to the provisions.
- Mark Tarallo’s “Non-Mandatory Provisions of the Dodd-Frank Act as Guidance for Small Companies,” describes certain provisions of the Dodd-Frank Act that are applicable only to larger “financial services” companies but may also be adopted by all public companies who are interested in applying “best practices” for corporate governance.
For more information, please visit our resources page.
Tags: ESTA, immigration, USCIS
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The Visa Waiver Program (VWP) was implemented in 1986 in order to allow travelers from certain countries to enter the U.S. for vacation or to attend business meetings without requiring a visa. To utilize the Visa Waiver for trips to the U.S., travelers must register online with the Electronic System for Travel Authorization (ESTA) prior to their trip. Previously, registering with ESTA was free for passengers; however, on September 8, 2010, the government began imposing a fee for new registrations and renewals. Read more in our full Immigration Alert.
As of December 10, 2010, the total number of H-1B cap-subject petitions counted under the regular cap was 52,400. This means that there will soon be less than 10,000 H-1B visas available. With respect to the 20,000 H-1B visas that are made available under the U.S. Master’s degree exemption tranche, 19,100 visas have already been called for as of the same date. As a result, now is a good time to review your hiring plans for any foreign nationals or foreign students.
MBBP’s December 2010 Immigration Alert also contains information on other topics including:
- USCIS Enhances its Information Gathering of H-1B and L-1 Employers and Employees through Form Revisions
- The Labor Condition Application Revisited
More information can be found in our full Immigration Alert.
Tags: NVCA, series a financing, term sheet
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MBBP Partner Jeffrey Steele has recently created a sample term sheet and annotations for a Series A Round of Financing. Some of the annotations and language in this model term sheet (including the veto rights) are borrowed from the NVCA model legal documents.
Please visit our resources page to view the Sample Term Sheet.
For more information, please contact Jeff Steele.
New Resource for Inventors 03/05/2010Posted by Morse, Barnes-Brown Pendleton in New Resources.
Tags: inventors eye, USPTO
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By: Lisa Treannie
The United States Patent and Trademark Office has launched a new electronic publication called “Inventors Eye” targeted to the independent and small entity inventor community. Inventors Eye will be published every other month and will feature tips on working with the USPTO; events, organizations and meetings of interest to the community; issues that impact independent and small entity inventors; and stories about people who have become successful inventors. If the first issue is representative, the content is interesting, helpful and to the point, and answers many of the questions patent attorneys are asked by independent inventors during their first meeting.
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Those involved with the filing and prosecution of a patent application before the United States Patent and Trademark Office are subject to a duty of candor and good faith in dealing with the USPTO. This duty, among other things, requires that such individuals disclose to the USPTO all information known to be material to patentability. An accused patent infringer may allege a breach of the patentee’s duty of candor, referred to as inequitable conduct, as a defense to patent infringement, but must do so in accordance with the evidentiary standards articulated by the recent United States Court of Appeals for the Federal Circuit Exergen Corporation v. Wal-Mart Stores, Inc., et al., 575 F.3d 1312 (Fed. Cir. 2009) decision.
In that decision, the Federal Circuit held that pleading inequitable conduct in patent cases must be done with sufficient particularity, requiring the identification of the “specific who, what, when, where, and how of the material misrepresentation or omission” before the USPTO. The decision places the burden on defendants to clearly articulate grounds supporting an allegation of inequitable conduct and to establish facts which support a reasonable conclusion that the patentee had the requisite scienter.
To read a more detailed account of the specifics of this case, please see the article: Turning Up the Heat on Pleading Inequitable Conduct on mbbp.com.
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On August 21, 2009, the Massachusetts Supreme Judicial Court in Somers v. Converged Access, Inc. held that an employee misclassified as an independent contractor is entitled to recover damages under Massachusetts wage and hour laws even if the individual received more money as an independent contractor than he would have received if properly classified as an employee. More significantly, the Court also signaled that persons misclassified as independent contractors may use the Massachusetts wage act to recover other benefits such persons would have received as employees, including vacation pay, holiday pay, and employer contributions to employee benefit plans. The decision creates (or at least highlights) a dangerous and uncharted area of legal exposure and likely will lead to a further rise in misclassification claims against businesses using independent contractors.
Read our current Employment Law Advisor for more details.