No business can completely avoid litigation – it’s simply a cost of doing business – but there are easy steps that can help control costs of future litigation. By investing a small amount of time and money now, you can improve your business practices and curb future litigation costs at the same time:

Annual Employment Audits.

The employment laws are changing practically month-to-month and impact businesses of all sizes. Even for a company with a dedicated Human Resource staff it is hard to stay on top of the developments. Having employment practices reviewed by an employment attorney once a year will keep company policies up to date, eliminate problem practices, and ensure that you have the best defenses to any employment claims that come your way. The first audit may take half a day or more, but after it is completed, a short annual visit will be all the company needs to feel comfortable with its compliance and be prepared to respond quickly and effectively to any claims that are filed.

Intellectual Property Audits.

You may or may not know that your company has intangible assets. These intangibles often give the company an edge over competitors. But without the proper protection, your employees can waltz out the door with these intangibles and take them across the street to your competitor. By taking certain small but important steps, the company can either avoid losing its intangible assets or prevail in a court action to enforce the company’s rights to the intangibles. An intellectual property audit will identify what assets can be protected and give you tools to protect them.

Records Management Policy.

The cost of litigation is linked largely to discovery. Control your records and you will likely reduce the reach and cost of discovery. To do this, the company needs a Records Management policy which is adopted in the normal course of business (not in reaction to a piece of litigation) and will address the retention and destruction of records regardless of whether the documents are paper or electronic. Combining management, information technology personnel and a retention specialist, the company can develop a comprehensive package that eliminates outdated documents, distinguishes short-term versus long-term record keeping, and dovetails with disaster recovery goals. By having such a policy, a company will have fewer records to produce in litigation.

Training for Management.

As an executive responsible for the direction of the company, you are keenly aware of how important it is to act quickly when a dispute is on the horizon in order to lessen risk and prevent losses. However, by the time news of a dispute reaches your attention, it may already be too late. Through simple training, your management team will know how to identify problematic situations and what to do when they arise.

Please let us know if you would like to investigate one or all of the above strategies to clean up your business practices and to help curb future litigation costs.

Illinois has recently joined a growing number of states which allow same-sex couples (and opposite-sex couples who have elected not to become married), to have the same rights and obligations as couples who are married, by entering into a Civil Union.

What Does the Act Say?

The Illinois Religious Freedom and Civil Union Act, which was recently signed into law provides, that any couple residing in the State of Illinois may enter into a Civil Union in much the same manner as a couple that elects to get married: they obtain a license from the County Clerk, and the Civil Union is then certified by an official specified in the Act. Similarly, a Civil Union can be dissolved on the same basis and in the same manner as a traditional marriage.

The Act does not interfere with or regulate religious practices, but it does grant to couples entering into a Civil Union the “same legal obligations, responsibilities, protections and benefits” as are afforded to “spouses” under Illinois law. The rights that parties entering into a Civil Union will now enjoy include:

• The right to inherit from the other party to the Civil Union if there is no Will in the same priority as a spouse; that is the entire estate if there are no children or one-half (1/2) of the estate if there are children.
• The right to elect to receive a specified percentage of the deceased partner’s estate, even if the deceased partner’s Will does not provide for the surviving partner.
• The right to visit a partner who is hospitalized and to make health care decisions for the partner, absent a valid health care power of attorney to the contrary.
• Certain rights with respect to real property, including the right to have a residence owned between the partners as “tenants by the entirety”.
• The right to make funeral arrangements and decisions regarding disposition of a deceased partner’s remains.
• The right to file a joint state income tax return.

Are Federal Rights Impacted by the Act?

Even though the new law provides broad protection to couples who enter into Civil Unions, it does not affect federal law. Under the Defense of Marriage Act (“DOMA”), only a marriage that was validly entered into between a man and a woman will be recognized for federal law purposes. As a result, same-sex couples who are married or enter into a Civil Union cannot claim the benefits of federal law, including:

• The right to file a joint federal income tax return.
• The right to a “marital deduction” for federal gift or estate tax purposes on transfers between spouses. As a result, any lifetime gifts in excess of the annual exclusion ($13,000) per year will be treated as a taxable gift and will reduce the donor’s exemption equivalent (currently $5,000,000) for estate and gift tax purposes.
• The right to treat any gifts from one partner to a third party as if such gifts were made one-half (1/2) by each partner.
• The right to be the required beneficiary under an employee benefit (pension, profit sharing or 401(K) plan, established under the Employee Retirement Income Security Act (“ERISA”).
• The right to receive survivor social security benefits.

Should it Change My Estate Plan?

The net result of the new law is that both same sex-couples and opposite-sex couples can receive many of the same benefits as married couples in Illinois. However, in order to insure that their objectives are fully carried out, they should seek the advice of legal counsel to discuss whether their current estate planning documents will help carry out their intentions and whether they should consider an agreement to provide for the ownership of their residence and other common property and possible payment of support in the event of the termination of their relationship.

The new healthcare law now requires health insurance plans to cover employees’ children until the age of 26. This requirement applies to all health insurance plans renewing on or after September 23, 2010. If your health insurance plan renewed on January 1, 2011, this includes you. Eligible children of employees are enrolled retroactively to the first day of plan coverage..

The U.S. Department of Labor has issued sample language for employers to use to give notice to their employees of the expanded coverage. The notice can come from either the employer or the insurer and must be sent by the first date of the new plan. The sample notice language is as follows:

Individuals whose coverage ended, or who were denied coverage (or were not eligible for coverage), because the availability of dependent coverage of children ended before attainment of age 26 are eligible to enroll in [Insert name of group health plan or health insurance coverage]. Individuals may request enrollment for such children for 30 days from the date of notice. Enrollment will be effective retroactively to [insert date that is the first day of the first plan year beginning on or after September 23, 2010.] For more information contact the [insert plan administrator or issuer] at [insert contact information].

A Union employee posted a negative comment about her supervisor on her own Facebook page, using her own home computer to do so. Co-workers responded to the comment supportively, which led to further negative comments from the employee herself. When the company learned of the comments, it fired the employee, stating that the postings violated the company’s internet policies. The National Labor Relations Board (NLRB) investigated the incident, and, in a groundbreaking move, determined that the Facebook postings were “concerted activity,” protected by federal law. The National Labor Relations Act, enforced by the NLRB, restricts employers’ attempts to interfere when employees work together to improve the terms and conditions of their workplace, and the NLRB argued that restricting an employee’s personal use of Facebook and the Internet to communicate with co-workers outside of work was a violation of the law. The NLRB announced on February 7, 2011 that it had reached a voluntary settlement with the employer, prior to a hearing on the complaint.

In a decision issued on February 8, 2011, the U.S. Court of Appeals for the 7th Circuit (which covers Illinois, Wisconsin and Indiana) upheld a jury’s verdict holding an employer liable for race discrimination for terminating an employee based on the recommendations of the employee’s manager who, unbeknownst to the employer, harbored racial bias against the employee.

The opinion in Schandelmeier-Bartels v. Chicago Park District is significant because it addresses a contested legal theory called the “cat’s paw,” which is currently awaiting a decision from the U.S. Supreme Court in Staub v. Proctor Hospital. The theory takes its name from a 17th century French fable about a monkey and a cat. As the fable goes, a monkey persuaded a cat to pull chestnuts out of a fire and the cat’s paw was burned. As the theory applies to employment law, it holds employers legally to blame for discrimination in the workplace by an employee who does not make an actual job decision, but influences the one who does. The question before the Supreme Court in Staub is how courts should apply the cat’s paw theory, if at all. The justices are reviewing an earlier decision from the 7th Circuit that said the theory applies only when the allegedly biased employee exerts “singular influence” over the decision-maker.

The 7th Circuit’s recent decision in Schandelmeier was issued before the Supreme Court ruled on Staub. As the 7th Circuit explained, “Under any formulation of the cat’s paw standard, the chain of causation can be broken if the unbiased decision-maker conducts a meaningful and independent investigation of the information being supplied by the biased employee.” In Schandelmeier, however, the jury found that the decision-maker for the Park District only solicited information from the biased supervisor, which does not constitute an independent investigation.

The take-away for employers, is that before you follow the recommendation of a manager to terminate an employee, you had better ask a neutral party (Human Resources or another member of management) to investigate the basis for the termination. Otherwise, your company’s failure to confirm that the manager’s recommendation does not reflect an illegal bias could make the company liable for discrimination.

New questions are appearing this year on the annual reporting form to the Internal Revenue Service, Form 990 (Return of Organization Exempt From Income Tax). For the first time, the IRS is asking that each tax-exempt organization disclose whether or not that organization has each of the following

(a) Written Conflict of Interest Policy
(b) Written Whistleblower Policy
(c) Written Document Retention and Destruction Policy
(d) Written Compensation Determination & Substantiation Policy
(e) Written Joint-Venture Policy
(f) Written Gift Acceptance Policy

While organizations are not required to have any of these policies in written form, it is prudent business practice to have them, and the fact that the IRS is asking for copies further confirms a trend for the government to ensure that these policies are in place.

Many newer organizations already have a written conflict of interest policy in place since the IRS requests a copy of that with the application for recognition of tax exemption. The other policies, though, may not be. We recommend that even though not required, each organization should consider putting these policies in place.

Golan & Christie assists nonprofit corporations with their operations and also has many clients who serve as directors on a number of nonprofit Boards. We are happy to assist your organization in formulating policies specific to your operations. Please contact Donna F. Hartl, 31 2-696-2035, or dfhartl@golanchristie.com for further assistance.

A clever name, logo or phrase can go a long way to identifying your service or product. You can protect these “trademarks” by registering them with the United States Patent and Trademark Office. However, the rules governing the registration of trademarks can limit your choices.

PROTECTABLE TRADEMARKS

Proper protection for a name, phrase or logo as a trademark requires actual use in connection with goods or services. Customers or clients should identify your goods and services with the trademark. Protectable trademarks must either be inherently distinctive or have acquired secondary meaning. Coined or fanciful words like CLOROX for bleach or KODAK for cameras are distinctive because they have never been used for another purpose. Words like TENDER VITTLES for cat food may have meaning in other contexts but have acquired a distinctive designation for the product. The same applies to phrases such as ‘YOU’RE IN GOOD HANDS WITH ALLSTATE’. The phrase itself contains a series of common words. But when used in conjunction with each other and the company name, they have acquired secondary meaning. Common words like ‘soap’ or ‘milk’ cannot be registered as trademarks because they are generic. Some words that were once trademarks can become generic. For instance, ‘aspirin’ was a protectable trademark at the very beginning of its use. Bayer Company allowed the word to be used as a term for all pain relievers. Thus, the word became a generic term for pain relievers. Additionally, certain other types of trademarks cannot legally be registered such as immoral or scandalous words, words that indicate a false connection with the goods or services, deceptive words, disparaging words, flags, insignia, coats of arms, a name, a signature, false designations of origin using a geographic term, functional features and ornamentation.

THE DO’S AND DON’TS

Given these rules, how does one go about choosing a protectable trademark?

DO use coined words or phrases that have no prior meaning. Example: MICROSOFT for computer applications.

DO use arbitrary or unrelated words for the product. Example: DOMINO’S for pizza.

DO use terms that suggest the nature of the product or services. Example: COPPERTONE for suntan lotion. (But be sure that no one else is already using the term as a trademark.)

DO use terms that describe the product, but be able to prove that your customers or clients have recognized the term with your product thus creating secondary meaning. Example: KRISPY for crackers.

DO use fonts and colors in your trademark as a way of further distinguishing your goods and services from others.

DO use slogans that describe your product. Example: DAN RIVER DESIGNER FABRICS for textile fabrics.

DON'T use any of the prohibited trademarks described above.

DON'T use a trademark that conflicts with someone else’s trademark. Example: SMALL STREET JOURNAL versus WALL STREET JOURNAL.

DON'T use a trademark that would confuse customers as to the origin of the product. GOLDEN GRIDDLE for a pancake restaurant where someone already has registered GOLDEN GRIDDLE for table syrup.