Winter 2009 Edition

Confidentiality Agreements - What You Need to Know When You're on a "Need to Know" Basis

By M. Blen Gee, Jr.

Confidentiality agreements are being used by business people on an increasingly frequent basis. Here is a list of key points and useful tips:

1. If you are fumishing sensitive information to anyone other than a professional who has a duty to keep your information confidential (attorneys, certified public accountants and physicians are the principal examples), you should insist on having at least a simple con dentiality agreement in place. If your industry deals frequently in highly sensitive information, you should have a well-drafted form confidentiality agreement on file.

2. If you receive confidential information, remember that misuse of confidential information can ave very serious legal consequences. Trade secrets are protected by law and can lead to substantial civil damages awards and even criminal liability.

3. Typically, confidentiality agreements relate only to written (including digitally written) disclosures of information. However, occasionally con dentiality agreements are written to cover ' verbal" disclosures as well. If you disclose any confidential information verbally, you should follow this up with a letter describing the confidential information that has been provided. Preferably, you should neither provide nor receive confidential information verbally since this creates a ques ·on of proof.

4. Anything that you wish to be main ained as confidential should be marked "Confidential: When providing the co fidential information, you should send a cover letter with an itemized list of e materials being provided. Keep a copy of your cover letter and the documents that you provided so that you can prove what information was provided and that it was marked as con dential.

5. Confidential information should be accessible 10 persons in your organization only on a need to know" basis. Make sure that persons receiving the confidential information understand that disclosure is grounds 'or immedia e termination.

6. All confidential information should be kept in a secure, locked location with a limited number of keys provided to only those persons having a need to know.

7. Documents stored digitally should be secured by a password at least 6 characters in length and con aining numbers, capital and lowercase letters and symbols. The password should be cha ged periodically. Also, if a person w 0 was on your "need to know" list leaves the company, the password should be changed. If the information is sufficiently sensitive, e cryption may be appropriate, especially if the Information is sent via email. 8. When your need for the information has ended, originals and all copies should be returned 0 the other party wi h an appropriate cover letter itemizing the items being returned. The items should be returned either by certified mail or overnight delivery service requiring a signed receipt

9. The confiden iality agreement should have provisions addressing information that is in the public domain, informa ·on that is already known to you, and information that comes to you from other, nonconfidential sources. If you receive information hat you were already aware of, you should promptly notify the other party that you ave already acquired this information from other sources.

Recent Employment Law Cases

By Sam Johnson

$35.6 MILLION VERDICT - FAILURE TO PAY OVERTIME

The Family Dollar Stores willfully violated the Fair labor Standard Act by not paying overtime to 1.424 retail store managers and is liable for approximately $35.6 million in back pay and liquidated damages and the 9th Circuit Court of Appeals affirmed the District Court's ruling that store managers were not "executives· but rather employees who spent 80% to 90% of their working hours on manual duties and lacked any authority over hiring, firing, payor evaluations of other store employees. These managers worked an average of 60 to 70 hours per week with no overtime pay

WAGE AND HOUR LAWSUITS AGAINST WALMART SETTLED FOR OVER $350 MILLION

Wal-Mart Stores, Inc. recently announced that it has agreed to pay between $352 million and $640 million to settle 63 wage and hour lawsuits filed against the retailer in 42 different states. The lawsuits accused Wal-mart of cheating hourly workers by forcing them to work through breaks and not paying them for overtime.

The wage and hour violation settlement may set a new standard for other companies who have been failing to pay employees according to the requirements of federal labor laws.

In recent years, federal court wage and hour class action filings have surpassed employment discrimination class actions, with claims involving issues such as misclassifying employees as salaried or independent contractors. failing to pay for 'off-the-clock" work or on-duty meal breaks, denied reimbursements and miscalculation of commissions and bonuses.

PRESERVE YOUR PERSONAL RESOURCES

By Jean Winborne Boyles

In times of financial stress, small business owners often feel that it is necessary to put more of their personal resources into their businesses to keep the businesses going. This action is risky business! Small businesses are often S corporations or limited liability companies, and in each case, the business is a separate legal entity from the owner. Small business owners must keep their personal fiances separate from their business finances. If it is in fact - after much deliberation and professional advice - necessary for the owner to infuse personal finances into the business, it is absolutely essential that this be done in the form of a business loan from the owner to the business. The transaction must be fully documented as such.

During this time of extreme financial decline, many businesses are declining also and are at risk of failure. Small business owners should be especially careful not to yield to the temptation of putting personal wealth into a business which is not economically viable. If the business is at risk, the owners should:

• Make sure that all owner-loans to the business are properly documented as such. This should include bookkeeping entries for the loan and any repayments to the owner. Importantly, the loan should also be documented by a promissory note with a reasonable interest rate and repayment schedule. If possible, the business should give the owner a security interest in business property as collateral for the note.
• Avoid blending the owner's assets with the business assets. Preserve the distinction between the business entity and its owner. Otherwise, a business creditor might be able to "pierce the corporate veil" so as to reach the assets of its owner.
• Review all promissory notes made by the business to financial instiu tions and other funding sources. Determine which creditors of the business have security interests in the business property. Determine which business debts have been guaranteed by the owner, and which, if any, have been also guaranteed by the owner's spouse. If both the owner and spouse have given their personal guarantee, their personal assets, including their home, are at risk if the business can no longer make payments on the business note.
• Do not use personal retirement to fund a failing business

Summary: The owner of a failing business must make prudent decisions regarding the continued viability of the business. These decisions are best made with the advice and counsel of professional advisors.

CONGRATULATIONS !!

By F. Stephen Glass

John Pittman, M.D., was recently elected President of the North Carolina Integrative Medical Society (NCIMS). Dr. Pittman is one of only six practitioners in North Carolina who is a Diplomat through the American Board of Metal Toxicology. He is a regular guest lecturer for the UNC School of Medicine Division of Integrative medicine. Dr. Pittman was recognized by Business leader magazine as one of the 2008 Triangle Impact Health Care Leaders.

Barry Doyle and Barry's Cafe were featured in the January 26, 2009 issue of People Magazine (p.100) as the magazine's "Hero Among Us' for his unselfish work through the organization he started, "Feed the Firefighters: Barry and Barry's Cafe recently won the National Restaurant Association's "Good Neighbor Award" for 2008.

Atlantic Tire & Services and its founder, Anthony Blackmon, were I honored by the trade association with the National Top Shop Award for 2008. "Its all about customer service, Blackmon states. "We strive to make it a comfortable, confident experience."

LOOK AT THE ECONOMIC STIMULUS OF 2009

By F. Stephen Glass

A brief look at the Tax and Benefits Provisions of the American Recovery and Reinvestment Act of 2009 (Stimulus) reveals the following - something for many businesses and individuals:

Tax Breaks for Business include extended bonus depreciation and increased expensing for 2009, longer net operating loss (NOl) carrybacks for some, deferral on debt discharge income from reacquisitions of debt, reduced capital gains tax for holders of qualified small business stock, and a shortened S corporation built-in gain holding period.

Tax Breaks for Individuals include a refundable tax credit of up to $400 per worker ($800 per couple filing jointly), phasing out completely at $190,OOO for couples filing jointly and $95,OOO for single filers, eased child tax credit and earned income tax credit rules, a beefed-up tax credit for higher education, an enhanced credit for first-time home purchases with the removal of the repayment requirement, a tax deduction for state sales and excise taxes paid on the purchase of new cars, including light trucks and SUVs, motorcycles and motor homes. Benefits-related changes include eased rules for transit and vanpool fringe benefits, a 65% subsidy for COBRA continuation coverage premiums for up to nine months, and eased health coverage tax credit (HCTC) rules.

AMT relief. The Recovery Act boosts alternative minimum tax (AMD exemption amounts for individuals for 2009, and also provides that for 2009, personal nonrefundable credits may offset AMT and regular tax.

There also are a host of energy related changes, including eased credit rules for various types of energy generation, and liberalized rules for homebuyers who make energy saving (or energy generating) improvements to their homes. Let's hope it works!!!

BUSINESS TAX LAW - DEDUCTION DENIED FOR TRAVEL EXPENSES ASSOCIATED TWO PLACES OF LIVING.

By F. Stephen Glass

The 7th Circuit Court of Appeals held that an airline mechanic who had been laid off and was forced to work at multiple distant locations was not entitled to travel expenses between the locations where he claimed residences. A tax payer who travels away from his home overnight on business can deduct not only his round-trip travel expenses but also 50% of meals and 100% of lodging costs. His home, for the purpose of this deduction, is either (1) his regular or principal place of business, or (2) if the taxpayer has no regular or principal place of business, his regular place of abode "in a real and substantial sense." In is case, the Court said at unless the taxpayer has a business rather than a personal reason to be living in two places, he cannot deduct traveling expenses if he decides after layoff not to move. His situation was no different from construction workers who work at different sites throughout the country. Wilbert v. U.S. (CA 7, 112112009).

 

About our authors:

Samuel H. Johnson is the founder and senior member of our firm. He served in the N.C. House of Representatives from 1965 to 1974. He also served as a UNC Trustee, Chairman of the N.C. Local Government Study Commission, the Advisory Budget Commission of the N.C. House, and as Special Counsel to Speaker of the House of Representatives and Lt. Governor, (1975-77). He was inducted into the N.C. Bar Associations' General Practice Hall of Fame in 2004.

 

M. Blen Gee, Jr. is an honors graduate of the University of North Carolina School of Law. His areas of concentration include business and corporate law, including sales of businesses; business litigation, including arbitration and mediation; franchise law; automobile dealer law; and insurance company insolvency. Mr. Gee has earned the highest peer-review rating for professional excellence and ethical standards by the national publication Martindale Hubbell.

 

F. Stephen Glass is the author of numerous publications on business and business entities as well as estate planning. He is a frequent presenter for the National Business Institute. His practice is concentrated in the areas of business and corporate law, business succession planning and estate planning. He serves on the Cary board of Capital Bank. Mr. Glass has earned the highest peer-review rating for professional excellence and ethical standards by the national publication Martindale Hubbell. He serves on the American Bar Association Business Law Committee on Corporate Governance.

Jean Winborne Boyles, concentrates her practice in health law, corporate law, bankruptcy and creditors' rights, commercial leasing, antitrust and state administrative law.

 

DISCLAIMER: Johnson, Hearn, Vinegar, Gee & Glass, PLLC, provides this newsletter for general information only. The materials contained herein may not reflect the most current legal developments. Such material does not constitute legal advice, and no person should act or refrain from acting on the basis of any information contained In this newsletter without seeking appropriate legal or other professional advice on their particular circumstances. Johnson, Hearn, Vinegar, Gee & Glass, PLLC and all contributing authors expressly disclaim all liability to any person with respect to the contents of this newsletter, and with respect to any act or failure to act made in reliance on any material contained herein. Distribution of this newsletter does not create or constitute an attorney-client relationship between the firm and any reader or user of such information.