The worker must first understand his level of authority in negotiating on behalf of his employer. This may, especially for a new offering, require research on what industry competitors are setting as terms for similar products or services. A meeting with the employer to discuss how the company wants to handle the pricing questions would be sensible.
Once the worker understands the parameters of his authority, he should identify the respective leverage each party has in the negotiation. It is good preparation to consider the alternatives to a negotiated agreement and analyze the possible options available to the other party if an agreement is not reached. This can also determine whether walking away from a potential deal is an acceptable alternative. It is important to remember that all negotiations need not result in an agreement and sometimes the best decision that management can make is to forego a potential deal.
Another important factor to consider is negotiation style. One of the biggest mistakes made in negotiating is to begin with an unreasonable position in the hopes of ultimately settling on a less unreasonable deal. Such tactics often result in the souring of a potential business relationship. It is a good idea to always leave some room for movement in an initial proposal, but not such a good idea to go in with such an unreasonable opening position that you risk tainting the relationship before it even begins.
Finally, it is extremely important to remember that a judge will enforce the written agreement based on its express terms. It would be a mistake to commit to a written provision that is unacceptable to you in reliance on the other party’s statement that it is their form provision and is never enforced. You should proceed with the attitude that, if the other party is unwilling to remove a provision from the agreement, they plan to enforce it. It is important that any agreement, however basic, has clear provisions in plain English so that if a problem arises, a judge can read the written provisions and understand what both sides’ respective rights and obligations are without having to rely on testimony from either party.
Such clarity in the agreement will not only help your company’s position should a dispute arise but it also decreases the chance of a dispute since both parties can look at a written agreement (after their respective memories of the specifics of the deal fail) and review the provisions to which they actually agreed.
J. Daniel Marr is a Director and Shareholder at Hamblett & Kerrigan, P.A. His legal practice includes counseling businesses and individuals on a variety of legal issues and advocating on their behalf. Attorney Marr is licensed and practices in both New Hampshire and Massachusetts. Attorney Marr can be reached at dmarr@nashualaw.com.
]]>In that case, Juan Espinal appealed an entry of summary judgment of the Massachusetts federal trial court in favor of his former employee, National Grid, in his employment race discrimination claim. The United States Court of Appeals for the First Circuit hears appeals from both New Hampshire and Massachusetts federal trial courts so therefore its decisions are important for employers and employees alike in both states.
Since December 2001, Espinal has worked as a Customer Meter Service Technician at National Grid and is currently a Senior Technician at the company’s Beverly, Massachusetts location. As such a technician, Espinal is responsible for investigating reported gas leaks while on duty and additionally once out of every four weeks he would be on call. In 2004, Espinal was twice disciplined for failing to respond to pages while on call. The Massachusetts Department of Public Utilities requires a National Grid to dispatch a trained employee to a reported gas leak within 60 minutes. National Grid’s employees are disciplined if they fail to respond to a page as to a gas leak when they are required to do. Espinal learned that another white employee had gone unpunished for failing to answer a gas leak page and claimed that showed National Grid discriminated against him in disciplining him with a 5-day suspension because of his Hispanic heritage. The white employee, when the information was brought to the attention of National Grid by Espinal, did receive a 5-day suspension and there was a distinction between the circumstances between Espinal and the white employee. In particular, there was no dispatch supervisor present when the white employee failed to return the page but there was when Espinal failed to answer his page. Because dispatch supervisors are tasked with establishing the employee for the missed page and preserving any relevant documentation, National Grid had to begin its investigation into the past event regarding white employee from scratch by collecting the night’s phone pager and dispatch records and interviewing all employees involved in order to establish good cause for any resulting suspension.
In this case, while Espinal argued that he had not received any of National Grid’s attempted communications on the night of the report of the gas leak, he was unable to prove that the decision-makers at National Grid who provided him with the 5-day suspension believed he had not received the notice but disciplined him anyway because he was Hispanic. To show discrimination under his claims, Espinal would have had to provide sufficient evidence that National Grid’s articulated reason for the disciplinary action was a pretext and that the true reason was discriminatory. The Court found that Espinal could not show sufficient facts to go to a jury on either points and therefore the case was dismissed.
This case is also a reminder to employers that some employees initiate a discrimination case even though the relatively small issue at stake, in this matter a 5-day suspension, appears not to justify a federal court battle. However, some employees may take such actions based upon principal and others may do so because they fear the employer’s discriminatory animus. The employee may believe the employer will try to find a way to fire the employee and the employee by actually bringing the discrimination lawsuit may further believe he will diminish that likelihood. That is because firing him after the discrimination claim was raised and pending could be the evidence that the employer was retaliating against the employee as a result of the discrimination claim that was filed. Thereafter the post-claim firing could put the employer at risk and the employer would be wary.
J. Daniel Marr is a Director and Shareholder at Hamblett & Kerrigan, P.A. His legal practice includes counseling businesses and individuals on a variety of legal issues and advocating on their behalf. Attorney Marr is licensed and practices in both New Hampshire and Massachusetts. Attorney Marr can be reached at dmarr@nashualaw.com.
]]>The Act
Previously, the sale of an equity interest was registerable under the Securities Act of 1933, as amended (“1933 Act”), unless the security or the transaction was exempt.
The Act provides for a funding exemption from the Securities and Exchange Commission (“SEC”) registration requirements for certain offerings with the following limitations.
(A) the aggregate amount sold within the previous 12-month period in reliance upon this exemption is: (i) $1,000,000, as such amount is adjusted by the SEC to reflect the annual change in the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics, or less; or (ii) if the issuer provides potential investors with audited financial statements, $2,000,000, as such amount is adjusted by the SEC to reflect the annual change in the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics, or less.
(B) the aggregate amount sold to any investor in reliance on this exemption within the previous 12-month period does not exceed the lesser of: (i) $10,000, as such amount is adjusted by the SEC to reflect the annual change in the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics; and (ii) 10% of such investor’s annual income.
When Congress passed the Act, lawmakers left it up to the SEC to determine the mechanics of how such transactions will actually work. The SEC started taking public comments in May.
In that the SEC has 270 days to implement the regulation; your company will not be able to use the Crowdfunding exemption until early 2013. Until then, federal and state securities law prohibitions remain in place against publicly accessible Internet securities offerings.
State Law
New Hampshire based companies or companies looking to raise money in the state must continue to comply with the current state securities law requirements. The Act only exempts equity offerings from federal securities law registration requirements. Also, the requirements of federal and state securities laws regarding disclosures, including disclosures of all material facts and risks to investors, will remain in place.
Issues to Consider
1. Prior Raises
If your company has raised more than a $1 million in the last 12 months, then your company will not qualify for the crowdfunding exemption.
2. Disclosure Requirements
The Act does not relieve your company from disclosure requirements. The requirement to disclose all material facts and risk factors to investors will remain in place. Failure to do so may expose your company to liability for securities fraud, private lawsuits and administrative enforcement actions.
3. Brokers/Dealers
Be aware of anyone or any company offering to collect a fee in exchange for help in raising capital over the Internet. Because the Act has not been implemented, such offers could be a scam, preying upon those entrepreneurs less familiar with the Act’s requirements
4. Communication Plan
Communicating with hundreds of “owners” may distract management from devoting the time and energy that is necessary to run a successful business. Your company will need an effective communication plan.
5. Keeping Your Secrets
Some companies don’t want to share a business plan or idea without requiring a non-disclosure agreement. However, your company will need to give potential investors enough information to make an informed decision and to allow the potential investor to preform their due diligence: company name, address, information about the management team, a business plan and description of the business, and the intended use of the funds raised must still be disclosed.
6. Financial Disclosure
If you don’t want your competitors to see how your company is doing, then you may not want your financials made public. But if you Crowdfund, you may need to provide different amounts of financial information to your investors depending on the amount you are attempting to raise.
7. You Still Need Professional Advice
The investments you receive through Crowdfunding will be for equity in your company, so you will need to have a lawyer structure the deal and set up the necessary funding documents. It would be ideal to have a Private Placement Memo that would disclose all of the risks to potential investors.
8. Up-Front Costs
There are a lot of costs that you will incur before placing your opportunity online for potential investors. If you are only raising a small amount, the Crowdfunding may not be a cost effective option.
Paul D. Creme is an attorney with Hamblett & Kerrigan PA. His practice is focused on business and corporate law. Of particular interest are the areas of software and emerging technologies. You can reach Attorney Creme at pcreme@nashualaw.com.
]]>