Category Archives: Legal

Calling All Lawyers – Network and Earn 1 Illinois MCLE Credit Hour


Last month the SBAC made history. The Lawyers Community held its first accredited Continuing Legal Education (“CLE”) event, with over thirty lawyers in attendance. On April 24th, we will host our second such event, featuring a presentation by SBAC member Stacey Kalamaras entitled, “Counterfeit Goods: The World’s Largest Illegitimate Industry.” Register today because space is limited!

The Lawyers Community is made up of a diverse group of lawyers, who meet on a monthly basis. SBAC Board Member and attorney, Marc Blumenthal, attended the March CLE luncheon and believes that the success of this event can be duplicated across other industries and ” showed that when an SBAC member has an idea about how to add value to the SBAC membership, and that idea turns into reality, the SBAC and those attending benefit.” It was a win-win and an opportunity for all the talented leaders and entrepreneurs in our membership.

Have an idea for an event that can bring value for other SBAC members in your industry? Contact SBAC Membership Director Kathi Quinn at kathi@sbacil.org.

Illinois Senate’s Surprising Failure to Override Governor’s Veto of Equal Pay Bill


ILLINOIS SENATE’S SURPRISING FAILURE TO OVERRIDE GOVERNOR’S VETO OF EQUAL PAY BILL
By: Jason Tremblay

As a follow up to a previous post, Illinois Equal Pay Act Likely to be Amended to Prohibit Salary History Inquiries, and in a surprising turn of events, the Illinois Senate did not overturn Governor Bruce Rauner’s veto relating to an amendment updating the Equal Pay Act of 2003 that would, among other things, prohibit employers from inquiring about the salary history of applicants. This amendment was aimed to mitigate the gender wage gap by eliminating the practice of “low balling” compensation for female applicants.

The Senate voted 29-17, which was far less than when the measure was first called in May. The measure had originally received 35 votes. In comparison, the House overrode the Governor’s veto by a much larger margin.

As such and at least for now, this law is not going to take effect. However, similar laws have been passed in other jurisdictions and there is an increasing trend to amend or enact laws to restrict the ability of employers to inquire about an applicant’s wage history.

Jason Tremblay is a partner at Saul Ewing Arnstein & Lehr LLP. Jason.Tremblay@saul.com

Protect Your Business & Employees from Sexual Harassment


PREVENTING SEXUAL HARASSMENT AT YOUR BUSINESS
By: Arthur  Ehrlich

As allegations of sexual harassment dominate headlines from Hollywood to the State Capitol, it is important to understand what actually constitutes sexual harassment and how to protect your business and employees.

Sexual harassment generally falls into two categories: quid pro quo sexual harassment, when a supervisor suggests that the employee may receive a benefit or favorable treatment in exchange for a date or sex, or harassment in a hostile environment, when there are repeated comments of a sexual nature or uninvited touching, which are deemed offensive to the employee.

Keeping this definition in mind, in addition seeking an experienced legal professional at the first hint of any potential issue, here are five tips to protect your business and employees from sexual harassment:

  1. Enforce a ZERO Tolerance Policy.  A single joke may seem innocent and the employee not appear to be offended, but tolerating a single incident encourages others to make similar comments, which ultimately creates a hostile environment.
  2. Provide Training to All Staff. Regularly educate your staff on what actions and statements might be construed as harassment and about other types of illegal discrimination. Provide a clearly written anti-harassment policy so employees understand what behaviors are prohibited.
  3. Set an Open Door Reporting Policy. Create an open reporting system that allows for employees to make any complaints of harassment. Designate who complaints can be made to and set up an anonymous hotline if possible. Employees should also be encouraged to report harassment of another employee.
  4. Establish Effective Internal Investigation Procedures.  It is imperative that a well-trained person investigates the complaint ASAP. The investigator must be fair, impartial and open minded. Failure to perform an effective and prompt investigation will result in a lawsuit. Any inappropriate act should be dealt with through appropriate discipline.  Separate the employee from the alleged harasser but not in a way that might inconvenience the employee.
  5. Take a Firm Stand on Any Hint of Retaliation. Transferring the employee might be seen as retaliatory even if done to separate her from the harasser. Be very careful before disciplining the employee in the future unless it is unequivocally justified.

Arthur Ehrlich is a partner at Goldman & Ehrlich, which primarily practices employment law.
Arthur@GoldmanEhrlich.com

Protecting Your Business from Wrongful Termination Lawsuits


STRATEGIES FOR PROTECTING YOUR BUSINESS FROM WRONGFUL TERMINATION LAWSUITS

By: Arthur Ehrlich

Employees who believe they were terminated unfairly or without prior warning are likely to file a lawsuit. Although Illinois is an “at-will” employment state, an employer cannot terminate employees based on disability, sex, pregnancy, race, or any other “protected” classification.  A failure to treat an employee fairly may create a perception of discrimination which can lead to expensive litigation even if the employer feels the termination was warranted.

While an employer may believe there are strong reasons for termination, discrimination is often based on circumstantial evidence. For example, you may believe you terminated a female employee for chronic absenteeism, but she may believe it was due to her race or gender, especially if Caucasian male employees had several absences and were not terminated. An employer may terminate an older employee for low productivity not knowing that there may be good reasons for this, while younger employees with productivity issues remain at work.

Employers cannot eliminate the risk of a lawsuit, but certain steps can reduce that risk and minimize the likelihood of a successful wrongful termination lawsuit:

1) Create and distribute written policies to employees which include reasonable expectations about conduct and performance. Employees should sign forms noting they read and understand these expectations.

2) Enforce your policies fairly and consistently: This is your best defense against discrimination claims. Disciplining one employee differently than another for similar violations, constitutes disparate treatment which is evidence of discrimination. Eliminate these risks by enforcing your written policies in a consistent manner.

3) Keep records of employee disciplinary issues: It is easier to justify terminating an employee for excessive absenteeism or poor performance if you discuss and document these issues with the employee and give written warnings about continued performance issues or violations of company policies. Have the employee acknowledge in writing that the issue was discussed. Be consistent in documenting these matters for all employees.

Arthur Ehrlich is a partner at Goldman & Ehrlich, which primarily practices employment law. Arthur@GoldmanEhrlich.com

Two qualities to consider when selecting a family law attorney


I think two qualities are absolutely critical when selecting a divorce or child custody attorney (and likely any attorney). Honestly, there have been times in my legal career where I did not abide by both of these traits and the quality of legal services that I provided was far inferior to the quality of legal representation that our firm currently provides.

  • First, the law firm should have a team of people with different strengths in order to ensure that the cases are resolved in the fastest time possible . In my opinion, the “sweet spot” for law firms in the family law practice area is a law firm that employs 2-5 attorneys The big problem with sole practitioner attorneys is that cases being handled are not pushed to move. Family law matters do not move unless the attorneys in the case PUSH them. If there is one attorney with no support staff, who is overwrought with cases, he/she does not have the capacity to push the cases, and then one’s case will just plod along from court date to court date with a resolution not in sight. I had a case last week in Chicago involving the enforcement and modification of child support that should have been completed in one hour. Instead, the opposing sole practitioner attorney was scrambling between three different cases in multiple courtrooms this caused the case to drag on for six hours. Surely this sort of one-attorney scrambling around is not the best thing for a client in terms of results and expense (if the lawyer is billing by the hour).
  • Second, narrow and focused practice areas are a must. I practice divorce and child custody law and matters that stem from those two areas…period. As we state on our website: Family law in the 21st century is far too complex to entrust your case and your life to an attorney who is not a specialist; our attorneys practice only family law. I just finished-up a relatively simple divorce case where the opposing attorney was not focused solely on family law matters. Due to this, the case took longer, was more expensive for both parties, and the final legal result was likely much worse for both parties. I had to do all the work and then basically explain how to do things to the opposing lawyer. The opposing lawyer was not much help at all, and due to his lack of focus needed when dealing with family law, both parties were not able to achieve what they had hoped for.

Peter R. Olson, Attorney at Law, advocates on behalf of individuals, families, and children during adoption, dissolution of marriage, and parentage cases often involving child custody, intricate property issues, the elderly, and persons with disabilities. Peter is an Allied Attorney with the Alliance Defense Fund where he provides pro bono representation on behalf of persecuted Christians. He’s a graduate of both Winona State University (MN) and the Southern Illinois University School of Law.

Peter R. Olson


Peter R. Olson, Attorney at Law, advocates on behalf of individuals, families, and children during adoption, dissolution of marriage, and parentage cases often involving child custody, intricate property issues, the elderly, and persons with disabilities. Peter is an Allied Attorney with the Alliance Defense Fund where he provides pro bono representation on behalf of persecuted Christians. He’s a graduate of both Winona State University (MN) and the Southern Illinois University School of Law.

Overregulation


In light of the myriad of political controversies and the upheaval of the financial regulatory system, the issue of over-regulation in the financial sector has become of great concern to corporations. The issue of over-regulation and its practical effect on businesses is an important one for RCM clients I wanted to take the time to delve a little deeper into this issue. I have found that our clients, particularly small and mid-sized entities, face several hurdles in capital raising and that the regulatory climate can prove particularly challenging. Specifically, I am interested in the question of whether capital raising requirements and the subsequent required disclosure is overly burdensome to small and mid-sized companies.

Presumably, the primary intent behind disclosure and government regulation of such businesses is consumer/investor protection and transparency. That is, the goal is to ensure that companies are what they purport to be. In this way, by relying on say, a financial statement of a company, investors, particularly public and non-institutional investors, can be assured that the company is being honest. Admittedly, the public needs some degree of protection. There are many material facts, which only insiders of companies are privy to and thus it seems only natural to ensure some degree of accuracy. This is especially true when smaller companies are looking to raise capital through equity. Moreover, smaller companies may not be able to look to institutional and savvy investors to extend funding in the same way that a larger, more established company may be able to.

Given that the public ought to be protected to some degree, the obvious question is: How much protection does the public need and how much should businesses have to sacrifice in order to afford this protection? On the one hand, smaller companies might seem to be especially likely to mislead the public. They are not inherently transparent by way of the internet’s immediate dissemination of information in the same way in which a publicly traded company might be. Without any regulatory protection, the average member of the public may not be able to Google a small company and come up with daily, material information. Aside from a Better Business Bureau report and perhaps a few consumer complaints, desired information might be tough to come by. This would suggest that these companies should be regulated significantly in order to deter small business owners from taking advantage of less experienced investors.

On the other hand, there are serious costs related to complying with all the meticulous requirements. Obviously, small businesses are less likely to be able to afford such costs. Thus in a somewhat indirect way, perhaps small businesses would be more likely to grow financially if they could eliminate the cost of compliance. Note that these are not simply financial costs. Indeed there are costs to hire an accountant or attorney to ensure compliance. Yet there is also an economic cost of time. Generally, complying with these specific guidelines requires careful review. It also might require some form of reliance upon the government, which can amount to a very painful waiting game. As anyone who has visited the DMV knows, the wheels of government spin especially slowly.

Balancing the need to protect the investor that is dealing with a small and relatively opaque company with the needs of business owners who have been inhibited from effectively operating their companies due to compliance burdens, is the key to effective regulation. Yet, from a legal perspective, we also should be analyzing the extent to which a public investor should be granted the right to act on their own volition. With the exception of fraud cases (which of course have their own, separate remedies), investors are not forced to give capital to companies. Given that most investments are inexorably risky, maybe the focus should shift away from the smaller companies to the investors themselves. Perhaps the government could donate more time towards educating inexperienced investors as to why they should be careful and how to assess risk.

Moreover, we reiterate the phrase caveat emptor (or “buyer beware”). While I certainly recognize that not every member of the American public is well educated, I look to casinos and the gaming industry for guidance. Anyone over 21 can gamble at their local casino. There are few, if any, limits on how much the average casino enthusiast can bet and spend. In fact, no prior gambling experience is required to sit down at the blackjack table. So long as the investor or gambler has funds sufficient to keep playing, his cards will keep being dealt. The point is- we recognize that all bets are risky and we place at least some faith in the public for knowing their own limits and assessing their own risks. I fail to see how, at its core, investing in a small company is much different from playing blackjack. While the stakes can be higher, the observable risk is not only apparent but obvious.

In closing, I posit that small businesses could benefit significantly from a reduction in government regulations concerning investment and capital raising. The current scheme of over-regulation has hindered the growth of small businesses and has put a huge emphasis on the protection of investors with very little empirical evidence that such protection is warranted or that it outweighs the associated costs. Without the overly burdensome compliance requirements, small and mid-market businesses could more readily raise capital and would be able to open their doors to a new and eager class of investors. Furthermore, business would be able to reduce a significant and, most importantly, an ongoing cost. This may just be a situation in which our practical, economic views should trump our ideological concerns.

Pete Hoglund is a third-year law student at the Depaul University College of Law and has always had an interest in the small business world. He also interns at Reliance Capital Markets in Chicago. Pete can be reached at petehoglund@gmail.com with any thoughts, questions, or concerns.

Favorable Expensing and Depreciation Rules for Businesses Extended


On January 2, 2013, President Obama signed into law the American Taxpayer Relief Act of 2012 (the “2012 Act”). Included in the Act were extensions of favorable rules for depreciating and expensing certain business assets that had been in effect in 2011 but were limited in 2012 and set to expire on January 1, 2013. These provisions were described in “2011 Year-End Tax Planning Opportunities for Small Businesses” available here.

179 Deduction. During taxable years beginning in 2012 and 2013, businesses now are allowed to deduct, rather than capitalize, up to $500,000 of the cost of machinery and business equipment, computers, computer software, office furniture and equipment, and certain business vehicles purchased during the year under Internal Revenue Code Section 179 (the “179 Deduction”). The 179 Deduction is available for used property as well as new property and also for off-the-shelf computer software. The 179 Deduction also can be taken on up to $250,000 (of the $500,000 deduction limit) of certain real estate purchases. This category includes qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement property (collectively, “Qualified Real Estate”). However, certain limitations remain in place. First, the deduction phases-out as a business spends more than $2 million on qualifying purchases. Second, the deductions cannot be used to cause or increase a tax loss (i.e., the business has to be profitable during the year). All of these provisions had been reduced or eliminated in 2012 and 2013, but all of them have been extended retroactively under the 2012 Act to cover tax years 2012 and 2013. Starting in 2014, the 179 Deduction limit is scheduled to drop from $500,000 to $25,000, the phase-out drops from $2 million to $200,000, and Qualified Real Estate and off-the-shelf software will no longer be covered.

Bonus Depreciation. The 2012 Act also extends into 2013 certain favorable accelerated depreciation rules that were effect in 2012. Business are allowed to depreciate 50% of the cost of new property purchased in 2013 (effectively the same as deducting the purchase price). The property must either be Qualified Real Estate or qualify for depreciation under normal depreciation rules and includes things like buildings, machinery, vehicles, furniture, and equipment, as well as “intangible property” like patents, copyrights and computer software. Bonus Depreciation is not subject to the $500,000/$2,000,000 limitations of the 179 Deduction. Bonus Depreciation will expires in 2014, when the normal depreciation rules go back into effect. Unlike the 179 Deduction, Bonus Depreciation can create a net operating loss which can be carried forward to future years or carried back to prior years (which could result in a refund).

The 179 Deduction and Bonus Depreciation may be combined, but there is an ordering rule for applying these incentives. The 179 Deduction is considered first, followed by Bonus Depreciation, and then by regular depreciation. This can be illustrated by an example in which a business buys two pieces of machinery, one new and one used, for a price of $1,000,000 each. For the new machinery, the taxpayer can claim a 179 Deduction of $500,000 and Bonus Depreciation of $250,000 (50% of the $500,000 cost basis remaining after the 179 Deduction). The remaining $250,000 would be depreciated over a number of years under regular depreciation rules. For the used equipment, the taxpayer would be limited to a 179 Deduction of $500,000, with the remaining $500,000 cost basis depreciated under regular depreciation rules.

The information described herein is of a general nature, based on information currently available, and should not be relied upon to make planning, purchase, sale, or exchange decisions without seeking personal professional advice.

CIRCULAR 230 DISCLOSURE: Pursuant to the regulations governing practice before the Internal Revenue Service, any tax advice contained in this communication is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding tax penalties that may be imposed on the taxpayer. Further, any tax advice contained in this communication is not intended or written to support the promotion or marketing of the matter or transaction addressed by such tax advice.

Adam J. Grais, Partner, Sugar Felsenthal Grais & Hammer, LLP, advises clients on structuring business and financial transactions, including complex federal income tax issues. He represents individuals, closely held businesses, start up companies and family offices. Other law firms frequently turn to Adam as a consulting expert witness and as co-counsel for their clients’ tax matters. Adam serves on the firms management committee and is actively involved in strategic planning for the firm. Contact Adam at agrais@sugarfgh.com.

Marketplace Fairness Act Levels The Playing Field For Illinois Small Businesses


David Davis, the owner of Davis Audio & Video, is generally reserved when talking about political issues that impact his successful, family-owned, small business. However, when David talks about how difficult it is to compete with large on-line retailers, whose customers do not pay sales tax, he becomes passionate. David explains, “It is becoming increasingly more difficult for us to compete with large internet companies whose customers can avoid paying sales taxes.  Local businesses cannot be expected to compete when the price of our products is inflated by a sales tax internet companies do not pay.” 

We must level the playing field for local businesses to ensure they can survive, and thrive, in this changing economic environment. For that reason, the Small Business Advocacy Council strongly supports the Market Place Fairness Act. This bi-partisan legislation, introduced by Senators Mike Enzi (R-WY), Lamar Alexander (R-TN) and Dick Durbin (D-IL), will allow our local businesses to compete with larger companies, outside Illinois, whose customers are not burdened with the Illinois sales tax. Moreover, this legislation will raise approximately a billion dollars in revenue for Illinois without raising taxes. That revenue would be extremely valuable to Illinois, which struggles with fiscal concerns that include rising taxes and underfunded government programs.

The Marketplace Fairness Act will grant states the authority to compel online and catalog retailers, who gross more than $500,000 in internet sales, to collect sales tax at the time of a transaction. The Act will ensure that local Illinois businesses, who must collect sales taxes from their customers, to compete with large on-line retailers. Local business owners will no longer lose prospective customers to internet companies, located outside Illinois, who do not collect these taxes.  No longer will our local businesses hear this dreaded passage: It is cheaper to buy it on-line because I do not have to pay taxes.

As the system stands now, it is left up to consumers to pay taxes on their online purchases. However, many folks do not pay these taxes because reporting on-line purchases is a cumbersome process and nearly impossible for states to enforce. Naturally, the result is that our local small businesses are at a competitive disadvantage to online retailers as significant internet sales taxes go uncollected.

Congressional action must be taken before states can require on-line companies to collect and report sales taxes. Once the Market Place Fairness Act is passed, states will be required to simplify their sales tax laws before collecting these taxes. The simplification of these laws will eliminate confusion and make compliance significantly easier for large on-line retailers. Given that Illinois could receive an additional $1 billion in revenue from actually collecting sales taxes from on-line retailers, a small portion of this money could certainly be allocated to working with large on-line companies to ensure they fully understand the law.

As Illinois struggles with significant debt, a pension crisis and other fiscal problems, we cannot miss this opportunity not only to level the playing field for small businesses, but to generate badly needed revenue for the State. Business organizations, including the SBAC, have formed a coalition focused on passing this important legislation because the free market only works when it is also a fair market.

Elliot Richardson is a partner at the law firm of Korey, Cotter, Heather & Richardson, handling a variety of commercial litigation matters in both federal and state court. Prior to running for Congress in Illinois’ 10th District, Elliot’s practice included civil rights litigation. Specifically, he represented clients whose constitutional rights were violated.

Elliot has been involved in community service since his college days. Presently, Elliot serves on the Board of Directors for Childserv, a large and successful organization focused on helping at-risk children. Elliot is co-chair of the resource development committee of this organization. Elliot is also on the board of Youth Conservation Corp., a dynamic non-profit which provides training in the construction industry to at-risk children.

Elliot formerly served on the Board of Directors for Youth Communications, an organization that empowers children by teaching them crucial writing skills. He also served on the Editorial Board of the Chicago Bar Association and on the executive committee of the Young Lawyers Section of the CBA. Elliot also served on the board of the YMCA Alliance Board.

Elliot received his law degree from the University of Dayton. In law school, he was a member of the Public Interest Law Organization and received the University of Dayton School of Law Pro Bono Publico Service Award. Elliot graduated from Bradley University with a degree in sociology and criminal justice. He obtained a minor in history.

Contact Elliot directly at elliot@sbacil.org.

Legal Update on Non-compete Agreements in Illinois


Every business has money-making ideas and information they would like to protect from their competitors. With high rates of employee turnover this becomes an even bigger issue as businesses try to prohibit their employees from taking this important information with them when they leave. The question business owners ask is “How can I protect my information from being taken?” The answer is the non-compete agreement which, if enforceable, will serve to protect your important business information.

On December 1, 2011, the Illinois Supreme Court clarified and broadened the enforceability of non-compete agreements in Reliable Fire Equipment Comp. v. Arnold Arredondo. Docket No. IL 111871 (Dec. 1, 2011). The Court held that, when considering the enforceability of non-compete agreements, a court should look at the totality of the circumstances surrounding the agreement to determine whether it protects a legitimate business interest.  Prior to this determination there was much confusion in the Illinois Courts regarding how to handle non-compete agreements. Specifically, the Reliable decision rejects the previous Illinois Appellate Court holding in Nationwide Advertising Service, Inc. v. Kolar where the Court held that there are only two legitimate interests that are protectable: confidential information the employee acquired through his employment and subsequently tried to use for his own benefit and an employer’s near-permanent relationship with its customers when, but for the association with the employer, the former employee would never have had contact with its customers in question. 28 Ill. App. 3d 671, 673 (1975).

 In Reliable, the court ruled that the specific non-compete agreement at issue prohibiting the salesmen from competing in Illinois, Indiana and Wisconsin for one year after their termination was unenforceable because Reliable failed to identify a “legitimate business interest” they were protecting. In doing so Justice Charles Freeman reiterated the standard for a restrictive covenant: “A restrictive covenant, assuming it is ancillary to a valid employment relationship, is reasonable only if the covenant: (1) is no greater than is required for the protection of a legitimate business interest of the employer-promisee; (2) does not impose undue hardship on the employee-promisor, and (3) is not injurious to the public.” Id. Justice Freeman went on to restate that “whether a legitimate business interest exists is based on the totality of the facts and circumstances of the individual case.” Id. When looking at the totality of the circumstances, factors that are to be considered in such an analysis include, but are not limited to: “the near-permanence of customer relationships; the employee’s acquisition of confidential information through his employment; and time and place restrictions.” Id. No single factor is more important than any other and must be considered in conjunction with all other factors.

The Court’s decision in Reliable will result in Illinois Courts upholding more non-compete agreements than they have in the past. However, while the Reliable decision serves to clarify the state of non-compete agreements in Illinois, its broader applicability presents many questions that will likely be asked, and hopefully answered, soon. Is an employer’s reputation and goodwill a protectable business interest? What are all the factors that are to be considered? Are there any factors which would destroy or inhibit an employer’s protectable business interest? These are the questions that Illinois Courts, and business owners, will face in the near future.  

Jakub Piechnik graduated from the Earle Mack School of Law at Drexel University in December 2011 and was admitted to the Illinois State Bar Association in 2012. His studies included areas of international law while studying abroad with the Temple University Rome program. Jakub graduated from the University of Illinois in Champaign-Urbana with a B.S. in Recreation, Sports and Tourism. Jakub speaks Polish fluently and is invaluable in assisting Polish clients.