2. It is important to know the local commercial rental market by talking to other tenants and commercial real estate brokers in the area. For example, do you know what the current market is in the area for comparable rent and common area maintenance?

3. A tenant should consider more than one space that will meet their businesses needs. You are negotiating from a weak position when only one space is considered. If you can not successfully negotiate terms with one landlord, you may be able to come to better terms with another landlord.

4. It is important to understand the terminology of the lease so you are clear on what you are agreeing to. A good real estate attorney can review and summarize the lease with you so you have a basic understanding of the many commercial provisions typically included for landlords and tenants.

5. A tenant should know what their total cost will be to lease a space, and what their obligations would be if they are to default on the lease. Some commercial leases are called net leases and require a tenant to pay additional monthly charges for taxes, insurance and common area maintenance; other leases are based on gross rents and are all inclusive of rent and operating expenses.

6. The term of the lease is important. If you are starting a new business, it may be best to have a shorter term lease. If you are an established business, than negotiating a longer term lease may offer opportunities for landlord concessions. A longer term lease eliminates the need and expense of re-leasing the property and ensures a more stable income for a property owner.

7. It is often necessary to make improvements to a space so that it fits your particular business needs or meets a franchisor’s requirements. A landlord may be willing to negotiate some of these costs improvements, alterations, renovations, or remodeling costs with a tenant. This is called the build out, or tenant improvements, of a space.

8. Most commercial retail leases include terms about the permitted use for the space. It is beneficial to negotiate broad usage terms in case the business expands or another tenant sublets the space.

9. Negotiating the right to sublet or assign a lease to another tenant is a valuable business strategy. If a business owner eventually wants to sell their store, business of franchise, the ability to assign the lease or sublet the space to another tenant will offer flexibility for future plans.

10. Landlord’s obligations must be written, there is no “implied” duty to repair in commercial leases. And tenant’s obligations must also be clearly set out. There are many details in a commercial lease that should be addressed regarding maintenance and repairs the of the leased premises, building, building systems and common areas. A landlord should be obligated to minimize interference with a business. It is helpful to negotiate the right to do critical repairs in the leased premises.

This article may not be reproduced in any form without the permission of Holden Law Firm. © Copyright 2012 Holden Law Firm. All rights reserved.

The principled negotiation method is a helpful tool to anyone seeking an approach to deal with conflict resolution. The book is a theoretical framework for dealing with negotiations, but is practical and the techniques taught in the book can be used by anyone. Whether you are negotiating a contract for your business or trying to negotiate a raise with your boss this method of negotiation would be effective.

The book argues convincingly that thinking of negotiations as either winning or losing is not an effective strategy, but rather seeking a win-win negotiation strategy will be more successful and effective. The authors support their arguments with examples from international political crisis, union negotiations, landlord and tenant disputes, and other disputes to illustrate how principled negotiations have been successful or how positional negotiations have resulted in further difficulties. The authors state the greatest benefit of using principled negotiations is it results in better relationships between the negotiators and the examples illustrate this.

This article may not be reproduced in any form without the permission of Holden Law Firm. © Copyright 2012 Holden Law Firm. All rights reserved.

In determining whether to enforce a non-compete agreement or provision, the court balances the employer’s interest in protection from unfair competition against the employee’s right to earn a livelihood.  If the employer’s interest outweighs, the non-compete agreement is valid and enforceable.

Minnesota courts will review the facts of each case to determine if a non-compete is valid and enforceable. The first thing to determine is whether the employer provided the employee with adequate consideration for the non-compete. Consideration means the employee received something in return for signing the non-compete. If the non-compete agreement is entered into at the beginning of the employment relationship, the promise of employment will be considered adequate consideration to make the agreement valid.  If the non-compete agreement is entered into after the employment relationship begins, it is not valid unless the employer provided some additional consideration, which would be additional money or another benefit to which the employee was not otherwise entitled. 

Second, the Minnesota Courts will review whether the non-compete protects a legitimate business interest.  A non-compete clause will be held valid if it is necessary for the protection of the business or goodwill of the employer and is not broader than necessary to protect this interest. 

The types of legitimate business interests that the courts have said are permissible to protect by a non-compete include protecting an employer against an employee capitalizing on the relationship established with the employer’s customers.  Other legitimate business interests that have been protected by a non-compete include preventing the disclosure of confidential information or the potential disclosure or disclosure of trade secrets.  Finally, employers may protect any specialized investment or training that they provide to their employees with non-compete agreements.  The employer must show that it provided the employee with extensive and specialized training. In all cases the court must find that the employer will be irreparably harmed if the business interest is not protected before the non-compete will be held valid and injunctive relief granted.

The third issue the courts review to decide whether a non-compete is enforceable is whether the non-compete is not more restrictive than reasonably necessary to protect the employer’s business given the nature of that business, and the extent of the duration and the geographic scope of the restraint.  If the non-compete is not for a reasonable duration and a reasonable geographical area, the non-compete may be held to be overly broad and not valid and unenforceable.

Almost all non-compete cases are decided in the context of a motion for either a temporary restraining order (TRO) or a temporary injunction.  The courts will decide if the employee should be prevented from engaging in competitive activities and may award damages including, in certain cases, legal expenses.

If you have questions about non-competes, you should contact an employment attorney.

This article may not be reproduced in any form without the permission of Holden Law Firm. © Copyright 2012 Holden Law Firm. All rights reserved.

Many solo business owners chose to forego filing as a Limited Liability Company or creating a Corporation, and instead operate as a sole proprietorship.  If your business is owned and controlled by one person and you do not file with the Minnesota Secretary of State, you will be considered by default to be a sole proprietorship unless you start working with a partner.

As a sole proprietor, you are personally liable for the debts and losses of your business.  An owner of this type of business can lose their personal assets in a lawsuit.  There is also less credibility since your business does not have the prestige of having “Inc.” or “LLC” attached to your name.  Many small businesses are choosing to form an “LLC” Limited Liability Company because of the ease of forming this type of entity and the insurance and prestige that it provides.  A Minnesota LLC is governed by Minnesota Statutes Chapter 322b.

The LLC is fast becoming the entity of choice for closely held businesses in Minnesota and throughout the United States.  The LLC provides easy management, limited liability protection and pass-through taxation.  The LLC may have one or more owners who are called “members.” Members of the LLC own a pro-rata share of the LLC, and therefore have rights to a pro-rata share of the LLC’s profits and losses.  Members may elect a manager to run the LLC.  The manager may be a member or a nonmember, and can be an individual or separate entity.  Most states do not restrict ownership and members may include individuals, corporations, other LLCs and foreign entities. There is no maximum number of members for an LLC.  Be advised that there are special rules for foreign LLCs.

In order to form an LLC, you must first file the “articles of organization” with the Minnesota Secretary of State and pay a filing fee of $160.  The LLC is created once the articles are filed. The articles of organization must disclose certain basic information, including the LLC’s name (which must contain the words “limited liability company” or the abbreviation “LLC”), the address of the company, along with the names and addresses of each organizer, and the period of existence of the LLC if other than perpetual.  The LLC must register with the Minnesota Secretary of State annually.  A Minnesota LLC that fails to file their annual registration is administratively terminated. Foreign LLCs (those organized under LLC statutes of other states) will have their authority to do business in Minnesota revoked.

The main benefit to forming a LLC is to obtain the “limited liability” so that if the owner of the business is sued for something related to the business, only the business assets are at risk and the owner’s personal assets are protected.  The LLC would be liable rather than the small business owner and the small business owner’s assets such as home, car and personal assets are protected from any judgment.

In certain circumstances, a creditor or other litigant may try to impose personal liability on the business owner by claiming that the LLC is a sham and was created merely to defraud creditors, or is being run as a sole proprietorship and has commingled funds of the LLC and the business owner.  The process of imposing personal liability is referred to as “piercing the corporate veil,” or disregarding the corporate entity. For these reasons, it is wise for the LLC to obtain a business banking account separate from the business owner’s personal banking account and not commingle funds. The LLC should also obtain a federal employer identification number FEIN and a Minnesota Tax ID.

LLC’s can elect to be taxed as a sole proprietorship, a partnership, a corporation, or an S-Corp, as long as the LLC meets legal requirements and files the proper documentation.

A domestic LLC with only one member is disregarded as an entity separate from its owner and must include all of its income and expenses on the owner’s tax return.  This is called a pass-through entity.  Pass-through taxation means that unless the LLC chooses to be taxed as a corporation, it will be taxed as a sole proprietorship or a partnership. Pass through taxation means that the company itself does not have to pay taxes to the IRS, unlike a corporation which receives a double taxation.  Instead, each owner of the company will report their own profits or losses in the company on their tax returns.

A domestic LLC may file IRS Form 8832 to avoid either default classification and elect to be classified as an association taxable as a corporation.  If the LLC is eligible to be treated as a corporation that meets certain tests and wants to elect to be treated as an S corporation, it must timely file IRS Form 2553.  The LLC is like a corporation with fewer formalities.  The LLC is not required to hold board meetings, shareholder meetings, or prepare minutes that a corporation has to.

LLCs are not required to hold annual member meetings or manager meetings.  However, an LLC may chose to require such meetings in what is called the Operating Agreement. The Operating Agreement of the LLC is the equivalent of the bylaws of a corporation and determines how the LLC is governed.  LLCs are also not required to distribute an annual report to members advising of the status of the business.  However, LLC’s must make information available to members upon request.

By letting a corporation attorney set up a limited liability company for you, you will create a legal barrier between your business and your personal assets.  As a business owner, you can protect your personal assets and property, but you must take the appropriate actions. There are many laws which govern a Limited Liability Company that can seem very complex to the average person.  A business lawyer can discuss your options and help you start your business the proper way.  Our business attorneys are experienced in business law and can help you form a LLC and can also assist you with contracts, leases and employment law issues as your business grows.   

This article may not be reproduced in any form without the permission of Holden Law Firm. © Copyright 2012 Holden Law Firm. All rights reserved.

A lawyer can assist you with the preparation of your legal documents, and may even use a service to help file the documents, but contacting an attorney when you begin your business is a good way to develop a relationship with an attorney who can assist your business in avoiding potential trouble down the road.

The reason a small business should use an attorney as opposed to an online legal document service is that using an attorney can help with the process of starting a new business by assuring that the on-going legal requirements to maintain the corporation status are completed and maintained. Annual shareholder, director and partner meetings need to be held, and recording of minutes and election of officers must conform to state requirements. Failure to do these things can jeopardize corporate status and result in “piercing of the corporate veil” in the event of a lawsuit or other legal action, exposing corporate officers to personal liability or other legal problems.

This article may not be reproduced in any form without the permission of Holden Law Firm. © Copyright 2012 Holden Law Firm. All rights reserved.

As an employer, you want to conduct an internal investigation that is thorough, expeditious, discreet and confidential, so you can take an action which responds to the problem without exacerbating the situation.  There are a variety of ways to investigate an employee complaint in the workplace, but following certain general guidelines can assist your company in developing an investigation policy.  

Here are ten guidelines to consider when investigating employee complaints:

1.  Develop Policies and Procedures for an Internal Investigation:

The first step is to establish policies and procedures for investigations so that all investigations are uniform.  This should include an understanding of who is in charge of the investigation, who will receive the investigation report and who will make conclusions about the investigation report.  It should be determined who will follow up on corrective action or discipline, and if any training is deemed necessary based on the conclusions of the report.  Conducting regular training for employees and managers on company policies prohibiting discrimination and harassment in the workplace can prevent claims.  Finally, there should be a policy about where and how long the investigation report, investigation interviews and documents are kept.

2.  Choosing the Investigator:

The second step to addressing employee complaints is to have an objective person conduct the investigation.  The person conducting an investigation needs to be credible, respected, and regarded as fair and impartial. One of the most difficult aspects of an internal investigation is obtaining an impartial investigator, because the parties may be too personally involved.  The parties may have known each other as colleagues, manager/employee or co-workers, and have impressions and personal biases of each other making it almost impossible to conduct an objective investigation.

In some circumstances, such as when the manager is the alleged offender or if the manager had many problems with the complainant, it is a good idea to use a manager from a different department or an outside investigator to investigate the complaint.

It is advisable to have someone investigate the matter who is not involved in the workplace dispute.  Sometimes this is not feasible given the size of a company, but if possible, having an objective point of view can help the employer determine how to resolve the problem.

3.  The Investigator Needs to Know Employment Law:

The person conducting the investigation needs to be credible, respected and regarded as fair and impartial, but also knowledgeable about company policies, practices and employment law issues.  The investigator must be familiar with the state and federal employment laws.

Investigators will need to identify potential witnesses and documents for review in an efficient manner.  If the investigator is not familiar with the employment laws, they can make the matter worse by investigating matters which do not need to be investigated; or unnecessarily interviewing witnesses and wasting the company and employees’ time.  If the investigation is not done timely and efficiently, it can be a distraction to employees, lead to gossip, cause morale problems and slow down production.

4.  The Investigation needs to be Timely:

The fourth step to conducting an investigation into employee complaints is to begin and complete the investigation in a timely fashion. The employer needs to start an investigation, talk to the complainant and the alleged offender and any alleged witnesses, and reach a conclusion based on the investigation in less than sixty days. This will help avoid many lawsuits filed by employees.

Many employment lawsuits result because the employer does not act in a timely fashion when an employee complaint is received.  Many employers begin an investigation, but don’t tell the employee who filed the complaint that any action has being taken.  It is good practice to advise the complainant in writing that an investigation is underway, and that the employee will be notified when the investigation is completed.  The employee can and should be contacted shortly after they file a complaint and an interview scheduled.  The alleged offender should also be given reasonable notice before being interviewed as well.  The witness should be contacted, and an interview scheduled in a timely manner.  It is not a good practice not to give notice to employees who are being interviewed.

Most investigations should be concluded in less than sixty days.  There are rare circumstances where an investigation will last over sixty days, such as complaints that involve documentation of FMLA violations or where there is a need to compile, review and analyze a large amount of documentation.  In those circumstances, the employee who made the complaint should be contacted every thirty days and notified that the investigation is still on going.

When the investigation is concluded, notify the complainant that the investigation has been completed and the matter was handled appropriately based on the conclusions of the investigation.  If an investigation is inconclusive, provide an explanation of why further investigation is not merited or why the investigation is inconclusive. The more responsive the employer is in handling the complaint, the quicker the company can get back to its business.

5.  Encourage Cooperation:

An iinvestigator needs to encourage cooperation. The investigation process is for the purpose of resolving a complaint, not to discipline or punish poor performing employees. The employees need to know that this process is to resolve legitimate complaints and not to make false claims or to retaliate against other employees.  The investigator must create an atmosphere where employees feel it is in their interest to cooperate and to tell the truth.  All employees should be told that the investigation is a company investigation, and failure to provide honest and truthful statements or to provide misleading information can lead to discipline.

6.  The Investigation needs to be Confidential:

Make certain any investigation is done in a confidential manner.  The witnesses should be told that the investigation is confidential and they are expected to keep the investigation confidential, and that a breach of confidentiality can lead to discipline.

All witnesses must be made aware of the importance of keeping the investigation confidential, and the ramifications in the event the investigation is not kept confidential. It is important that employees not gossip about the investigation or talk to each other to compare answers to the investigator’s questions.

In an initial letter to the employee telling them you are investigating the complaint it is important to tell the employee to keep the matter confidential, and not to speak to anyone other than an appropriate manager or union representative.  The employee can also be told that any discipline issued as a result of the investigation will be kept confidential. Confidentiality is important in order to avoid claims of defamation and to insure the integrity of the investigation by minimizing any disruption to the workplace.

7. The Investigator’s Report:

The seventh step in responding to employee complaints is developing a record which can be reviewed a year from the investigation to understand what the complaint was, what was done to investigate it and what conclusions were made as a result of the investigation.  Each step of the investigation needs to be documented by the investigator. Many managers who investigate employee complaints waste time talking to employees, and never documenting anything that was said.

The investigator needs to keep good notes documenting each step of the investigation. The report that is put together should include the following:  A summary of the allegations made; which witnesses were interviewed by noting who was present, including dates and position of the employees interviewed; a list of documents reviewed; an executive summary; the body of the report setting forth the facts and what the witness said along with conclusions for each allegation; and a summary of the findings.  Finally, the employer needs to document that it took appropriate remedial action if an allegation is substantiated.

8.  The Investigator Needs to Gather Facts:

The investigator can best obtain facts by avoiding questions that are confrontational, argumentative, leading, judgmental or opinionated. The investigator should use open ended questions to allow the person tell their side of the story.  The investigator needs to make sure they don’t get just one side of the story, but rather obtain responses to all allegations made.  It is helpful to have the complainant fill out a complaint form, but this is not mandatory.

Some investigators begin the interviews with the complainant. This may be appropriate if there is a written complaint and the investigator knows what the issues of the complaint are. However the complaint is vague and broad in many situations. The complaint may say, “I was discriminated against by my manager when I was disciplined for my attendance.” In this example, it will be helpful to interview any managers of the complainant first before actually interviewing the complainant so you know the dates and policies involved.  It is also advisable to explain to the complainant that a follow up interview may be necessary.  An investigator should not disclose any witnesses who have been interviewed, or the order of the interviewees.

The investigator should take careful notes of each interview and ask questions several different ways to ensure each witness’s side of the story is fully understood. The investigator must ask the complainant about all relevant allegations and not assume answers while remembering that the investigation is to document what was said and to assist the company in resolving and documenting the investigation. The investigator who gathers the facts, and keeps everything in their head and then comes to you and saying they solved the problem is of no help.  The employer needs to document what it did to investigate the matter.

9.  No Retaliation Allowed:

The ninth step to investigating employee complaints is to ensure all participants know there is zero tolerance for retaliation against someone making an allegation or against any other employee.  It is important to tell employees interviewed that the company has a policy to investigate all complaints, and this is the process to resolve employee complaints.  Inform employees that under no circumstances should employees retaliate against someone for making a complaint. The employees must be advised that if an employee feels retaliation, or if an employee retaliates against someone else, they may be disciplined.

10.  If Discipline is Implemented, Ask Questions:

Always ask six questions at the conclusion of the investigation. After reviewing the investigation file, there should be answers to these questions: 

• What were the allegations made by the employee?
• What were the facts involved with regard to each allegation?
• Did the facts substantiate, not substantiate or was there not enough evidence to substantiate or not substantiate the allegations and why?
• Were there any violations of company rules, policies or procedures?
• What action was recommended and was that action taken.
• If discipline action was taken, was the employee treated similarly to other employees in accordance with the company policies and procedures?

Addressing these questions ensures that employees are treated in a consistent and fair manner.  If an employer makes a decision that leads to a possible termination, it is advisable to have another manager outside the complaint review the file to determine whether these questions can be answered by looking at the file.

These are ten important guidelines to consider when handling employee complaints. These are general parameters, and will not guarantee that an employee who files a complaint would sue the company - even if you follow these guidelines.  But the company’s response to employee complaints can mean the difference between resolving an employment issue in a couple of months, or spending the next three years paying attorneys, and possibly a former employee, ten times what it costs to do an investigation of the complaint.

This article may not be reproduced in any form without the permission of Holden Law Firm. © Copyright 2012 Holden Law Firm. All rights reserved.