Category Archives: Miscellaneous

• posted: Feb. 09, 2016
• Hemmer DeFrank Wessels PLLC
• Uncategorized

Written By: Scott R. Thomas

Do you get bombarded with questions from employees about the same topics, over and over again?  Are you plagued with situations where information given by one supervisor conflicts with that given by another supervisor?  Are you summoned to referee disputes between employees who claim that someone is being treated differently? If so, peace awaits.  The answer is your Employee Handbook.

Many employers resist the idea of creating an Employee Handbook.  To be sure, putting it together is a lot of work.  But that work pays dividends, year in and year out.  And it can even act like an insurance policy!  First, let’s consider the advantages.

One function of the Employee Handbook is to serve as a repository for all the answers to the questions employees like to ask.  “Do we get Arbor Day off?”  “Can I take off a quarter of a sick day to go to a doctor’s appointment?”  “Why does Jeff get ten days’ vacation and I get only five?”  The Employee Handbook can be your storehouse of all the information employees need to understand the benefits they have.  Employees want to know about holidays, sick days, vacation days, outside employment, jury duty, funeral leave, breaks, meal breaks, inclement weather, paydays, and everything else you can imagine.  Put it all in one place and your knee-jerk response can be: “What’s the Employee Handbook say?”  The amount of questions you have to answer on the fly will plummet.

The Employee Handbook is a living document.  Have you ever gotten a question from an employee premised on some past action the company took, e.g., “Are we going to be let off early for Halloween like we were last year?”   Properly maintained, the Employee Handbook can grow with you and your company.  Many employers keep a log of issues that come up that were not addressed in the Employee Handbook.  The company then studies these items and decides whether the issue is likely to crop up again down the road.  If the question is likely to resurface, or there’s a benefit to memorializing the decision, it makes sense to amend the Employee Handbook to include the new policy.

All that said, the Employee Handbook is not an Employee Bill of Rights.  Of course, the Employee Handbook tells the employees things they want to know.  But it also tells them the things you want them to know: telephone courtesy, the difference between full time and part time, cell phone usage, personal appearance, etc.  If it’s important to you, put it in there.

“Must,” not “may.”  Your Employee Handbook is not the place for wiggle room.  If you want an employee to do something, phrase that task as an obligation.  Some handbooks express the employer’s desire with a gentle “should,” as in “The employee ‘should’ call the supervisor as soon as he knows he will be absent or late.”  If you want the employee to do it, phrase the obligations not as a “should do” but a “must do.”  If it’s important enough to you that you want it in the manual, make it mandatory.  If the employee falls short of the requirement, you can always decide whether—as a matter of your discretion—you want to let the employee slide.  But keep all the discretion on your side of the table, not the employees’.

“May, not “will.”  When it comes to your obligations, on the other hand, give yourself some latitude.  You don’t want to set your own obligations in concrete.  For example, there is no law that requires you to set out in an Employee Handbook such as “Every November 1, the Company will provide each employee with a written performance evaluation on which any compensation adjustments will be made.”  Say you put that burden on yourself and then an unforeseen circumstance makes it impossible to make the requirement.  A few weeks later, you get a complaint from a disgruntled employee: “The Company was supposed to give me a written performance evaluation but failed to do so; if the Company evaluated my performance, I would have gotten a raise.”  You don’t need that aggravation.  Better to say: “From time to time, the Company will evaluate your performance to give you feedback on how you’re doing” and “From time to time, the Company will adjust an employee’s compensation based on the employee’s performance, attendance, attitude, and the needs of the Company.”

Perhaps the best benefit of creating an Employee Handbook is its service as insurance policy of sorts.  A comprehensive Employee Handbook will include a section on the Company’s policy of no toleration on sexual harassment.  That section will explain what an employee needs to do if she feels she may be the victim of sexual harassment.  You tell the employee to whom a report may be made, without fear of retaliation, and with the assurance that the Company will conduct a thorough investigation and take appropriate action.  If a sexual harassment situation later becomes a full-blown lawsuit, merely having this section in your Employee Handbook will help the company establish an affirmative defense to liability.  Given that many actual insurance policies exclude coverage for sexual harassment claims, this may be the best protection available.  And the best part: you don’t have to pay any premiums.

So if you have an Employee Handbook, dust it off and make sure it says all the things you want it to say, the way you want them said.  If you don’t have one, start typing!

About Finney Law Firm, LLC

Founded in 2014, FLF has grown to 15 attorneys located in offices in Eastgate and downtown Cincinnati with five major practice areas: Corporate Law, Real Estate Law, Employment Law, Commercial Litigation and Public Interest and Constitutional Litigation.  FLF has the unique claim to three 9-0 victories at the United States Supreme Court for its public interest practice along with breakthrough class action work.

FLF also has an affiliated title insurance company, Ivy Pointe Title, LLC, that closes and insures nearly a thousand commercial and residential real estate transactions annually.

For more information about Finney Law Firm, visit finneylawfirm.com.

Media Contact: Mickey McClanahan; mickey@finneylawfirm.isoc.net; 513.797.2850.

 

• posted: Jan. 20, 2016
• Hemmer DeFrank Wessels PLLC
• Uncategorized

Written By: Scott R. Thomas

Few things have a more costly and damaging effect on all aspects of a business than a sexual harassment complaint.  Legal costs are incurred to respond to inquiries from the Equal Employment Opportunity Commission.  If the matter is not resolved there, costs escalate as the matter proceeds to litigation.  Even with federal limits, exposure under state law claims can be high, as plaintiffs plead their claims in alternative ways such as assault and battery, infliction of emotional distress, negligent supervision, etc.  Many of these claims carry the specter of punitive damages.  On top of that, most insurance policies exclude sexual harassment claims from the scope of coverage so the Company is totally exposed.  The litigation creates significant indirect costs associated with the loss of productivity of having company personnel appear in court, sit for depositions, meet with counsel, etc.   If the claim garners media attention, the cost to the business can be devastating. For all of these reasons, it becomes critical to investigate the claim properly from the moment it is made.  A good investigation will position the company for optimum results in every forum at every stage.  A shoddy investigation, on the other hand, will make matters worse and perhaps increase the company’s exposure.

Do it Now.  Since the courts require the employer to take prompt remedial action, it is imperative that the employer respond immediately to a claim of sexual harassment. Prompt investigation must be taken. In one case a supervisor delayed an investigation for one day, 24 hours, and a court held that was not quick enough. “Prompt” apparently means less than 24 hours; “prompt” means “right now.” Managers and supervisors will most often state that they have other things to do, such as get production out, respond to customer complaints, whatever, but as far as the courts are concerned, once a complaint of sexual harassment is lodged, the supervisor must take immediate action to respond.

Just Do It.  A Company who receives a complaint of harassment against must proceed to investigate the complaint, even if the complaint is believed to be false.   The investigator’s personal views on whether a factual basis for the complaint exists does not factor into the equation.  Conversely, the victim doesn’t get to call off the investigation.     The Company has an affirmative duty to investigate whenever a complaint is made, regardless of whether the victim has agreed to the investigation.   When the Company learns of sexual harassment, an investigation must be conducted even if no complaint is made.  In some cases, the victim may say they only wanted the Company to know about it but don’t want to make a “formal complaint,” whatever that is.  The victim has no veto power.  When the Company learns the facts, it must investigate.  Explain this to the victim.  This alleged violation of federal and state law must be addressed.  Understand that plaintiff lawyers know this rule and will bury a Company that ignores a sexual harassment report at the victim’s request.

Do it by the Book.    By “the book,” I mean your Company’s  Employee Handbook.  If you don’t have one, set aside the time to write one.  The Employee Handbook should set forth the Company’s policy that sexual harassment in any form will not be tolerated.  The policy should also state the procedures that a victim of sexual harassment can follow to report the incident without fear of retaliation so that the conduct can be investigated and the Company can take appropriate corrective action.   The U.S. Supreme Court has encouraged employers to take this step by giving them an affirmative defense to liability for a supervisor’s misconduct in certain circumstances.  If the Company has no policy, the defense is unavailable.  At any rate, the investigation should follow the pattern outlined in the Company’s policy.

 Make an Appointment.  The investigation should be initiated with an “appointment letter.”   The appointment letter should say that the Company is appointing the person to conduct an investigation into the complaint of sexual harassment made by Jane Smith on January 10, 2016.  If the complaint was made in writing, the complaint should be attached to the appointment letter.  Most important, the appointment letter should state: “The Company anticipates that this matter will result in litigation.  This investigation is being conducted for the purposes of assisting the Company’s attorney and provide a factual basis for counsel’s legal guidance to the Company.”  This will ensure that the fruits of the investigation will be covered by the attorney work product privilege.  That way, if litigation does not ensue, the Company will have grounds to contest turning over the investigation materials to opposing counsel.  Put the date and time on this appointment letter.  That will help the Company later show that the investigation was begun “promptly.”

 First Things First.  There are a few things that need to be done straight away.  In no particular order, these “first things” should be accomplished as soon as possible after getting the complaint.  Gather all documents that pertain to the event.  This may be a police report, a performance evaluation, an email string.  The initial intake of evidence may also include physical evidence, e.g., defaced personal property of the victim.  Collect these materials and safeguard them throughout the investigation.

 Protect the Victim.  This is an easy one but terribly important.  The last thing the Company wants is for someone to take action that could be perceived as a retaliation against the victim for making the report of sexual harassment.  Obviously, the alleged harasser has to be warned in no uncertain terms not to have any contact with the victim or communicate with the victim about the complaint.  In addition, other personnel need to be notified to suspend any action relating to the victim.  If the Company had been planning to cut the victim’s hours, put that on the back burner.  If the Company had decided to transfer the victim to another office before this sexual harassment claim broke, put it off till the dust settles.  You don’t want to strengthen a sexual harassment claim by taking action that can arguably be made to look adverse to the victim.  Trust the victim’s attorney to make it look like a punishment for reporting the misconduct.  This is the stuff punitive damages are made of.

 No Penalty for Holding.  Another first few hours action is to prepare what we call a “Litigation Hold.”  This is a simple letter instructing the appropriate personnel that all documents that may have some bearing on the investigation must be preserved.  The things to be preserved may vary with the circumstances of the particular case.  What must be avoided at all costs is the destruction, intentional or inadvertent, of any document, file, quest, thing, that turns out later to be relevant to the inquiry.  Lawyers call this “spoliation of evidence.”  That’s a fancy term to describe the concept that the judge or jury will be entitled to assume that the evidence that got destroyed would have been unfavorable to the party that failed to preserve it.  In some circumstances, this spoliation inference can give a lame case new legs.  Nothing good comes of lost evidence.  Get this letter out to supervisors, managers, human resources, the alleged harasser, the IT, and anybody who might possess something useful to the investigation.

 Freeze!  Ten minutes into any good cop show and you’ll hear the protagonist shout this command.  This is also a powerful tool at the Company’s disposal.  The Company wants to “freeze” the situation for purposes of the investigation.  You don’t want the challenged conduct to continue.  You don’t want the victim’s work to be interrupted.  Consider other interim corrective action that should be taken.  You may want to consider interim action should not appear to punish either the victim or the alleged harasser.  On the contrary, explain that the Company is taking this action to protect them both.  Such actions could include a non-disciplinary separation, potential leave with pay, temporary transfer of the alleged harasser (not the victim!), etc.  If the incident involves other misconduct or a violation of Company policy on the part of the harasser, e.g., drug use, drunkenness, immoral or indecent conduct, you could consider disciplinary action for those violations—separate and apart from any future determination of whether the conduct constituted sexual harassment.

 Call for Reinforcements.   Legal representation is expensive.  The Company wants to balance the cost of an attorney with the risk of going it alone.  Every Company has to make a personal decision in this regard.  I suggest the Company ask itself whether it’s likely that the complaint turns into a lawsuit.  If it seems likely to blossom into litigation, the Company is better off getting a lawyer sooner rather than later.  In my experience, if the victim accuses a senior member of management, or the allegations involve physical touching, you’re going to court.  Best to get an attorney at the earliest possible stage.

 Make No Promises.  An investigator will frequently tell the victim or a witness that statements made in the investigation are confidential.  This is a promise the investigator can’t keep.  The Company is not going to broadcast the investigation on the internet but lots of people have a need to know the information.  The most glaring example is that the Company must necessarily advise the harasser of the grounds for any discipline that flows from the investigation.  The investigator means well but the unkeepable promise creates unrealistic expectations.   When the promise is ultimately broken, the victim feels violated again and resents the Company, fueling a desire to take it to another level.  The investigator must tell the victim that disclosure of the information will be kept to the smallest group of Company personnel having a need to know.

 Talk to Me.  The guts of the investigation is the interview.  The investigator must interview every person with personal knowledge affecting the determination of whether sexual harassment occurred.  I recommend starting with the victim.  This may be done in one session or multiple sessions.  Get the victim to put the complaint in writing.  You need it as detailed as possible.  That will set the parameters.  Conclude the interview with a closer: “Have you told me all the facts regarding your complaint of sexual harassment against John Smith?”  Keep asking that question until you get it all.  Remember to put the date and time on every statement.

Keep in mind that some victims regret making a complaint and want it to end.  They don’t have the power to turn off the investigation.  They do, however, have the power to withhold information and cripple the investigation.  You still must go through with the investigation.  If the victim refuses to cooperate, however, that refusal must be documented in the report.  Make a note of questions the victim refused to answer.  Make the victim sign off on a statement that says she declined to provide additional information to aid the Company’s investigation.

Then move to the witnesses.  Don’t go straight to the alleged harasser.  Do that interview last, when your brain is full of all the knowledge imparted to you by the victim and all the witnesses.

Make each witness prepare a written statement.   Accurate records created during the investigation carry much more weight than deposition or trial testimony years later. Right or wrong, juries tend to give more weight to something that’s been reduced to writing.

If the witness created a document you collected earlier, make sure that witness’ statement notes that “the attachment is a true copy of the letter I received from the customer on July 2, 2015.”

The investigator’s questions should be open-ended.  Let the witness tell the story rather than putting words in the witness’ mouth.  What happened? What was said?  Where did it occur?  How was your work affected?  Are there any witnesses I should talk to?  Has this ever happened before?  Details?  How did you reacted to John Smith’s behavior/remarks?  Did you discuss this with anyone else?  Do you have any other evidence relating to the incident?  Are you aware of any reason for the conduct?  The witness’ statement must be reduced to writing.  Do not attempt to filter out what the witness wants to say.  You can evaluate later what weight to give to portions of a statement that you think may be unreliable, e.g., facts reported to the witness by another person but not personally observed.

The investigator should develop a checklist that can be used for each witness.  The checklist should end with a note to remind the witness that the matter is not to be discussed with anyone and that no retaliatory action against the victim will be tolerated.

The alleged harasser should be interviewed last.   You will then have the most information to evaluate whether the alleged harasser is providing truthful responses.  The alleged harasser may provide additional information that raises questions that must be put to the victim or other witnesses.  If the alleged harasser invokes the Fifth Amendment privilege against self-incrimination, have the person record that in writing.

Search and Seizure.  The investigator may consider searching areas in which the person—victim, witness, or alleged harasser—has no expectation of privacy.  Hopefully, these areas are spelled out in the Employee Handbook.  These areas typically include spaces like the employee’s locker, desk, work phone, work computer, or other cubby hole.   The Fourth Amendment’s warrant requirement only restricts the government, not private actors.  Depending on your Employee Handbook, you may also be able to search purses, back packs, briefcases, and other containers, provided the Company has given employees notice via the Employee Handbook or otherwise.

Turn over the Stones.  A good investigator will turn over stones looking for information that relates to the complaint.  In our times, many of these stones are electronic.  The investigator should examine whether the people involved have communicated regarding the events at hand using email, texts, Twitter, FaceBook, or other social media.

 Make the Call.   The investigator needs to document the investigation, summarize it, and draw conclusions.  This record is important because the Company can later use it to prove the employer acted responsibly and took prompt action.  In many circumstances, the case will boil down to the victim’s word against the alleged harasser’s word.  In lay terms, this “he said/she said” situation results in an impasse.  Wrong.  People go to prison every day based on the testimony of one person against another.  The investigator has to make the call.  If the claim of sexual harassment is proved, the investigator so concludes.  If not, the investigator so concludes.  That said, the investigator is not the final authority.  The Company, not the investigator, is the final arbiter of what happened.  The Company always has the authority to make a different determination based on the evidence collected by the investigator.  The Company has the power, not the investigator.

Slap the Wrists or Drop the Hammer.  If the investigator finds that sexual harassment occurred, appropriate sanctions must be imposed.  The conduct cannot be ignored.  Appropriate sanctions do not necessarily mean discharge. The punishment should fit the crime. A warning may be sufficient in some cases, particularly for a first offense. Under other circumstances, discharge may be necessary.   The Company’s prompt, remedial action to protect those rights when a violation has occurred will provide a powerful deterrent and enable the Company to maintain a successful defense if litigation follows.  The Company may consider: the harasser’s employment record; whether the harasser was aware of the Company’s policy; whether the harasser ignored the victim’s request that the harasser stop; what discipline, if any, has been imposed in the past.

Tie Up the Loose Ends.  The victim should be told that the matter has been investigated and what the Company has decided to do.  The investigation record is not considered a personnel file and should be maintained separately and confidentially.   Neither the victim nor the alleged harasser is entitled to a copy of the report.  The Company has an ongoing duty to insure that the harassment has stopped.  Even if the complaint is not sustained, the alleged harasser should be counseled to get his act together.

About Finney Law Firm, LLC

Founded in 2014, FLF has grown to 15 attorneys located in offices in Eastgate and downtown Cincinnati with five major practice areas: Corporate Law, Real Estate Law, Employment Law, Commercial Litigation and Public Interest and Constitutional Litigation.  FLF has the unique claim to three 9-0 victories at the United States Supreme Court for its public interest practice along with breakthrough class action work.

FLF also has an affiliated title insurance company, Ivy Pointe Title, LLC, that closes and insures nearly a thousand commercial and residential real estate transactions annually.

For more information about Finney Law Firm, visit finneylawfirm.com.

Media Contact: Mickey McClanahan; mickey@finneylawfirm.isoc.net; 513.797.2850.

 

• posted: Jan. 19, 2016
• Hemmer DeFrank Wessels PLLC
• Uncategorized

Written By: Todd V. McMurtry

Foreclosures, criminals and divorces combined with chronic understaffing have clogged the courts.  If you have not been involved in a lawsuit in the past ten years or so, you should count your blessings.  In my opinion, because many states are functionally insolvent, they have understaffed and underfunded their courts.  The brave few who have agreed to serve as judges face large dockets with diminished resources.  The unfortunate few who need the aid of the state courts have to compete with the many forces shaping the legal system to have their case heard. 

Once a person finds themselves in court, it is often very difficult to get out without expending more money than the dispute is worth.  Legal fees for even a simple case can quickly run into the tens of thousands of dollars.  Petitions to the court, called motions, can drag on for months as the courts struggle to keep up with the paperwork associated with such arguments.  It is common for the party that does not want to pay what is due to drag the process out as long as possible and then use the delay as a bargaining chip to pay far less or demand more than is equitable. 

I advise every client that a case can take 12 to 18 months to get through the courts.  On top of that, an appeal can easily drag a case out for another two years.  If the case then goes to the state supreme court, it might take another 6 to 18 months to get a final judgment.  In the worst case scenario, a case can then be remanded to the trial court for further proceedings and it starts all over.  It is not uncommon for a case to take four to six years to reach a conclusion.  During that time, you have to pay your attorneys tens of thousands of dollars to keep your case on the move. 

I share this sobering reality because I strongly recommend that you make every effort to avoid state court as a means to resolve a dispute.  Instead, I recommend these three alternatives:

• Limit involvement of legal counsel.
• Choose binding arbitration.
• Try pre-suit mediation.

Limit the involvement of legal counsel.  For a practicing trial attorney, this is tough advice to offer.  But, the truth is that disputes under $25,000 or so should be negotiated with limited involvement by attorneys.  Net of legal fees, a compromise in a one-on-one negotiation is often the best solution.  A good idea in this situation would be to consult with your attorney, but not have your attorney directly involved.  There may be something very important about your situation that you do not understand.  Buy an hour of your attorney’s time and make sure you understand what type of dispute you have.  As well, legal counsel can draft an agreement that will fully release whatever claims exist so both parties can put the matter permanently behind them. 

Choose binding arbitration.  Arbitration is faster.  Even more complex disputes can be resolved in months instead of years.  It is very hard to appeal an adverse arbitration award, so when it is over, it is usually over.  As well, you can use the courts to enforce any judgment you receive in arbitration.  Arbitration is more streamlined than state court proceedings.  You do have to pay an arbitrator to act as your private judge, but in most situations it will likely save money.  As well, since you can pick your own private judge, you can find someone with particular skill in a given area.  You hire a construction professional for a construction dispute, etc.  Ask your attorney to help you include a binding arbitration provision into contracts you sign. 

Try pre-suit mediation.  Let’s assume a circumstance where you have tried to negotiate a resolution with the opposing party, but failed.  Assume as well that your agreement does not require arbitration.  This means you are headed to state court.  At this point, it is almost always a good idea to hire a professional mediator to attempt a resolution before going into state court.  Your attorney can help you through this process and make it more effective.  The mediation process creates strong momentum for settlement and can overcome obstacles that may have blocked the success of direct negotiations.

A smart business should always try to avoid state court.  But, if your effort to be nice and resolve the problems through negotiation fails, then I recommend that you hire a real trial attorney and do battle!

About Finney Law Firm, LLC

Founded in 2014, FLF has grown to 15 attorneys located in offices in Eastgate and downtown Cincinnati with five major practice areas: Corporate Law, Real Estate Law, Employment Law, Commercial Litigation and Public Interest and Constitutional Litigation.  FLF has the unique claim to three 9-0 victories at the United States Supreme Court for its public interest practice along with breakthrough class action work.

FLF also has an affiliated title insurance company, Ivy Pointe Title, LLC, that closes and insures nearly a thousand commercial and residential real estate transactions annually.

For more information about Finney Law Firm, visit finneylawfirm.com.

Media Contact: Mickey McClanahan; mickey@finneylawfirm.isoc.net; 513.797.2850.

 

• posted: Dec. 15, 2015
• Hemmer DeFrank Wessels PLLC
• Uncategorized

Written By: Scott R. Thomas

You’ve built your business on the model that people doing work are independent contractors rather than employees.  Everything has been going fine until one day when you sit down at your desk to find a letter from a federal or state agency.  It might be the Internal Revenue Service, the Ohio Bureau of Worker’s Compensation, the Kentucky Division of Unemployment Insurance, or the Indiana Department of Workforce Development.   Regardless of the sender, the punch-line is the same: the agency in its infinite wisdom has determined that your independent contractors are in fact your employees.  At the stroke of a pen, the agency has created the foundation demand you make back payment for all the obligations you would have had if your contractors were on your company payroll going back however many years the statute of limitations allows.  Imagine if you suddenly had to pay several years worth of payroll taxes, workers’ compensation premiums, and unemployment insurance premiums, plus penalties and interest!  How would that affect your bottom line?  Would you even be able to stay in business?  Under-budgeted agencies are turning increasingly to these tactics in an effort to obtain revenue for operating expenses.  Will your company be next?

Fortunately, you can take pro-active steps to avoid these dire consequences.  The IRS and courts use a list of 20 factors as an aid in determining whether a worker is an employee or an independent contractor.  The test is not a math problem; you need to do more than prevail on 11 of the 20 factors.  On the contrary, the test is rather subjective and that’s part of the problem.  You need to prepare in advance to make sure you land on the independent contractor side when the agency evaluates each individual factor.  The factors are discussed below.

(1)   Do you direct or control the manner or method by which instructions are given to the person performing services?

A worker who is required to comply with another person’s instructions about when, where, and how he is to work is ordinarily an employee. This control factor is present if the person or persons for whom the services are performed have the right to require compliance with instructions.  On the other hand, constraints imposed by your customer’s demands and government regulations do not determine the employment relationship.  Your efforts to monitor, evaluate, and improve the results of ends of the worker’s performance do not make the worker an employee.  Work by independent contractors is often performed to the exacting specifications of your customer.

 (2) Do you require the person performing services to undergo particular training?

The “training factor” refers to an experienced worker giving guidance to new workers to demonstrate how the instructions must be followed.  For example, people who are required by the company to attend more training than was mandated by the government have been deemed employees.  People who arrange for their own training tend to be deemed independent contractors.  Familiarizing a person with a customer’s needs does not constitute training.  Likewise, explaining the paperwork the independent contractor needed to complete in order to get paid does not constitute “training.”

(3)  Are the services performed by the individual integrated into the regular functioning of your business?

The “integration factor” refers to whether a business could continue without the contribution of the person’s services.  Integral services are more likely to be subject to the business’ control.

(4)  Do you require that services be provided by a particular individual?

If the services must be rendered personally, presumably the person for whom the services are performed is interested in the methods used to accomplish the work as well as in the results.  If your independent contractor has the power to hire a substitute to actually perform the services, that power strongly tends to show an independent contractor relationship.

(5)  Do you hire, supervise, or pay the wages of the individual performing services?

This factor tends to state the obvious.  Supervision tends to show an employee relationship.  Where the company does not confer benefits such as paid leave, health insurance, life insurance, or retirement benefits, this suggests an independent contractor relationship.

 

(6)  Is there a continuing relationship between you and the person performing services which contemplates continuing or recurring work, regardless of whether that work would be full- or part-time?

A continuing relationship between the worker and the person for whom the services are performed tends to indicate an employer-employee relationship exists. A continuing relationship may exist where work is performed at frequently recurring although irregular intervals.  Conversely, contracts of a set length often indicate independent contractor status.

 (7) Do you require the individual to perform services during established hours?

The establishment of set hours of work by the person or persons for whom the services are performed is a factor indicating control.  The absence of set hours or a minimum number of hours tends to indicate an independent contractor relationship.

(8)  Do you require the individual performing services to be devoted on a full-time basis to your business?

If the worker must devote substantially full time to your business, that requirement tends to show an employee relationship because you have control over the amount of time the worker spends working and impliedly restrict the worker from doing other gainful work.  An independent contractor, on the other hand, is free to work when and for whom he chooses.

(9)  Do you require the individual to perform services on your premises?

The performance of work on the premises of the company suggests control over the worker, especially if the work could be done elsewhere.  Where the person has no specific work location, a finding of an independent contractor relationship is more likely.

(10)    Do you require the individual performing services to follow the order of work that you have established?

If a worker must perform services in the order or sequence you set, that requirement suggests employer control.  An employee is typically not free to follow his own pattern of work but must follow the established routines and schedules of the company.

(11) Do you require the individual performing services to make oral or written progress reports?

A requirement that the worker submit regular or written reports to the person for whom the services are performed indicates a degree of control typically present in an employee relationship.

(12)    Do you make payments to the individual for services on an hourly, weekly, or monthly basis?

Payment by the hour, week, or month generally points to an employer-employee relationship, provided that this method of payment is not just a convenient way of paying a lump sum agreed upon as the cost of a job.  Payment made by the job or on a straight commission, on the other hand, generally indicates that the worker is an independent contractor.   The independent contractor status is also indicated when the company does not withhold taxes or benefits on behalf of the worker.

(13)    Do you pay expenses for the person performing services?

If the company pays the worker’s business and/or traveling expenses, the worker is ordinarily deemed an employee.

(14)    Do you furnish the tools and materials for use by the person to perform services?

If the company furnishes significant tools, materials, and other equipment, that fact tends to show the existence of an employer-employee relationship.  Where a worker furnishes his own tools, that fact tends to support the existence of an independent contractor relationship.

(15)    Has the person performing services invested in the facilities used to perform services?

If the worker invests in facilities that are used by the worker in performing services and are not typically maintained by employees, that factor tends to indicate that the worker is an independent contractor.  On the other hand, lack of investment in facilities indicates dependence on the person or persons for whom the services are performed for such facilities and, accordingly, the existence of an employer-employee relationship.

(16)    Does the person performing services realize a profit or suffer a loss as a result of the performance of the services?

A worker who can realize a profit or suffer a loss as a result of the worker’s services is generally an independent contractor; the worker who cannot is an employee.  This factor reflects the shift in emphasis away from the subjective inquiry about “control” toward something that can be measured.   Courts focus on whether the worker has an entrepreneurial stake in his work.  This factor is powerful because independent contractors tend to be entrepreneurs; employees tend to have less ability to affect the income they generate.

(17)    Does the person perform services for two or more employers simultaneously?

If a worker performs services for two or more companies at the same time, that factor generally indicates that the worker is an independent contractor.  If the independent contractor agreement prohibits the worker from providing services to others, that fact will lean toward a finding of an employee relationship.

(18)    Does the person performing services make the services available to the general public?

The fact that a worker makes his services available to the general public on a regular and consistent basis indicates an independent contractor relationship.

Workers who are paid by the job, chose their own work hours, have the right to refuse assignments, and can work for others, are typically deemed independent contractors.  If the worker operates as a partnership, limited liability company, or a corporation, that fact will also weigh in favor of an independent contractor finding.

(19)    Do you have a right to discharge the individual performing services?

The right to discharge a worker is a factor indicating that the worker is an employee and the person possessing the right is an employer. An employer exercises control through the threat of dismissal, which causes the worker to obey the employer’s instructions. An independent contractor, on the other hand, cannot be fired so long as the independent contractor produces a result that meets the contract specifications.

(20)   Does the person performing services have the right to end the individual’s relationship with the employer without incurring liability pursuant to an employment contract or agreement?

This is the flip side of Factor #19.  If the worker has the right to end his relationship with the company any time he wishes without incurring liability, that factor indicates an employer-employee relationship.  A worker who breaches an independent contractor agreement, however, is subject to contractual liability for damages.

As you can see, these factors can be very subjective.  Whether one factor weighs in favor of a finding of an employee or independent contractor relationship can depend on which side of the bed the auditor woke up on.  Remember, the agency is motivated to find the existence of an employee relationship because that relationship will generate revenue.  Accordingly, it is imperative that the company develop a strategy to make it difficult to support a finding of an employee relationship and to implement that strategy immediately.  If you wait till one of your independent contractors files for unemployment benefits or an agency picks your name out of a hat for an audit, it may be too late to put the positive spin on your business model.  When that seemingly innocuous government questionnaire arrives in the mail, handle it with utmost care and at the highest level.  Because the test is subjective and no one factor is controlling, a careless answer or ambiguous word choice could make it easy for the government to brand your independent contractors as employees.

If you would like more information about these issues, please contact Scott Thomas.   Scott has secured victories for firm clients in Ohio, Kentucky, Indiana, New York and Pennsylvania against claims by state and federal agencies that the client’s independent contractors were employees.  He has assisted clients in developing proactive strategies to strengthen the company’s shield against such accusations.  He welcomes the opportunity to work with you on your case.  His direct line is 859.578.3862.  You can email him at sthomas@HemmerLaw.com.  If there is a particular topic you would like to see addressed in a blog, please send Scott an email with your ideas.

About Finney Law Firm, LLC

Founded in 2014, FLF has grown to 15 attorneys located in offices in Eastgate and downtown Cincinnati with five major practice areas: Corporate Law, Real Estate Law, Employment Law, Commercial Litigation and Public Interest and Constitutional Litigation.  FLF has the unique claim to three 9-0 victories at the United States Supreme Court for its public interest practice along with breakthrough class action work.

FLF also has an affiliated title insurance company, Ivy Pointe Title, LLC, that closes and insures nearly a thousand commercial and residential real estate transactions annually.

For more information about Finney Law Firm, visit finneylawfirm.com.

Media Contact: Mickey McClanahan; mickey@finneylawfirm.isoc.net; 513.797.2850.

 

• posted: Dec. 03, 2015
• Hemmer DeFrank Wessels PLLC
• Uncategorized

Written By: Scott R. Thomas

You started your business on a shoe-string but you’ve worked hard and built it up.  Now you’re at the point where you’re ready to take on other people to help shoulder the work.  You’ve interviewed several candidates you think have the potential to become true partners as you take your company to the next level.  But then you think, “What if it doesn’t work out?”  Your mind starts racing.  “What if I invest in this new employee, provide expensive training, share my business model, provide access to my hard-won customers, and then he/she leaves to go to my competitor?  Or decides he/she can hang up his own shingle?”  So you decide to make the prospective employee sign a covenant against competition.  If you go that route, there are a number of pitfalls that you need to avoid.  American judges don’t like non-competes because they are a restraint on free trade.  Courts will enforce them but they have to be fair and reasonable or your non-compete agreement won’t be worth the proverbial paper it’s written on.  Here are the “Top Ten” things to keep in mind.

• New employee. If you think you need the protection of a non-compete, make it part of the hiring process.  Once an employee has begun work, the employer must provide some additional value in exchange for the employee’s promise not to compete when the employment ends.  When the agreement is hammered out at the beginning, no consideration beyond the job itself is necessary to support the agreement.
• Geography. You may want to make the new employee agree not to compete with you in the same galaxy but non-compete agreements must be reasonable.  Consider how far your most distant customer is.  Pushing the envelope beyond that distance is dangerous.  Try to match the non-compete zone to your company’s footprint.  Pick a radius to be drawn from each place where you do business.  The reasonableness of the length of the radius will vary with each business.  If it’s more appropriate, you may specify a city, or a county or other defined region but be prepared to show that you have customers to protect in the territory you’ve identified.
• Duration. As with geography, you need to pick a time period that is reasonable.  You may wish to prevent the employee from competing till the rocks melt with the sun but judges will take a red pen to your agreement.  Again, the time period varies with the nature of the employer’s investment.  In some businesses, a year is appropriate; in others, two years might be reasonable.  Pushing it past two years is difficult.
• Activities. The activities that are prohibited must be spelled out clearly and in detail.  If any ambiguity exists, the law requires the Court to interpret the agreement in favor of the employee.  Accordingly, you must state exactly what your new employee cannot do in the event the employment ends.  In this regard, it’s a good idea to define what your competitors look like—without naming them.  You don’t want your employee to have any wiggle room.
• Injunctive relief. An injunction is an order from the Court that, in this case, would require your employee to refrain from violating the contract.  If the employee continues to violate the agreement, the Court can punish the employee via its contempt powers.  Your agreement should require the employee to agree to the things you would otherwise have to prove to the Court.  For example, the agreement should specify that the employee understands and agrees that if he were allowed to compete with the employer during the time and in the locale specified, you would suffer “irreparable harm,” i.e., harm that could not be remedied by mere dollars and cents.  By having the employee agree to the elements you would have to prove, you avoid much of the risk of litigation and make it much less expensive.
• Damages too. Your agreement should also specify that you are entitled to damages.  I know what you’re thinking, that I just said the employer has to prove “irreparable harm” to get an injunction.  True enough, but your employee will have violated the agreement for some period of time before you get a chance to persuade a judge to give you the injunction.  In many cases, you won’t know that your employee has been unfairly competed for some weeks or months.  Your agreement should state that while you are entitled to injunctive relief going forward, you are also entitled to compensatory damages for the unfair competition that occurred before you obtained the injunction.
• No Bond, thank you. Before an injunction takes effect, the Court has to specify a bond.  The bond is a surety that can be used to compensate the employee if it later turns out that the Court should not have issued the injunction. You don’t want to have to pay a bond to get the benefit of the bargain you made with the employee.  So put that in the agreement: the employee agrees that no bond is necessary to make the injunction effective.
• No cherry-picking, if you please. While we’re making the employee promise not to compete, you ought to make him promise not to hire away your employees.  You don’t want to come in to work and find out that your ex-employee has made your secretary a better offer to come work for him five miles away.
• Re-start the clock. Five hundred years ago, Hamlet complained about “the law’s delay.”  Courts try to work quickly when it comes to temporary restraining orders but things still take time, more time than you probably like.  By the time you get your injunction, your former employee may have been improperly competing for six months.  It’s only fair that that six months not be counted against the non-compete period in your agreement.  Unfortunately, that’s exactly what will happen unless you put language in the agreement that will re-start the non-compete period.
• Attorney fees. In the absence of an agreement or statute, American litigants have to pay their own attorney fees.  You can change that by putting it in your agreement.  You can provide that the “prevailing party” gets an award of attorney fees from the other side.  You can even specify that the employee has to pay your attorney fees but not vice versa.  That sounds harsh but the employee is the one violating the agreement.  But you won’t get fees unless it’s in the agreement.

Lastly, the employer has to keep his nose clean too.  An injunction is what Courts call “equitable relief.”  The goal is fairness.  If the employer has violated the employment agreement is some way—e.g., not paying a promised bonus—the Court may deny a request for an injunction.  The Court is going to look at the conduct of both parties.

If you would like more information about these issues, please contact Scott Thomas.   Scott has secured victories for firm clients both seeking and defending claims for injunctive relief in Ohio and Kentucky courts.  He welcomes the opportunity to work with you on your case.  His direct line is 859.578.3862.  You can email him at sthomas@HemmerLaw.com.  If there is a particular topic you would like to see addressed in a blog, please send Scott an email with your ideas.

About Finney Law Firm, LLC

Founded in 2014, FLF has grown to 15 attorneys located in offices in Eastgate and downtown Cincinnati with five major practice areas: Corporate Law, Real Estate Law, Employment Law, Commercial Litigation and Public Interest and Constitutional Litigation.  FLF has the unique claim to three 9-0 victories at the United States Supreme Court for its public interest practice along with breakthrough class action work.

FLF also has an affiliated title insurance company, Ivy Pointe Title, LLC, that closes and insures nearly a thousand commercial and residential real estate transactions annually.

For more information about Finney Law Firm, visit finneylawfirm.com.

Media Contact: Mickey McClanahan; mickey@finneylawfirm.isoc.net; 513.797.2850.

 

• posted: Dec. 01, 2015
• Hemmer DeFrank Wessels PLLC
• Uncategorized

Written By: Justin Whittaker

What happens when your previously reliable commercial tenant stiffs you on the rent?  If you are a commercial landlord in Kentucky, you’ve likely had to grapple with this question.  If you are a commercial landlord who has not yet faced this issue, give it time; you’re up next.  All landlords have a fundamental interest in securing a responsible tenant to occupy their property, the security of their property, and collecting rent for the use of their property.  In the event of a breach of a commercial lease, the last thing the commercial landlord wants to do is misstep in securing its rights.  Any misstep may result in landlord being left out in the cold on months of rent, and damage to its property.  These risks will rear their ugly heads if the commercial eviction is not handled properly.

In Kentucky, the commercial eviction procedure is known as a “forcible detainer” proceeding.  The purpose of a forcible detainer proceeding is to simply determine who has the right to possession of the commercial property at issue.  Forcible detainer proceedings arise if the commercial tenant hasn’t paid rent, or if it has otherwise failed to comply with other terms of the commercial lease.  In order to recover the money owed by the tenant for back rent, late fees, damages, etc., a landlord is required to file a separate civil action against the tenant.  In either case, the commercial landlord must act swiftly – and act correctly – to secure its rights.

Commercial landlords are required to provide proper written notice and an opportunity for the tenant to cure its breach of the commercial lease.  If the commercial tenant fails to cure its breach within seven days of proper notice, the landlord must proceed formally by filing a forcible detainer complaint to evict the tenant.  After the complaint is filed, the court will schedule a hearing.  In Kentucky, a representative of the landlord must appear at the hearing to offer testimony as to the landlord’s right to possession of the property.  If the judge grants a forcible detainer judgment, the tenant has seven days to either vacate the property or appeal.  At this point, the commercial tenant can either make plans to vacate the property, appeal, or try to make a deal with you.

Resolution at this point may sound great.  It is important, however, that in your eagerness to put the matter behind you, you do not give up your rights to continue collecting rent and enforcing the commercial lease.  If the tenant appeals the forcible detainer judgment ordering it to vacate, the court will require it to post a bond in the form of ongoing rent payments.  The court clerk will hold these funds until the appeal is resolved.

If the tenant does not file an appeal but also does not willingly vacate the property by the end of the seventh day, the landlord must obtain a writ of possession from the district court judge and ask the County Sheriff to enforce the judgment.  The Sheriff will require a fee for this service, and precise instructions as to the removal of the tenant, either by “put out” or “set out.”  The Sheriff is then authorized to physically remove the tenant and reclaim the property for the landlord.  You may be tempted to avoid the hassle and expense of enlisting the Sheriff’s services and resort to “self help” in evicting the deadbeat tenant.  It is important to understand the risks to the self-help approach.  Regardless, once you have successfully removed the commercial tenant, you will need to secure as much of the back rent as possible through the enforcement of a “landlord’s lien” on the personal property of the tenant.  It is critical that you differentiate between the value of your lien and the overall value of the tenant’s property.  While you are entitled to receive value for rent of your property, you are not entitled to convert the tenant’s property in excess of the value of your lien, lest you face a lawsuit for damages and attorneys’ fees from the tenant.

If you need assistance with these issues, please do not hesitate to contact Justin Whittaker at 859.344.1188.  Justin is also happy to help you prepare a commercial lease agreement.  You can email Justin at jwhittaker@HemmerLaw.com.

About Finney Law Firm, LLC

Founded in 2014, FLF has grown to 15 attorneys located in offices in Eastgate and downtown Cincinnati with five major practice areas: Corporate Law, Real Estate Law, Employment Law, Commercial Litigation and Public Interest and Constitutional Litigation.  FLF has the unique claim to three 9-0 victories at the United States Supreme Court for its public interest practice along with breakthrough class action work.

FLF also has an affiliated title insurance company, Ivy Pointe Title, LLC, that closes and insures nearly a thousand commercial and residential real estate transactions annually.

For more information about Finney Law Firm, visit finneylawfirm.com.

Media Contact: Mickey McClanahan; mickey@finneylawfirm.isoc.net; 513.797.2850.

 

• posted: Nov. 23, 2015
• Hemmer DeFrank Wessels PLLC
• Uncategorized

Written By: Matthew T. Cheeks

Has your practice done a HIPAA Risk Analysis lately?  Indiana provider pays $750,000 settlement for HIPAA violations.

Hacking and data breach incidences are increasingly common and have become a fact of life in modern business.  Regardless of the sector or industry, individuals rarely have to wait long before the next hack or breach grabs national headlines (e.g., government, banking, retail or healthcare).  The constant media attention and an increased awareness of the risks of identity theft have driven healthcare consumers’ concerns about the use and security of their electronic protected health information (ePHI).  This growing concern and the ease of electronically filing a Health Insurance Portability and Accountability Act (HIPAA) complaint via the U.S. Department of Health and Human Services Office for Civil Rights’ (OCR) online Complaint Portal have led to tremendous increases in the number of HIPAA complaints OCR receives.  For instance, there was a 16 percent increase in the number of complaints received between 2011 (9,018) and 2012 (10,457).  The number of complaints increased 24 percent in 2013 (12,974) and jumped 37 percent in 2014 when OCR received 17,779 complaints.  As healthcare consumers’ interest in ePHI has grown, so too has OCR’s enforcement efforts, and OCR publicly maintains that enforcement is a high priority.

The natural result of these factors is the increased risk to healthcare providers of potentially significant liability, particularly growing out of the failure to be proactive in guarding ePHI.  For example, OCR recently announced the $750,000 settlement of potential violations of HIPAA’s Security Rule and Privacy Rule against Cancer Care Group, P.C. (CCG), an Indiana-based group that includes 18 physicians.

CCG self-reported the theft of “computer server backup media” (e.g., back-up tapes) containing the unencrypted ePHI of 55,000 patients from a CCG employee’s vehicle in August 2012.  OCR’s investigation revealed that “CCG failed to conduct an accurate and thorough assessment of the potential risks and vulnerabilities to the confidentiality, integrity, and availability of ePHI help by CCG.”  OCR further found that CCG had “failed to implement policies and procedures that govern the receipt and removal of hardware and electronic media that contain [ePHI] into and out of a facility, and the movement of these items within the facility.”

While the impermissible disclosure of ePHI of 55,000 patients certainly played a role in the outcome of OCR’s investigation, it is clear that CCG’s failure proactively address the security of ePHI was a—if not the—significant factor.  OCR reinforced its emphasis on the Risk Analysis and Risk Management requirements (45 C.F.R. §164.308(a)(1)(ii)(A) and (B)) in the Resolution Agreement and required CCG adopt a “robust corrective action plan” subject to OCR’s review and approval.

Despite OCR’s efforts in recent years, the U.S. Department of Health & Human Services Office of the Inspector General (OIG), Office of Evaluation and Inspections, released two reports in September 2015 (found here and here) calling on OCR to strengthen its enforcement efforts regarding general privacy standards and security breach reporting requirements.  OCR agreed with the OIG’s reports, and indicated that it intends to do just that (the implementation of Phase 2 audits in 2016 will be part of these efforts).

Thus, all signs point to increasing risks for providers with respect to ePHI and the need to be proactive about the security of ePHI.  The unfortunate fact, however, is that policies and procedures—or lack thereof—similar to CCG’s are probably not uncommon.  Providers are too often reactionary, addressing these issues only after a breach for a variety of reasons (e.g., costs of risk analyses, costs of implementing recommended safeguards, or even a general unawareness of the need for the analyses).  Old adages often hit the mark and, when dealing with ePHI, an ounce of prevention is truly worth a pound of cure.

Matthew Cheeks is a trial attorney with Hemmer DeFrank Wessels PLLC.  His practice focuses on helping individuals and businesses solve complex problems through negotiation, mediation, arbitration and trial.  You can reach him at mcheeks@hemmerlaw.com.

About Finney Law Firm, LLC

Founded in 2014, FLF has grown to 15 attorneys located in offices in Eastgate and downtown Cincinnati with five major practice areas: Corporate Law, Real Estate Law, Employment Law, Commercial Litigation and Public Interest and Constitutional Litigation.  FLF has the unique claim to three 9-0 victories at the United States Supreme Court for its public interest practice along with breakthrough class action work.

FLF also has an affiliated title insurance company, Ivy Pointe Title, LLC, that closes and insures nearly a thousand commercial and residential real estate transactions annually.

For more information about Finney Law Firm, visit finneylawfirm.com.

Media Contact: Mickey McClanahan; mickey@finneylawfirm.isoc.net; 513.797.2850.

 

• posted: Nov. 12, 2015
• Hemmer DeFrank Wessels PLLC
• Uncategorized

Written By: Kyle M. Winslow

Limited liability companies (“LLCs”) have become a popular business entity for individuals in Kentucky. One of the main reasons that Kentucky small business owners choose the LLC is because of the protection offered by Kentucky Revised Statute 275.150 – “no member…of a limited liability company…shall be personally liable by reason of being a member…for a debt, obligation, or liability” of the LLC. Generally, LLC members can take business risks and creditors cannot seek their personal assets should their business ventures fail.

However, the LLC protection is not absolute. “Veil piercing” is an equitable remedy that allows a court to impose personal liability on shareholders for a corporation’s wrongful acts. In Turner v. Andrew, the Kentucky Supreme Court stated that the doctrine can also apply to LLCs.

In 2012, the Supreme Court of Kentucky clarified the test for veil piercing in Inter Tel Techs v. Linn Station, LLC. While Inter Tel Techs discusses veil piercing in the context of a corporation, Kentucky law does not distinguish between corporations and LLCs when analyzing the equitable remedy. In Inter Tel Techs, The Supreme Court stated that in its determination of whether to pierce the corporate veil, trial courts should essentially resolve two dispositive elements: (1) domination of the corporation resulting in a loss of corporate separateness and (2) circumstances under which continued recognition of the corporation would sanction fraud or promote injustice.

So how does the veil piercing doctrine affect small businesses? In Inter Tel Techs, the Court noted that in assessing the first element above, courts give the most emphasis to several factors, one of which is the egregious failure to observe legal formalities.

In my practice, piercing the corporate veil has come up most often where small businesses fail to follow the legal formalities associated with the business entity. This can include failure to hold meetings, failure to keep records of important decisions, and failure to monitor the activities of its members. To avoid personal liability, LLC members should make sure that they know the ins and outs of their LLC’s operating agreement and strictly comply with the agreement’s provisions.

Our team at Hemmer DeFrank Wessels is ready to answer any questions that you may have about your operating agreement or corporate bylaws, or how the legal doctrine of piercing the corporate veil may affect your business.

Kyle Winslow is an attorney with Hemmer DeFrank Wessels PLLC. He helps business professionals solve problems in Kentucky, Ohio, and Indiana.

About Finney Law Firm, LLC

Founded in 2014, FLF has grown to 15 attorneys located in offices in Eastgate and downtown Cincinnati with five major practice areas: Corporate Law, Real Estate Law, Employment Law, Commercial Litigation and Public Interest and Constitutional Litigation.  FLF has the unique claim to three 9-0 victories at the United States Supreme Court for its public interest practice along with breakthrough class action work.

FLF also has an affiliated title insurance company, Ivy Pointe Title, LLC, that closes and insures nearly a thousand commercial and residential real estate transactions annually.

For more information about Finney Law Firm, visit finneylawfirm.com.

Media Contact: Mickey McClanahan; mickey@finneylawfirm.isoc.net; 513.797.2850.

 

• posted: Oct. 30, 2015
• Hemmer DeFrank Wessels PLLC
• Uncategorized

Written By: Kyle M. Winslow

The construction industry is on the rebound in Kentucky and throughout the rest of the country. In northern Kentucky, our river cities are booming with various development projects. Nevertheless, in a good or bad economy, contractors and subcontractors encounter payment problems.

Kentucky’s mechanic’s lien statutes, found in Kentucky Revised Statutes (“KRS”) 376, provide protection to construction companies who furnish materials and labor on public or private projects.

While some of the statutes’ terms are interpreted liberally, Kentucky courts have consistently held that lien claimants must strictly comply with the notice requirements of KRS 376. Due to the demands of the construction industry, contractors and subcontractors routinely miss these deadlines and forfeit the leverage and security that accompany a mechanic’s lien.  The general notice requirements for private projects can be simplified into four steps:

(1) Preliminary Statement of Lien. The lien claimant should file a Preliminary Statement of Lien with the county clerk to secure priority over subsequently recorded liens. While the Preliminary Statement of Lien is not required to establish a valid mechanic’s lien, it protects the lien’s precedence. Since it’s not required, there is no deadline to file the Preliminary Statement of Lien.

(2) Notice of Intent to File Lien. Prior to filing the Lien Statement, subcontractors must notify in writing the owner of the property to be held liable or his authorized agent, of their intent to file a lien. This notification must be completed within 120 days on claims in excess of $1,000 (75 days on claims amounting to less than $1,000) after the last item of material or labor is furnished.

(3) Lien Statement. Lien claimants must file their Lien Statement with the county clerk within 6 months of the last day on which the lien claimant last furnished labor or materials. KRS 376.080(1) imposes strict requirements on the form of the Lien Statement.

(4) Notice to Property Owner. The lien claimant must send by regular mail a copy of the Lien Statement to the property owner at his last known address within seven days of filing the Lien Statement. Failure to follow this last requirement dissolves the lien.

In my practice, when a client anticipates payment problems, I immediately calendar all four steps on my personal calendar and on my firm’s litigation practice group calendar. I have forms for all four steps so when a deadline arrives, I’m prepared to take action. Should your company encounter payment problems, I’d encourage you to contact a construction lawyer familiar with the ins and outs of KRS 376. While many of the deadlines seem simple, they often involve complex factual issues.

About Finney Law Firm, LLC

Founded in 2014, FLF has grown to 15 attorneys located in offices in Eastgate and downtown Cincinnati with five major practice areas: Corporate Law, Real Estate Law, Employment Law, Commercial Litigation and Public Interest and Constitutional Litigation.  FLF has the unique claim to three 9-0 victories at the United States Supreme Court for its public interest practice along with breakthrough class action work.

FLF also has an affiliated title insurance company, Ivy Pointe Title, LLC, that closes and insures nearly a thousand commercial and residential real estate transactions annually.

For more information about Finney Law Firm, visit finneylawfirm.com.

Media Contact: Mickey McClanahan; mickey@finneylawfirm.isoc.net; 513.797.2850.