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Hot Legal Issues In This Economy For Material Handling & Industrial Equipment Businesses
 

Hot Legal Issues In This Economy For Material Handling & Industrial Equipment Businesses

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  • _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________
  • What is an authorization card? Legal document signed by an employee that designates a union as his or her bargaining agent. The union authorization card is legally binding on the employee. Union authorization cards legally authorize a union to represent an employee for the purposes of collective bargaining with an employer. VALID FOR ONE YEAR – SOME UNIONS HAVE CARDS FROM LAST YEAR WAITING FOR THE ACT TO PASS!
  • TO understand what this new law is, it is important to review the statement of the law by Congress. Note efficient system to enable employees to join or assist a labor organization Provide for mandatory injunctions during organizing – BY the Government, NLRB! The original NLRA, Wagner Act, was much more neutral in its statement of purposes: Its purpose is to define and protect the rights of employees and employers , to encourage collective bargaining , and to eliminate certain practices on the part of labor and management that are harmful to the general welfare.
  • The proposed EFCA accomplishes statement of purpose through 3 major changes: 1. Both processes already exist under current law, but employers currently hold the power to veto the decision of workers to form a union through majority sign-up. 2. Under current law, employers have a duty to bargain in good faith, but are under no obligation to reach agreement. Obvious to provide teeth to the NLRA This slide is taken from the House of Representatives’ Committee on Education and Labor Website
  • TO BEGIN TO UNDERSTAND THE EFCA, WE WILL GIVE A LITTLE BACKGROUND ABOUT THE CURRENT NLRA
  • Here is the typical process to certify a union today. We will go through is more detail, but the key points are there is a campaign period for each side to express their views and then a secret ballot election conducted by the NLRB . Much of the delay associated with an election is at the hearing and objections stage. This is where labor lawyers earn their money as many times an employer will seek to delay the elections or the ultimate results. Bargaining units Workers in like position – DEFIENS THE NUMBER OF WORKERS WHO CAN VOTE, no management or supervisors ALLOWED – WHO IS A SUPERVISOR IS A BIG ISSUE AT THE HEARING STAGE? Currently, hearings determine units. Generally results in either a determination of appropriateness by the Board, or a mutual agreement by the parties that the bargaining unit is acceptable.
  • LETS TAKE A CLOSER LOOK 30% OF CARD = THE RIGHT TO FILE A PETITION – TYPICALLY UNIONS WAIT TO FILE UNTIL THEY HAVE 6—70% BECAUSE THE CAPMPAIGN PERIOD WILL ERODE SOME SUPPORT – CURRENT SYSTEM, AN AUTHORIZATION CARD IS NOT A VOTE, ONLY A STATEMENT THAT ONE DOES AUTHORIZE THE UNION TO BE THE REPRESENTATIVE – CAN CHANGE YOUR MIND IN THE LECTION BOOTH THERE TYPICALLY IS A 40 DAY CAMPAIGN PERIOD!
  • Here explain the Card Check Process briefly Potentially eliminates any kind of campaign period. There is a provision that allows for 30% of the employees to demand a secret ballot, so the secret ballot provision is not entirely gone. NOTE – We close the Election Portion of the presentation with this slide also.
  • No TIPS Threats Interrogation Promises Surveillance Other notes Questioning includes questioning their leanings or whether they go to meetings. Quid pro quo includes changing management structures or enhancing communication…ANYTHING.
  • Unions have a more leeway in making statements although they too are prohibited from tips Challenges to union activity do exists but I think it is fair to say much harder to prove and more leeway granted to unions. Employers argue that the Campaign Period and the Secret Ballot are the great equalizers in explaining positions and protecting employee privacy.
  • Formal process overseen by the nlrb A list of dos and don’ts – objections will be filed by the losing party which drag the process out several months I have conducted elections in plants, storage areas, chicken farms, anywhere and everywhere – my personal favorite was an election conducted in e poultry processing plant – not pretty
  • Here is a sample form – very simple yes or no The employer is listed at the top and the union where sample is listed Can be more complicated if several unions involved – secrecy is protected – there is a protected area at and around the ballot area – no interference allowed
  • The Employee Free Choice Act will revolutionize Labor Law in America History of Labor Law Depression brought on the 1935 Wagner Act The pendulum swings back – the 1947 Taft Hartley Act – some significant modifications NOTHING FOR 50+ YEARS 74 years of case law and practice 2009 – Recession/Depression? = The Employee Free Choice Act I WOULD NOTE AT THE THIS SLIDE THE HOUSE RECENTLY UPPED THE NLRB BUDGET BY 6 MILLION PER YEAR – WHATS DOES THIS MEAN? NOTE THE EEOC BUDGET WAS UPPED 1.5 MILLION – NLRB RECEIVED 4X MORE OF AN INCREASE!
  • A Card Check can occur and the Union can present the cards to the NLRB without any prior warning to the company Stress that a Card Check can occur and the Union can present the cards to the NLRB without any notice to the employer Potentially eliminates any kind of campaign period. There is a provision that allows for 30% of the employees to demand a secret ballot, so the secret ballot provision is not entirely gone. NOTE – We close the Election Portion of the presentation with this slide also.
  • What is an authorization card? Legal document signed by an employee that designates a union as his or her bargaining agent. The union authorization card is legally binding on the employee. Union authorization cards legally authorize a union to represent an employee for the purposes of collective bargaining with an employer. VALID FOR ONE YEAR – SOME UNIONS HAVE CARDS FROM LAST YEAR WAITING FOR THE ACT TO PASS! EFCA REQUIRES RULES AND REGULATIONS TO BE ISSUED – WHO KNOWS WHAT THIS MEANS
  • This is a commercial from myprivateballot.com, a group dedicated to defeating the EFCA in congress. Click on the box to play the commercial.
  • Negotiations – what are they process to reach an agreement on terms and conditions of employment NLRA currently only requires good faith bargaining – no mechanism to force an agreement Parties can strike, lockout, declare an impasse and implement terms Litigation over good faith bargaining is a major area of dispute – what is good faith?
  • Here we see a handshake – the current NLRA requires agreement The EFCA imposes a referee requirement - lets see what I mean by that!
  • Here is a comparison for you! Note the differences under current law and the new law!
  • Currently, Interest Arbitration cannot be forced on any party, union or employer. Now it will be a requirement. Remember, this is only for 1 st Contracts
  • Unfair Labor Practice – Term of Art that applies to actions taken by employers that violate the NLRA Inspected by the NLRB Concerted activity simply means two or more employees acting together, regardless of whether a union already exists.
  • Gissel (Pronounced with a hard G) bargaining orders are basically the NLRB deciding certain terms of the agreement for the parties as a punishment Currently penalties are remedial and “make-whole” New penalties are more punitive. Injunctions are VERY infrequent under the current system. Civil damages under the EFCA are for severe and repeat offenders. Note that historically, an employer’s allegation that employees or unions were acting unfairly were granted priority. The EFCA adds several employee/union allegations that will also be given priority including Discharge or threatened discharge Any ULP that significantly interferes with…right to unionize
  • Bill hasn’t passed Discuss cloture and political issues Potential for compromise
  • Similar to the trial practice of “drawing the sting”, or introducing bad information before your adversary can. Attack these negative issues, or at least let the employees know that you are aware of them, you will lessen the effect of the Union promoter’s sales pitch.
  • Card check can allow a union to gain a foothold before the employer knows its an issue…then its too late!
  • Get an honest and effective audit of your company’s human resources to determine where and how vulnerable you really are Salts - A “Salt” is an employee of the Union who attempts to get hired by the employer - Primary goal is to unionize “co-workers” - Employer CAN NOT fire a salt based solely on his union affiliation or organizing activities Technically, he is moonlighting and it is second job In reality, his primary goal is unionize his co-workers Termination cannot be for salting activities if they are conducted outside normal working time. - Supreme Court has expressly permitted salts
  • Place a premium on training managers as leaders and communicators “ Intimidators” are generally poor communicators and leaders - A note on “intimidators” Often be considered the best managers on a staff because they generally “make their numbers”. Production may ultimately come at a very expensive cost if workers feel they need a union to protect them from their boss!
  • Train managers and supervisors to recognize the “Early Warning Signs” Of union activity to create awareness & open communication Unions do have certain limitations A recent case confirmed that the unions and employees did not have a right to use company email for union purposes. One concession for the EFCA may be something similar to a “do not call” list, which would protect workers from harassing unionizers Inform Your Employees? - Benefit - Employee is insulted by the EFCA and opposes it - Company campaigns first and controls message - Risk - Employee is educated and seeks out the union Refer to hand-out of Union Testimony This goes both ways…we probably shouldn’t advise that they do or do not educate their workers on the EFCA. It could really go either way depending on the attitude of the work force.
  • Create a campaign calendar with specific responsibilities assigned within the organization Develop a program to educate employees TIPS – threats, interrogation, promises, surveillance
  • Some incarnation of the EFCA will likely received the votes in the Senate to push the act into law Unlikely that the current incarnation will be passed in tact
  • President Obama received a lot of campaign support from Unions in the elections, based in part on his support of the bill
  • History Previous incarnations of the Bill were voted down in the House of Representatives in 2004 and 2006 Introduced to the House of Representatives in February of 2007. Passed the house on March 1, 2007 by a vote of 241-185, largely along party lines Introduced to Senate on March 30, 2007 by Ted Kennedy, co-sponsored by 46 other senators including Barack Obama The bill was never voted on because there were not enough votes to avoid a filibuster A filibuster is an action available to senators, whereby they can hold up a bill in discussion (theoretically forever) to prevent it from passing. Sixty votes are needed to break-up a filibuster and move the legislation to a vote, where only 51 votes are needed.
  • On election day in 2008 it was widely assumed that congress would vote on the EFCA strictly along party lines, although recently, even though there will likely be sixty senators caucusing with the Democrats when the time to vote comes (58 democrats and 2 independents), the democrats don’t know if all 60 will be voting for the EFCA. The confirmation of democrat Al Franken, of Saturday Night Live fame, as a Minnesota senator is being held up by an election contest. Franken will likely be confirmed. The two independent voters, Joe Lieberman (CT) and Bernard Sanders (VT), will likely vote for the EFCA However, some Democratic senators are receiving intense pressure and have shown signs of wavering on the EFCA vote Diane Feinstein (CA) is being pressured by the chamber of commerce and major CA businesses Blanche Lincoln (AR) is being pressured by Wal-Mart, which is headquartered in Arkansas And finally newly converted Democrat Senator Arlen Spector, a longtime supporter of Labor Law reformation, has already stated he will NOT vote for the EFCA in its current form, specifically reiterating that point on the day he switched parties, but has been proactively working to reform the current form of the bill. NOTE - Obama recently has said he is willing to make compromises to get the bill passed and his office is working with Spector and other senators from both parties to craft a compromising version of the ill. Obama has said that will not accept any amendment whose premise is that people should not unionize Basically, this includes anything that looks to add a hurdle to unionization, regardless of the “free choice” argument.
  • Some incarnation of the EFCA will likely received the votes in the Senate to push the act into law Unlikely that the current incarnation will be passed in tact
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Hot Legal Issues In This Economy For Material Handling & Industrial Equipment Businesses Hot Legal Issues In This Economy For Material Handling & Industrial Equipment Businesses Presentation Transcript

  • Hot Legal Issues in this Economy for Material Handling & Industrial Equipment Businesses Jeremy Silberman David Cassidy Mo Bauer Gary Marks Charles Bruder The material provided herein is for informational purposes only and is not intended as legal advice or counsel.
  • Protecting Your Dealership Under State Franchise and Dealer Protection Laws Jeremy Silberman
    • THE ECONOMY:
    • EFFECT ON THE INDUSTRY
    • OUTLOOK FOR RECOVERY
  • The Manufacturers Alliance/MAPI May 2009 Economic Report:
    • “ January-to-March, inflation-adjusted material handling orders were 56 percent below order activity one year ago . The material handling equipment business took a sharp dive at year end 2008 and the contraction continued in the first quarter of this year. The sharp decline in industrial activity caused factory utilization rates to drop precipitously, which in turn lessened the need for general purpose material handling equipment.”
  • The Manufacturers Alliance/MAPI May 2009 Economic Report:
  • United States Forklift Sales Class 4 & 5 (Internal Combustion) Source: Industrial Truck Association; 2006 – 2008 Shipments; 2009 Estimated Orders.
  • Northern New Jersey Forklift Orders Class 1 – 5 2009 estimate based on annualizing Jan - May 2009 Orders.
  • Projected Timing for Recovery of New Equipment Sales
    • Material Handling Equipment lags:
    • Federal Reserve Board’s Industrial Production Index by 9 – 12 months
    • Consumer Confidence Index by 12 months
    • Housing Starts by 21 months
    • Source: MHIA March 2009 Material Handling Equipment Manufacturing History and Forecast Report.
    • THE NEW JERSEY FRANCHISE PRACTICES ACT
  • New Jersey Franchise Practices Act – Protection Against Termination
    • “ It shall be a violation of this act for a franchisor to terminate, cancel, or fail to renew a franchise without good cause .”
    • “ For purposes of this act, good cause . . . shall be limited to failure by the franchisee to substantially comply with those requirements imposed upon him by the franchise.”
    • N.J.S.A. 56:10-5
  • New Jersey Franchise Practices Act – Indirect Termination
    • “ It shall be a violation of this act for any franchisor directly or indirectly … to terminate, cancel, or fail to renew a franchise …”
    • N.J.S.A. 56:10-5
  • New Jersey Franchise Practices Act – Proper Notice of Termination
    • “ It shall be a violation of this act for any franchisor directly or indirectly … to terminate, cancel, or fail to renew a franchise without having first given written notice setting forth all the reasons for such termination, cancellation, or intent not to renew at least 60 days in advance of such termination …”
    • N.J.S.A. 56:10-5
  • New Jersey Franchise Practices Act – Injunction Against Termination
    • “ Any franchisee may bring an action against its franchisor for violation of this act in the Superior Court . . . to recover damages sustained by reason of any violation of this act and, where appropriate, shall be entitled to injunctive relief …
    • Such Franchisee, if successful, shall also be entitled to the costs of the action including but not limited to attorneys fees . ”
    • N.J.S.A. 56:10-10
  • New Jersey Franchise Practices Act – Standards of Performance
    • “It shall be a violation of this Act for any franchisor, directly or indirectly to … impose any unreasonable standards of performance .”
    • N.J.S.A. 56:10-7(e)
  • New Jersey Franchise Practices Act – Other Protections
    • It is a violation of the Act for a manufacturer to:
    • Prohibit dealer associations and the right of dealers to organize;
    • Require or prohibit a change in management unless the manufacturer has good cause, stated in writing, to require or prohibit the change;
    • Restrict the sale or transfer of any equity in the business to the spouse, child, heirs, employees or managers of the business, so long as it is not a sale of control of the franchise.
    • N.J.S.A. 56:10-7
  • New Jersey Franchise Practices Act – Sale or Transfer of Franchise
    • Dealer must give written notice of the buyer’s name, address, statement of financial qualification, and business experience.
    • Manufacturer has 60 days to approve the sale or advise of unacceptability on the basis of the buyer’s (a) character, (b) financial ability, or (c) business experience.
    • If no reply in 60 days – approval is deemed granted.
    • N.J.S.A. 56:10-6
  • New Jersey Franchise Practices Act
    • Must meet six requirements
    • to be protected by the Act
      • What can you change in your business to ensure that you meet the six elements?
      • How would you prove in court that your business meets the six elements?
  • New Jersey Franchise Practices Act – Qualifying for Protection of the Act
    • Written arrangement
      • It does not matter whether the agreement actually uses the word “Franchise.” It may be a Sales Agreement, or Dealer Agreement, or any other kind of agreement. It is still a “franchise agreement” if the business meets the six elements of the Franchise Act.
  • New Jersey Franchise Practices Act – Qualifying for Protection of the Act
    • 2. Place of business in New Jersey where the franchisee displays for sale and sells the franchisor’s goods or services. But …
    • “ Place of business shall not mean an office, a warehouse, a place of storage, a residence or a vehicle.”
      • You need some sales activity at your facility – not just storage of goods and back office operations. What can you do to ensure some retail sales at your place of business? (e.g. a showroom or a parts counter).
  • New Jersey Franchise Practices Act – Qualifying for Protection of the Act
    • 3. Gross sales of products or services between manufacturer and dealer exceed $35,000 in prior 12 months.
    • More than 20% of gross sales are derived (or intended to be derived) from the franchise.
          • Document your revenue stream by product brand
          • Equipment sales: new and used
          • Parts sales
          • Service work: warranty and non-warranty
  • New Jersey Franchise Practices Act – Qualifying for Protection of the Act
    • License to use the trade name, trade mark, service mark.
      • Not necessarily a formal trademark license, but must show the public that there is a relationship between the dealer and the manufacturer.
      • Does the manufacturer give you guidelines on how their trademark must appear?
      • Document your use of the “license.” Do you use the trademark in your advertisements? Yellow page ads? Uniforms? Letterhead?
  • New Jersey Franchise Practices Act – Qualifying for Protection of the Act
    • “ A community of Interest in the marketing of goods or services at wholesale, retail, by lease, agreement, or otherwise.
      • You must demonstrate substantial “Franchise specific investments” - - -
        • What equipment, software, training, advertisements, signs and logos, etc. have you bought over the life of the business specifically related to selling and servicing this brand?
  • Be Prepared
    • Document, Document, Document … all of your proofs of each requirement now and on an ongoing basis as a regular business practice.
    • Save all proofs of use of the trade mark, “franchise specific investments,” and revenue from selling and servicing the product, training customers, etc.
    • Save all documents from all your interactions with the manufacturer; letters, emails, agreements, dealer meeting notes and presentations, etc.
    • For at least as long as the relationship exists.
  • Pennsylvania
    • No specific franchise protection statute
    • However, Pennsylvania courts have recognized some level of protection against termination without good cause.
  • Pennsylvania
      • Pennsylvania Supreme Court Decision:
      • Atlantic Richfield Company v. Razumic, 480 Pa. 366 (1978)
      • Definition of a franchise:
      • “ In its simplest terms, a franchise is a license from the owner of a trademark or trade name permitting another to sell a product or service under the name or mark . More broadly stated, the franchise has evolved into an elaborate agreement by which the franchisee undertakes to conduct a business or sell a product or service in accordance with methods and procedures prescribed by the franchisor , and the franchisor undertakes to assist the franchisee through advertising, promotion and other advisory services.”
  • Pennsylvania
    • “ In exchange, an Arco dealer such as Razumic [the dealer] can justifiably expect that his time, effort, and other investments promoting the goodwill of Arco will not be destroyed as a result of Arco's arbitrary decision to terminate their franchise relationship. Consistent with these reasonable expectations, and Arco's obligation to deal with its franchisees in good faith and in a commercially reasonable manner, Arco cannot arbitrarily sever its franchise relationship with Razumic. A contrary conclusion would allow Arco to reap the benefits of its franchisees' efforts in promoting the goodwill of its name without regard for the franchisees' interests.”
    • Atlantic Richfield Company v. Razumic , 480 Pa. 366 (1978)
  • Employee Free Choice Act: Where It Stands and What It Means to Employers David Cassidy
  •  
  • What Is The EFCA?
    • An Act to “amend the National Labor Relations Act to establish an efficient system to enable employees to form, join, or assist labor organizations, to provide for mandatory injunctions for unfair labor practices during organizing efforts, and for other purposes.”
  • EFCA in a Nutshell
    • Gives workers the choice of whether to form a union through majority sign-up or through the National Labor Relations Board election process
    • Guarantees a first union contract through mediation and arbitration
    • Strengthens penalties for violations against workers who are trying to organize or negotiate a first contract
    • http://edlabor.house.gov/employee-free-choice-act efca/
  • Certifying A Union
  • Certifying A Union Today Petition Campaign Election Democracy!!! Objections Hearing
  • Campaign Period Current System
    • Authorization cards from 30% = petition for election
    • Employer provides union with roster of eligible employees
    • Election date = no less than 10 days from the day the roster was released
    • 2007 median period - 39 days from the date the petition was filed (NJ: 42 Days)
  • Voluntary Recognition/Card Check
    • Employer can agree to voluntarily recognize a union via a card check
      • 51% permits the union to be voluntarily recognized by the employer
    • Employer may reject voluntary card check and force secret ballot
  • Campaign Rules - Employers
    • Don’t make negative predictions about the effect of the union on business
    • Don’t question or surveil employees regarding their voting choices or leanings
    • Don’t offer incentives for voting against unions
      • Not only includes wages and benefits but any other type of working condition
    • Don’t hold campaign meetings within 24 hours of balloting
    • Don’t Discipline, Discharge, Discriminate or Retaliate
  • Different Rules for the Unions
    • Unions may…
      • Promise higher wages/benefits/changes without accountability
      • Contact employees at their homes and repeatedly inquire about their vote using union members or co-employees
  • Secret Ballot Elections
    • Conducted by NLRB
    • Represented at the election by an observer
    • Union must receive a majority of the votes cast
      • Majority of voters – Union certified as exclusive bargaining representative for the unit
      • No Majority – Certified as no union
    • Either way, no election in that unit for at least one year from the date of election results
  • Secret Ballot S A M P L E
  • The EFCA WAY!
  • Involuntary Card Check Union =
  • Authorization Cards
  • Privacy?
  • The Union is in… Now What??
  • Negotiating With The Union
  • Out with the old… In with new… Current labor negotiations under the NLRA Proposed changes under the EFCA
  • The Negotiation Process
    • Under Current Law
    • Each negotiation is decided by the parties on a case-by-case basis
    • There is no requirement to reach a final resolution
    • Both sides have leverage
      • Employer – Last, best contract offer and lock outs
      • Union – Strike, picket and handbill
    • Under the EFCA
    • Resolution WILL be reached
      • If an agreement can’t be reached, parties are sent to mediation
      • If mediation doesn’t work, parties are sent to mandatory arbitration
    • Arbitration
      • First contract and binding for two years
  • Binding Interest Arbitration
    • Arbitration decision would be binding for two years , unless parties agree otherwise
    • Rules to be issued on how it will work
  • ULP Remedies – Ouch! What they are, and the price to pay under current law and EFCA
  • Employer Unfair Labor Practices
    • Interfere/restrain/coerce employees in exercising their rights to engage in concerted activity or union activity
    • Dominate or interfere with formation or administration of union
    • Discriminate against employees based on union actions
      • Includes filing charges or taking part in a proceeding for the NLRB
    • Refusal to bargain with the lawful representative
  • Penalties for Employers
    • Current Penalties
    • Remedial back pay and reinstatement
    • Possible Injunctions
    • Posting Requirements
    • New Elections
    • Bargaining Orders
      • Extreme cases only
    • Priority granted to allegations of ULP by the Union
    • EFCA Penalties
    • In addition to previous remedies…
      • Treble Back Pay
      • Mandatory Injunctions
      • Civil Damages
        • $20K per violation
    • No change in remedies against Unions
    • Provisions grant priority to allegations made by unions and employees against employers
  • Planning for the EFCA How to prepare for the worst case scenario
  • Don’t Stand PAT!
    • Plan
      • How to minimize exposure to unionization
    • Analyze
      • Perform a critical audit of your own vulnerability
    • Train
      • Pro-actively educate while you still can
  • Plan
    • Passive approach = No approach
    • Speak NOW or Forever Hold Your Peace
    • Explain to Company Leaders how the EFCA will impact your Company
    • A union may be in place literally before you know it
  • Analyze
    • Perform a self-audit to determine if you are really vulnerable
      • Industry
      • Wages/Benefits
      • Employee morale
      • Union activity in the area
      • Supervisor competence
      • Communication methods
  • Leadership
    • The best union organizer is a bad manager…
    • Poor leadership (NOT pay or benefits) is the primary issue that leads to unionization
    • Employers have the most power to remedy poor leadership
  • Policies and Practices
    • Policies
    • Is your handbook written in plain language?
    • Are your policies comprehensive?
    • At Will employees?
    • Hiring Practices
    • Train Managers on how to hire
    • Hire from positive sources
  • Train Your Managers
    • Train you managers to focus on employee relations
      • The primary reason given for unionization is frustration with supervisors
    • Teach supervisors
      • What leads to unions and how to avoid them
      • How to spot early signs of unionization
      • What to say and what NOT to say
  • Contingency Planning
    • Create a rapid response communication plan
    • Develop a “Ready to Go” Campaign that can be launched if you learn of union activity
    • Be ready to train managers on TIPS
  • Will It Pass?
  • Political Support
    • "We will pass the Employee Free Choice Act. It's not a matter of if—it's a matter of when. We may have to wait for the next President to sign it, but we will get this thing done."
      • Barack Obama, 3/4/07
  • Status
    • The bill passed unchanged through the House of Representatives
    • The Bill has not been offered to the Senate for a vote at this time
    • The President is a co-sponsor of the Bill and will sign the Bill if it comes to his desk
  • What now?
    • Magic Number = 60
    • Magic Word = Compromise
  • Collecting From Financially Distressed Customers Mo Bauer
  • Factors Leading to Financial Distress
    • Liquidity Crisis
    • Asset-Based Loan Default
    • Loss of Major Client/Customer
    • Loan Maturity and Unable to Refinance
    • Drop in Revenue
    • Increased Operating Costs
  • Red Flag Factors
    • Industry in Distress
    • Payment Terms Expanding, i.e. Late Payments
    • The Rumor Mill – Other Creditor Comments
    • Continual Empty Promises
  • Should We Continue to Do Business With Distressed Customer
    • Assess Import of Distressed Customer to your business
    • Size-Up Customer’s Ability to Find a Replacement
    • Request Financial Statements from Customer, including Bank Loan status
    • Assess Amount of Customer debt that you are prepared to write-off and set threshold accordingly
    • Place Customer on COD Basis.
  • Legal Pursuit of Collections
    • Know Legal Rights
      • Contractual Rights and Remedies
      • Lien Rights, i.e. recorded UCC statements, warehouseman lien, artisan lien
    • Demand Letter or Default Letter
    • Collection Complaint
  • Should We Do Business With a Chapter 11 Debtor?
    • Access to Financial Information of Debtor
    • Business Terms
    • Administrative Expense Claim
    • Emotions v. Profit
  • Available Information
    • Schedules of Assets and Liabilities and Statement of Financial Affairs
    • Budget for Use of Cash Collateral and DIP Financing
    •  Monthly Operating Reports
    •  Counsel to Creditors Committee
    • Other Creditors
    • Disclosure Statement Provides Historical Financial Information and Forecasts
    •  The Web, Court’s Website, Newspaper Articles, etc.
  • Executory Contracts
    • An Executory Contract is a contract in which both parties still have continuing obligations
    • Examples: Residential or Commercial Leases, Certain Equipment Leases, Service Contracts, License Agreements, and Collective Bargaining Agreements
    • A non-Debtor party is required to continue with performance under the contract
    • Motion to Assume or Reject Lease or Contract
  • Equipment Leases Equipment Financing
    • True Lease vs. Disguised Security Interest
    • Motion for Stay Relief
    • Motion for Adequate Protection
    • Assumption of Lease
    • Sale of Equipment
  • Claims Process
    • Bar Date (Deadline to File a Claim)
    • Filing a Proof of Claim
    • Motion Objecting to Claims
  • Preference Actions Adding Insult to Injury
    • Preference Payments – Typically, any payment received within 90 days of the Petition Date
    • Dunning Letter from Debtor or Liquidating Trustee’s Counsel
    • Defenses
      • Contemporaneous Exchange
      • New Value
      • Ordinary Course of Business or financial affairs of the debtor and the transferee or made according to ordinary business terms
  • Sales of Assets in Chapter 11
    • Notice of Asset Sale
    • Sale Free and Clear of All Liens, Claims and Encumbrances
    • Assumption and Assignment of Executory Contracts
      • Payment of Arrearages
      • Adequate Assurance of Future Performance
    • Higher and Better Offers
  • When to Consider Filing for Bankruptcy Protection for Your Business Gary Marks
      • May not always have the luxury of time to plan for bankruptcy
      • Considerations
        • If possible, file at a time when debtor’s business cycle is such that it is flush with cash. Consider the seasonality of the business.
        • Avoid bank set-offs
        • Insurance issues
        • Whether to apprise lender and major suppliers in advance
        • Time limits on whether to assume or reject a lease could dictate the timing of the petition, especially in retail cases with a large number of leased locations
    Pre-Bankruptcy Planning and Timing of Filing Petition
  • Dealer Agreements May Precipitate A Bankruptcy Filing
      • Termination notice given by manufacturer and notice period both expire before dealer files petition. Dealer agreement can be terminated and cannot be resurrected in subsequent bankruptcy.
      • Termination notice given by manufacturer prior to dealer filing petition, but dealer files during the notice period
        • If dealer has no right to cure, mere passage of time alone will not stay termination of the Agreement
        • If dealer has a right to cure, the termination is stayed and the dealer will have the chance to cure and reorganize its business
  • Types of Insolvency Proceedings
      • Chapter 7
      • Chapter 11
      • Assignment for benefit of creditors
  • Alternatives to Insolvency Proceedings
      • Out of court workout with principal lender
      • Out of court workout with key trade creditors
  • Succession Planning — Minimizing Costs and Risks When Transitioning Your Business to a Family Member or Selling to a Third Party Charles Bruder
  • What is Succession Planning? – An Overview
      • Equity gifts to family members
      • Transfers to trust/controlled entity
      • Equity grants to key family member employees
      • Sales to third parties
  • Gifts of Equity to Family Members Potential Pitfalls
      • Gifting limits
      • Valuation Issues
      • “ Overgifting”
  • Gifts to Family Members - Intentions?
      • Outright Gifts vs. Gifts with Restrictions
        • What do you intend to give?
          • Stock Value?
          • Voting Rights?
          • Dividends?
          • Transfer restrictions?
          • Shareholder agreement issues?
            • Buy/Sell Agreements?
  • Transfers to Trusts/Controlled Entities
      • Types of Techniques
        • Grantor Trusts
        • Family Limited Partnerships (FLPs)
      • Use of these vehicles may allow for the transfer of equity in your company at a discounted value, while permitting you to retain some “control” over the transferred assets
  • Transfers to Trusts/Controlled Entities
      • Many of the same potential pitfalls as outright gifts to family members
      • However, valuation issues require additional scrutiny
        • Use of trusts/controlled entities has gained additional IRS scrutiny during the past few years
        • The IRS has had some success in challenging equity valuations, particularly for minority discounts
        • Additional costs associated with implementation and maintenance of trusts/controlled entities
        • Potential estate inclusion if not properly structured
  • Equity Grants to Family Member Key Employees
      • If a family member is also a key employees of the company, there are a variety of equity and equity-based incentive compensation techniques available
        • Stock option plans
        • Restricted stock arrangements
        • Stock bonus plans
        • Stock appreciation rights
        • Phantom stock arrangements
        • Deferred compensation arrangements
      • With these latter 3 techniques, the employee does not receive actual equity, but rather the value of same
  • Equity Grants to Family Member Key Employees
      • Remember, there must be a true employee relationship
      • Certain restrictions may exist on family member stock ownership
      • Non-family member employee relations issues
      • Employment-related grants raise many of the same issues as outright gifts
  • Sales to Third Parties - Considerations
      • Sales Structure - Stock vs. Equity
      • Cash vs. debt vs. equity
      • Post-sale rights
        • Right of first refusal
        • Right of repurchase
        • Collection rights on debt default
  • Sales to Third Parties - Employee Sales?
      • Do your employees have any interest in purchasing the company?
        • Can use equity-based employee benefits plans to facilitate a transfer
          • Employee Stock Ownership Plan (ESOP)
          • Employee Stock Purchase Plan (ESPP)
          • Stock options
  • Sales to Third Parties – What about you?
      • What do you plan to do post-sale?
        • Cash flow needs
        • Earn-out?
      • Post-sale employment?
        • Employee vs. Independent Contractor
        • Duties and responsibilities
  • Question & Answer Session Thank you for coming!