business operations Tag

by Kim, Lahey & Killough Law Firm

Franchisees as Third-Party Beneficiaries

Franchise attorney Emily Bohan chosen for publication in the prestigious ABA Forum on Franchise Law Journal—explores Third-Party Beneficiary Rights in Franchise Law

Kim, Lahey & Killough attorney Emily Bohan and Hannah M. Leiendecker of the Faegre Drinker firm in Minneapolis, MN published an article in the latest edition of Franchise Law Journal with the American Bar Association. The article, “Franchisees as Third-Party Beneficiaries to Franchisor’s Agreements with Other Franchisees or Vendors” sheds light on the complex world of third-party beneficiary rights in franchising and examines how individuals or entities not directly party to a contract may still enforce its terms under certain circumstances. This article was published immediately prior to the annual meeting of the ABA Forum on Franchising, at which Emily was in attendance last week.

Executive summary:

A significant impact on Dispute Resolution: Third-party beneficiary rights can play a crucial role in franchise disputes, often determining whether a case has any remedy at all. This underscores the importance of understanding these rights for all parties involved in franchise relationships.

Clear Intent: Courts typically require clear evidence that the contracting parties intended to benefit the third party. This high standard emphasizes the need for precise language in franchise-related contracts.

Franchisee Enforcement of Vendor Agreements: In some cases, franchisees have successfully enforced agreements between their franchisor and vendors as third-party beneficiaries. This highlights a potential avenue for franchisees to protect their interests.

Employee “Poaching” Restrictions: Some franchisors have utilized third-party beneficiary rights to limit employee recruitment between franchisees. However, Bohan and Leiendecker note that this practice faces increasing legal scrutiny and potential antitrust challenges.

Rare Vendor Claims: While uncommon, there are instances where third-party vendors have successfully claimed benefits under franchise agreements. These cases often hinge on exceptionally close relationships between the vendor and franchisor.

Highly Fact-Specific Nature: Bohan and Leiendecker emphasize that third-party beneficiary cases in franchise law are typically unpredictable and heavily dependent on specific circumstances. This unpredictability underscores the need for careful contract drafting and legal guidance.

The full article provides a thorough examination of relevant case law and offers practical insights for franchise industry professionals. It serves as a valuable resource for franchisors, franchisees, and their legal counsel in navigating the complex web of contractual relationships inherent in franchise operations.

Bohan and Leiendecker emphasize that these cases are highly fact-specific and often unpredictable. Both recommend that franchisors and franchisees carefully consider potential third-party beneficiaries when drafting contracts. They suggest a proactive approach and recommend that parties mitigate uncertainty and reduce ambiguity by explicitly stating their intentions regarding third-party benefits within their contracts.

The full article, “Franchisees as Third-Party Beneficiaries to Franchisor’s Agreements with Other Franchisees or Vendors,” is available in the current issue of the Franchise Law Journal.

Copyright 2024. Published in The Franchise Law Journal, Vol. 43, No. 3, Fall 2024, by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association or the copyright holder.

Emily Bohan is an attorney in the Greenville, S.C. office of Kim Lahey & Killough. Hannah M. Leiendecker  is an attorney at Faegre Drinker, practicing in the Minneapolis office.

by Kim, Lahey & Killough Law Firm

New DOL Rule Independent Contractor Classifications

New Department Of Labor Rule in Effect March 11 Affects Employee/Independent Contractor Classifications

Businesses relying on independent contractors need to know about the US Department of Labor’s new 6-factor test for determining worker classification under the Fair Labor Standards Act. This test narrows who is an “independent contractor,” and goes into effect March 11, 2024.

Key Changes in Worker Classification: New 6 Factor Test Used In Determining Worker Status. Factors considered:

1. Opportunity for profit or loss depending on managerial skill;
2. Investments by the worker and the potential employer;
3. Degree of permanence of the work relationship;
4. Nature and degree of control;
5. Extent to which the work performed is an integral part of the potential employer’s business; and
6. Skill and initiative.

DOL says these factors aren’t exhaustive. Instead, the analysis uses a totality-of-the-circumstances “economic reality” approach, allowing consideration of other relevant factors that “in some way indicate whether the worker is in business for themself.” Where the worker is dependent on the employer for work, they will not qualify as an independent contractor under this rule. Importantly, only the courts, federal and state agencies decide classification, not the employer or the worker.

Diverse Classification Standards:

Notably, this rule solely addresses DOL’s interpretation under the FLSA and does not supersede other law, such as state “ABC Tests,” IRS interpretations of common law, etc.

Serious Consequences for Misclassifying Workers:

• Owing double the worker’s damages
• Paying the other side’s attorney’s fees and costs
• Individual liability: individuals with a hand in misclassification aren’t shielded by the corporation; and
• To the extent a settlement is reached, the agreement itself—and the amounts paid—is public information.
• Not including IRS and/or DOL penalties.

What Employers Should Do Now:

1. Review existing and future independent contractor arrangements against the new framework.
2. Consider conducting a worker classification audit using the updated criteria.
3. Explore the IRS Voluntary Classification Settlement Program (VCSP) with guidance from a CPA.
4. Seek legal advice to understand the implications and ensure compliance.

If you would like for us to assist you in navigating the complexities of worker classification, please contact attorney Casey Martens at cmartens@kimandlahey.com or 864.973.6688.

by Kim, Lahey & Killough Law Firm

B C Killough named Thomson Reuters Stand-Out Lawyer

CHARLESTON, SC – Kim Lahey & Killough law firm is pleased to announce that B.C. Killough has been named to the list of “Stand-out Lawyers” by Thomson Reuters.  Each year, thousands of senior in-house legal counsels from around the world nominate the top three attorneys they have worked with during the past year.

Bill Killough has been recognized for decades by his peers in publications such as The Best Lawyers in America, South Carolina Super Lawyers and Charleston Business Magazine’s Legal Elite. Best Lawyers named him the “Corporate Lawyer of the Year” for the Charleston area in 2015. These client-nominated attorneys are “real stand-out lawyers [and] are distinctive because, in combination with their technical competence, they offer business savvy advice, deliver exceptional service, or integrate well with the client team,” according to Thomson Reuters.

Bill Killough practices law in the areas of intellectual property and business law, including commercial transactions. He is a registered patent attorney and has obtained more than 350 patents for clients and filed more than 1500 trademark applications on behalf of clients. He has experience as an intellectual property litigator, with at least one of his cases setting precedent. As a certified mediator, Killough assists parties in intellectual property and corporate disputes in coming to a resolution outside of a courtroom.

With offices in Greenville and Charleston, SC and Brevard, NC, the Kim, Lahey & Killough Law Firm is devoted to helping clients achieve their business goals and establish, enforce, and leverage their intellectual property rights from the Upstate, to the Lowcountry to across the globe.

by Kim, Lahey & Killough Law Firm

Casey Martens admitted to NC Bar and GA Bar

Congratulations to Kim, Lahey & Killough attorney Casey Martens, who has recently been admitted to both the North Carolina and Georgia Bars. Casey heads up our Brevard, NC office and serves clients in GA, NC and SC in the areas of employment law counseling and compliance, employee investigations, wage and hour disputes, business disputes and litigation, contracts, and trademark analysis and registration.

A graduate of the University of Colorado and the Charleston School of Law, Casey has regularly been named as a Legal Elite of the Upstate by Greenville Business Magazine and a South Carolina Super Lawyers Rising Star as a Top Rated Employment and Labor Attorney.

With offices in Greenville and Charleston, SC and Brevard, NC, the Kim, Lahey & Killough Law Firm is devoted to helping clients establish, enforce, and leverage their intellectual property rights from the Upstate, to the Lowcountry to across the globe.

by Kim, Lahey & Killough Law Firm

Emily Bohan joins Kim, Lahey & Killough

GREENVILLE, SC – Kim, Lahey & Killough Law Firm is pleased to announce the addition of attorney Emily Bohan to the firm’s Greenville, SC, office. Bohan’s law practice focuses in the areas of franchise law, business formation and organizations (including LLC’s and Partnerships), business disputes, alternative resolutions, and labor and employment matters.

Bohan’s firsthand experience in navigating the complexities of running a franchise operation equips her with insights into the myriad of challenges faced by businesses; her own franchise business, PuroClean, will celebrate its 15th year in 2024. As an attorney, Bohan counsels businesses and individuals in all aspects of business law including business formation, contracts, franchise, employment, compliance, licensing, and trademark matters.

In addition, Emily Bohan is a South Carolina certified mediator and is able to assist parties in business disputes to come to a resolution outside of a courtroom.

Bohan earned a Bachelor of Arts in Economics and Legal Studies from the University of California, Santa Cruz and her Juris Doctor from the George Mason University School of Law. She is admitted to practice before federal and state courts within both South Carolina and Virginia.

With offices in Greenville and Charleston, SC and Brevard, NC, the Kim, Lahey & Killough Law Firm is devoted to helping clients establish, enforce, and leverage their intellectual property rights from the Upstate, to the Lowcountry to across the globe.

by Kim, Lahey & Killough Law Firm

Are Your Non-competes Null & Void? 

Why You Should Re-examine Employment Contracts Post COVID-19.

If you had to lay off employees during the global shutdown, there is more than safety to consider as you begin to reopen. Your re-hired employees may need to sign new employment contracts, or you risk not being able to enforce the restrictive covenants employees agreed to when they were first hired.

Earlier this month, pharmaceutical company Novo Nordisk Inc. was prevented from enforcing a confidentiality and noncompete agreement it had with an employee who was briefly laid off and then rehired before leaving to work for another pharmaceutical company.

Novo Nordisk sought to enforce the agreement that prohibited the employee from working for a competitor for a year after the end of his employment. The employee was laid off in 2018 and rehired a few days later but was not asked to sign a new agreement upon his return.

Was there a break in employment?

The court said for the employee to continue to be bound to not compete beyond 2019, “Novo Nordisk would have needed to ensure there was no break in employment.” It relied on the unambiguous language of two documents:

• The termination letter stated his employment “ended effective August 3, 2018.”
• The rehire letter offered him a “new position” “effective August 6, 2018.”

The court determined there was a clear break in employment. As such, the employee was no longer bound by the “old” terms of his “previous” employment. Download full findings: Russomano v. Novo Nordisk Inc., 1st Cir., No. 20-1173, 6/2/20.

What to do next.

We want our clients to be aware of the potential pitfalls involved when there’s a break in employment, even when it’s only for a few days. What constitutes a break in employment will depend on the facts of each case, especially the language used in the documents at issue. You will most likely need to re-execute new agreements when employees return to work.

Need our help?

Casey Martens offers services in state and federal employment law, drafting and enforcement of contracts, business disputes involving interference with client relations, defamation, collections and enforcement of non-compete agreements. You can reach her at cmartens@kimandlahey.com.

by Kim, Lahey & Killough Law Firm

More Emergency Funding For Small Business

US Senate Expected to Close the Deal Today

The SC Chamber of Commerce has released a statement informing business owners that US Senate Democrats and Republicans are close to a deal for additional funding for the Paycheck Protection Program (PPP). The package, expected to be passed today in the Senate by unanimous consent, will likely allocate close to $400 billion total including funding for: