Q:       How can I prevent my employees from leaving and starting a competing business with my clients?

A:        The best way a business can protect itself from this scenario is through the use of employee non-competition, non-solicitation and non-disclosure agreements (often referred to collectively as “restrictive covenants”).

When used together, restrictive covenants can effectively prevent a doomsday-type scenario where a key employee abruptly leaves a company and begins doing business with the former company’s clients.

Q:       What are the different types of restrictive covenants?

A:        (1) A non-competition agreement is a contract that prohibits an ex-employee from competing against a former employer for a specific period of time and within a specific geographic territory. 

(2) A non-solicitation agreement prohibits an ex-employee from soliciting business from, or doing business with, a former employer’s customers and vendors. 

(3) A non-disclosure agreement prohibits an ex-employee from disclosing any of a former employer’s intellectual property or other confidential information—such as customer lists and pricing information—to any third party. 

Q:       When are restrictive covenants most crucial?

A:        Sales is a field that is particularly vulnerable to an ex-employee leaving and taking a former employer’s clients. A salesperson who knows the former company’s pricing information and who has established relationships with the company’s best customers could lure away those customers with promises of lower prices. Restrictive covenants can help prevent this scenario.

Purchasing a business is another situation in which restrictive covenants are worth their weight in gold. The purchaser of a business certainly does not expect to compete with the seller of the business once the sale is finalized, but without the inclusion of restrictive covenants in the purchase agreement, that is exactly what may happen. In this context, restrictive covenants operate to prevent the seller from remaining in the same business or doing business with its old customers once the sale is final.

Q:       Are there any limitations on restrictive covenants?

A:        Yes. To be enforceable, restrictive covenants must comply with very specific legal requirements. Courts carefully scrutinize the contents of the written contract to ensure that the terms of the restrictive covenants are reasonable and that all requirements for a valid contract have been met. Proper drafting, therefore, is critical.

Q:       Where can restrictive covenants be enforced?

A:        In virtually every state, courts require restrictive covenants to be reasonable with respect to both time and geography. This means that they can remain in effect for only a limited period of time and within a limited geographical area. What is “reasonable” varies greatly from case to case and is an extremely fact-sensitive question. Generally speaking, restrictive covenants are reasonable only to the extent that they are necessary to protect the employer’s legitimate business interest.

Using the sales example from above, if a company sells products throughout the entire state of Ohio, then a court would likely hold that it is reasonable to restrict an employee from competing within the state. By contrast, if the company’s sales area includes only the Greater Cincinnati region, then that would be the maximum permissible geographic scope of the restrictive covenants.

Q:       For how long can restrictive covenants be enforced?

A:        Restrictive covenants generally apply for the duration of employment and then for a specific number of years following separation of employment. The time covered must be reasonable. Depending on the circumstances, a period of one, three or five years following separation of employment may be appropriate.

This “Law You Can Use” column was provided by the Ohio State Bar Association (OSBA). It was prepared by attorney Nicholas C. Birkenhauer of Dressman Benzinger LaVelle psc. Andrew J. Kaminski, J.D. candidate, contributed to this article. Articles appearing in this column are intended to provide broad, general information about the law. Before applying this information to a specific legal problem, readers are urged to seek advice from an attorney. 

Approximately 800 million people use Facebook, and Twitter has about 200 million account holders. Add in all of the bloggers and it becomes crystal clear that social media is more than just a fad. Social media is being used worldwide to connect old acquaintances, make business referrals, and market and advertise products and services. Chances are a vast majority of a company’s employees, customers, potential customers, and competitors access a social media site on a daily basis. Because social networks amass such huge audiences, social media is quickly becoming a preferred way for businesses to tout products and services.

Q:       Who regulates the use of social media as an advertising mechanism?

A:        The Federal Trade Commission regulates the use of endorsements and testimonials in advertising through its published Guides Concerning the Use of Endorsements and Testimonials in Advertising. These endorsement guides, which have been in effect for more than 20 years, address endorsements by consumers, experts, organizations, and celebrities. In fact, FTC revised its endorsement guides in 2009 to include blogs and social networking sites.

Q:       What qualifies as an endorsement?

A:        Under the guides, an endorsement is “any advertising message (including verbal statements, demonstrations, or depictions of the name, signature, likeness, or other identifying personal characteristics of an individual or the name or seal of an organization) that consumers are likely to believe reflects the opinions, beliefs, findings, or experiences of a party other than the sponsoring advertiser, even if the views expressed by that party are identical to those of the sponsoring advertiser.” 

Q:       What is the purpose of the FTC’s endorsement guides?

A:        The FTC’s aim is to ensure that endorsements are truthful and not misleading. Under the guides, endorsements must reflect the honest opinions, findings, beliefs, or experiences of the endorser, and not the marketer of the product. To help further this principle, “material connections” between marketers and endorsers that might affect the weight or credibility of the endorsement, such as connections that consumers would not normally expect, must be disclosed.

Q:       Don’t these updated regulations only apply when a sponsoring advertiser pays a blogger or spokesperson, like a famous celebrity, to tout its products online?

A:        No. If there is any relationship between the endorser and the marketer of the product that might affect how consumers evaluate the endorsement, the FTC regulations apply and the relationship should be disclosed. For example, the regulations would apply if a company’s receptionist wrote on her personal Facebook page a glowing review of a new product just launched by the company. Because the connection between the endorser (the receptionist) and the seller of the product (the company) might affect the weight or credibility of the endorsement, the receptionist’s employment must be clearly and conspicuously disclosed on her page. If the receptionist fails to disclose her relationship with the seller, her post would violate the FTC’s endorsement guides.

Q:       What can a business do to avoid violating the FTC’s endorsement guides?

A:        To avoid violating FTC regulations, businesses should educate their employees about what they can and cannot say and do online. An easy way to educate employees on how to properly use social media for business purposes is to adopt a clear, well-written social media policy.

Q:       Where can I go to get more information about the FTC’s Endorsement Guides?

A:        Visit the FTC’s website business legal resources page at http://business.ftc.gov/legal-resources/5/33 for more information.

This “Law You Can Use” column was provided by the Ohio State Bar Association (OSBA). It was prepared by Alan J. Hartman, a partner and head of the Technology Practice Group at Dressman Benzinger & LaVelle psc. For more information on a variety of legal topics, visit the OSBA’s website at www.ohiobar.org. Articles appearing in this column are intended to provide broad, general information about the law. Before applying this information to a specific legal problem, readers are urged to seek advice from an attorney. 

            Many resources are available, especially on the federal level, to assist veterans with physical or psychological “wounds of war,” but not all wounded veterans know how to access them. Rather than to reach out for help, some veterans may engage in behavior that brings them into the criminal justice system. The veterans’ treatment court helps these veteran defendants address the issues underlying their criminal behavior and links them to available resources.

Q:       What is a veterans’ court?

A:        The first veterans’ treatment court was established in 2008 in Buffalo, New York, in order to respond to the unique needs of veterans whose combat-triggered problems, such as mental illness or substance abuse, have led to criminal behavior. The veterans’ court is a hybrid between a drug court and a mental health court. It uses a treatment problem-solving model rather than a traditional court model to assist veterans whose problems can be clearly traced to military service. Ohio, whose population of veterans is sixth among the 50 states, now uses veterans’ courts to help deserving war veterans who have become criminal defendants.

Q:       How does a veterans’ court work?
A:        Veterans in the criminal justice system are first identified through evidence-based screening and assessments. They may then be referred to the veterans’ treatment court by probation officers, public defenders, defense lawyers or judges. Such a veteran defendant also may be referred by a veterans’ justice outreach specialist (VJO), whose job is to link veteran defendants with Veterans Affairs services.

            Veteran defendants who qualify for veterans’ court can participate in a court-supervised treatment plan with a court-appointed team of specialists. This team may include court staff, pro bono attorneys, probation officers, health care providers and treatment staff. The team’s goal is to help each veteran navigate the system and get necessary help. Veterans’ court teams also collaborate with the Veterans Service Commission and the Veterans Affairs office in each county so that veteran defendants can take advantage of the many resources these federal organizations provide. Volunteer veterans also provide assistance, often serving as mentors to veteran defendants throughout the course of treatment. Veteran defendants who have successfully completed their treatment plans and have met certain criteria may avoid jail or prison terms or even have their charges dismissed.

Q:       Do veteran defendants get their crimes excused?
A:        No. The goal of the veterans’ court is not to excuse a veteran defendant’s crime, but to address underlying reasons for the crime in ways that are most likely to prevent repeat criminal behavior. Often, veterans’ treatment courts have a more stringent probationary period than traditional courts. These probationary periods often include random drug and alcohol testing, and veterans who fail to abide by the terms of probation are diverted to a regular court docket.

           

Q:       Where are Ohio’s veterans’ treatment courts?

A:        Ohio currently has six veterans’ treatment courts: Cleveland Municipal Court; Hamilton County Common Pleas Court; Mansfield Municipal Court; Middletown Municipal Court; Stark county Common Pleas Court; and Youngstown Municipal Court. Many other municipal and common pleas judges in Ohio are in the process of establishing veterans’ treatment courts, while others have expressed interest, including courts in Akron, Dayton and Toledo, and courts in Butler, Franklin, Greene, Guernsey, Hamilton, Marion and Stark counties.

This “Law You Can Use” column was provided by the Ohio State Bar Association (OSBA). It was prepared by Justice Evelyn Lundberg Stratton of the Supreme Court of Ohio. The column offers general information about the law. Seek an attorney’s advice before applying this information to a legal problem.

            A short sale occurs when a lender is willing to take less money to pay off the balance owed on a mortgage loan so that the sale of real property can move forward to closing.

Q:       Why are short sales becoming more frequent in Ohio real estate sales?

A:        Sellers often find themselves “under water” when they owe more on their mortgage loans than their property is worth. For example, a seller may owe the bank $150, 000 on property that is worth only $100,000. In such a case, the seller may have to ask the lender (a bank or mortgage loan company) to agree to a short sale.

Q:       Why would the lender agree to being paid less money than what it is owed?

A:        Lenders know that many customers are “under water,” and may decide that it is better to receive less money in a controlled short sale than to risk a default on the loan or foreclosure.

Q:       Will a lender agree to a short sale in all situations?

A:        No. Most lenders will not consider a short sale unless a customer has routinely been late in making payments or has missed several payments, causing the loan to be in default. Many times, a lender will not agree to a short sale unless the property is already in foreclosure.

Q:       How should I ask my lender for a short sale?

A:        You can contact your lender directly, but most sellers work with a real estate agent or a real estate attorney who has experience in working with lenders in short sale situations.

Q:       How does the short sale work?

A:        Several weeks before closing, the lender will ask to see a proposed closing statement that shows any anticipated seller costs, including a real estate commission, conveyance taxes, deed preparation fees, tax proration credits and other typical seller-paid closing costs. This proposed closing statement allows the lender to see how much money will be netted from the sale of the real estate. The lender will issue a “short sale payoff demand statement” that spells out the minimum amount the lender must be paid at closing. In such a case, the seller usually is not entitled to receive any money from the sale.

Q:       Are there disadvantages to me as the seller if my lender agrees to a short sale?

A:        Yes. The lender will issue a negative report to credit agencies, which will significantly lower your credit score. The lender may also require you to sign a “reaffirmation of debt agreement,” in which you agree to pay the lender some of the money still owed on the original debt. Finally, you could owe federal and state income tax on the amount of debt the lender has forgiven. Because of these possible tax implications, you should always consult a competent tax advisor before asking for a short sale. 

Q:       What if I have a second mortgage or home equity loan? Do these impact a short sale?

A:        Yes. If you have a second mortgage or home equity loan, the lender may end up getting paid nothing from the short sale. If any such lender does not agree to release the lien of its mortgage after closing, a short sale cannot proceed. Sometimes, the first mortgage lender will agree to share some of its net closing proceeds with other lenders, or you, the seller, may have to bring some money to closing in order to satisfy or partially payoff a second mortgage or home equity loan.

This “Law You Can Use” column was provided by the Ohio State Bar Association (OSBA). It was prepared by Charles A. Brigham, III, an attorney with the law firm of Brigham & Brigham Co. L.P.A. and an Ohio licensed title agent with Buckeye Land Title Company in Cincinnati, Ohio. Articles appearing in this column are intended to provide broad, general information about the law. Before applying this information to a specific legal problem, readers are urged to seek advice from an attorney. 

Q: What, exactly, is collaborative probate law?
A: Probate disputes often arise between members of the same family and typically involve money, property or custody and control of another individual. Few probate matters are completely decided in court, and settlements are often reached only when the parties’ emotional and financial resources are exhausted. Collaborative law settlements tend to be more satisfactory to the parties, and thus more stable and enduring, and the process generally is less stressful and less expensive. Each collaboration participant is represented by his or her own independent attorney, and all parties and their attorneys work in face-to-face meetings to resolve probate issues such as adult guardianships, medical treatment decisions, residence and long-term care decisions, property and inheritance disputes, an elder’s remarriage or new relationship and succession planning for a family business. All interested parties can have a place at the table, including the senior subject of a dispute, adult siblings, spouses, grandchildren, concerned friends, support givers and caregivers.

Q: How does the process work?
A: All parties and their attorneys first must approach the court and get permission to put the case on hold while a collaborative settlement is attempted. The parties then sign a collaborative law participation agreement saying they will take a reasoned approach on all issues. Where positions differ, all participants agree to try to create proposals that will meet the fundamental needs of all parties and, if necessary, to compromise on all issues. After the agreement is signed, each party meets with his or her attorney, and then all parties and their attorneys attend the first collaborative meeting.

Almost all business is done in meetings of all parties and their attorneys. Nothing happens in secret. Since the collaborative lawyers are independent from each other, no attorney-client relationship exists between one party’s lawyer and any other party. The parties involved can talk directly to their own lawyers and to the other parties and their lawyers, but they may not threaten litigation, play games or take advantage.

The attorneys agree ahead of time that, if they cannot help the parties settle the case out of court, they will withdraw and will not represent a party in any court proceeding that is substantially related to the dispute’s subject matter. This allows collaborative law attorneys to devote all their time helping to resolve disputes without having to prepare for trial. Also, it discourages parties who are not serious about settling from engaging in the collaborative process.

In the five steps of the collaborative process, participants:
1) determine goals, interests and concerns;
2) gather relevant information;
3) develop options;
4) evaluate options; and
5) negotiate a settlement.

Q: What are the benefits and limitations of the collaborative process?
A: A collaborative process is less time-consuming, less expensive and less confrontational than a traditional adversarial case. The lawyers represent their parties’ respective interests and can prepare all necessary paperwork, but the parties have more privacy and control in a collaborative settlement than in a traditional court case. Settlements are designed to meet each party’s needs, and the process is especially effective in disputes where money is not the sole issue. Also, probate lawyers can help to prevent disputes from arising in the first place by using the collaborative process when negotiating and drafting wills, trusts, guardianships and other probate documents. Where parties cannot agree to settle their differences, or do not value a negotiated solution that meets the parties’ legitimate needs, the collaborative process is unlikely to be effective.

Q: How does the collaborative probate law process address issues that aren’t strictly legal?
A: Most collaborative probate law practice groups have non-lawyer members who are collaboratively trained and can act as neutral advisors. These may include guardians, physicians, mental health counselors or coaches, geriatric care managers, financial advisors, valuation experts and trust officers.


Q: How can I know if we can use the collaborative process for our probate matter?
A: Visit with a lawyer or other professional who has been trained in the process. A roster of collaborative lawyers and additional information about the civil collaborative process are available through the website of the Dallas-based Global Collaborative Law Council at www.collaborativelaw.us.


This “Law You Can Use” column was provided by the Ohio State Bar Association. It was prepared by Columbus attorney Tom H. Nagel, a past president of Collaborative Divorce Professionals, Inc. Articles appearing in this column are intended to provide broad, general information about the law. Before applying this information to a specific legal problem, readers are urged to seek advice from an attorney.