2 Years and 10 Miles: Federal Court Reviews Franchise Agreement’s Non-compete Clause

By: Sheila Raftery Wiggins

Two years and 10-mile radius = enforceable. The Federal Court in Philadelphia ruled against AAMCO, which sought to enforce the non-compete clause in its franchise agreement, prohibiting a franchisee from engaging in transmission repair within two years from terminating the relationship and within a 10-mile radius. Here, the franchisee sold his franchise and opened a repair business 90 miles away from their former AAMCO location—but 1.4 miles away from another AAMCO location. The court ruled: No violation by the franchisee. LESSON: The non-compete clause should be tailored to address: (1) direct competition and (2) abuse of the franchise system/improper use of trademarks or goodwill.

Sheila Raftery Wiggins, of the Newark office, handles matters involving complex commercial disputes, insurance defense, coverage disputes, financial fraud, and attorney ethics.

Submit Input: Appeals Court Hears the Franchise/Subcontractor Joint Employer Issue

By: Sheila Raftery Wiggins

The joint employer controversy flared-up against franchisors and companies that subcontract jobs as to whether their actions—controlling the work conditions and tasks of the franchisees/subcontractor’s employees—render the franchisor/business a joint employer of those employees. OPPORTUNITY TO SUBMIT INPUT: Browning-Ferris Industries appealed to the U.S. Court of Appeals in Washington, D.C. the NLRB’s groundbreaking 2015 ruling. Consider submitting “friend of the court” papers in the appeal on behalf of your company or industry group.

Sheila Raftery Wiggins, of the Newark office, handles matters involving complex commercial disputes, insurance defense, coverage disputes, financial fraud, and attorney ethics.

“Silent” Partner of a New York Franchise Location: You ARE Responsible for Unpaid Wages

By: Sheila Raftery Wiggins

Many franchise locations are operated by a privately held corporation.  In New York, the top 10 shareholders of a privately held New York corporation (determined by value of their interest) can be held liable for unpaid wages.  Effective January 19, 2016, the top 10 shareholders of privately held corporations organized in other states can now be held similarly liable.  LESSON: A shareholder should not be “silent” regarding the operation of the business.

Sheila Raftery Wiggins, of the Newark office, handles matters involving complex commercial disputes, insurance defense, coverage disputes, financial fraud, and attorney ethics.

FCRA Applies to Background Checks Too

By: Sheila Raftery Wiggins

The Fair Credit Reporting Act imposes many requirements, including on background checks of prospective employees. An employer may not obtain a background check unless: (1) a clear and conspicuous disclosure is made in writing before the report is caused to be procured, (2) the document consists solely of the disclosure (do not add extraneous information!) and (3) the person authorizes the check in writing. Failure to comply can result in an enforcement action by the Federal Trade Commission, other government actions or private lawsuits.  Keep it simple.

Sheila Raftery Wiggins, of the Newark office, handles matters involving complex commercial disputes, insurance defense, coverage disputes, financial fraud, and attorney ethics.

Wendy’s Franchisee’s Employment Arbitration Agreement Is Found to Be Illegal

By: Sheila Raftery Wiggins

The NLRB ruled that the mandatory arbitration agreement – which a Wendy’s franchisee asks its employees to sign – contains illegal waivers of class and collective rights. The NLRB’s decision conflicts with a federal appellate court ruling in 2013 in a case known as D.R. Horton.  Expect more cases – in the NLRB and the court system – to resolve this dispute. LESSON: Check your employment agreements and the arbitration clauses.

Sheila Raftery Wiggins, of the Newark office, handles matters involving complex commercial disputes, insurance defense, coverage disputes, financial fraud, and attorney ethics.

There for You? Confirm Your “Additional Insured” Status as Required by Business Contracts and Operations Manual

By: Sheila Raftery Wiggins

Business contracts – like franchise agreements and operational manuals – may require that another entity is listed as an “additional insured” on an insurance policy. Failure to comply may: (i) violate the terms of a contract and (ii) increase your exposure to risk. Minimize risk by: (1) Confirming status as an “additional insured” on your and your business partner’s policies; (2) Include “legal hot topics” covered by the policy by speaking with your broker and lawyers regarding legal trends so you are covered against the “hot topic” lawsuits/claims in your industry; and (3) Read business contracts and operations manuals, which may permit you to change coverage. This insurance coverage “check-up” will help confirm that your insurance will be there for you.

Sheila Raftery Wiggins, of the Newark office, handles matters involving complex commercial disputes, insurance defense, coverage disputes, financial fraud, and attorney ethics.

In Hot Water: Charging Sales Tax When Selling Water Bottles and Other Non-taxable Items

By: Sheila Raftery Wiggins

Franchisees of an international coffee chain were sued in New York and New Jersey for charging extra money—in the form of sales—for non-taxable food items such as water bottles and packaged coffee. LESSON: Check your state’s sales tax guide, which may limit taxes on certain food items and drinks. WARNING: Failure to comply could land you in hot water defending against a consumer class action lawsuit or a government investigation. HELP: If you are not in compliance, put together a strategy – include legal counsel to address all civil and criminal issues – to remedy this situation.

Sheila Raftery Wiggins, of the Newark office, handles matters involving complex commercial disputes, insurance defense, coverage disputes, financial fraud, and attorney ethics.

Puffery Vs. False Claims: The FTC Is Watching

By: Sheila Raftery Wiggins

LESSON: Avoid false endorsements by the government, especially when the government does not rank your business industry. The FTC reprimanded a fitness franchisor for falsely stating that the FTC endorses or has ranked the fitness franchise. A false claim may give cause to: (1) the filing of a complaint with the Federal Trade Commission—the filing is free, (2) a lawsuit and (3) decreased reputation. Comments to this post are welcome.

Sheila Raftery Wiggins, of the Newark office, handles matters involving complex commercial disputes, insurance defense, coverage disputes, financial fraud, and attorney ethics.