Philadelphia Business Lawyer Blog

Building and Renovation Contractors Need to Understand EPA's Renovation Repair and Painting Rule

Thu, 19 Aug 2010 14:16:39 -0500

With the upcoming deadline fast approaching, we wanted to follow-up our April 15, 2010 post titled "New Lead Paint Rules for Contractors" with a timely reminder. As most people are aware, lead based paints were banned from residential construction in the late 1970's because of the harmful affects to individuals and particularly, the developmental issues it created in young children.

Renovation firms/contractors and workers will have until September 30, 2010 to obtain the necessary training/certifications; or at least be enrolled in these classes to avoid violating the new Renovation Repair and Painting Rule. Requirements include, among others items, new training guidelines, new certification processes for paint disturbances where lead may be present and that each project must have a designated certified renovator that is responsible for overseeing the project and insure compliance with the new RRP Rule. The rule imposes requirements where a failure to comply can result in a substantial fine of $37,500 for a single violation! We know the costs of those new approved HEPA vacuum and filtration systems are high, but they don't approach the level of the potential fines for most small to mid-sized jobsites.
While we don't yet know exactly how expensive the new regulations will be in regards to lawsuits, we are working closely with many of our landlord clients to prepare for this new liability. We've already seen instances of contractors and property owners attempting to nod and wink their way out of compliance as a cost saving measure. From the landlord's perspective, even if the fines aren't enough of a deterrent, the potential lawsuits should be terrifying.

Going forward, we are advising our contractors, property managers and other clients who own and rent/lease real estate that this will be a major issue and that their contracts will need to be reviewed to allocate for this new liability. In addition, clients need to talk with their insurance adjuster as well to make sure they have coverage as well.

The Next Big Small Business Issue? Employee vs. Independent Contractor

Tue, 15 Jun 2010 17:00:56 -0500

The Department of Labor and Internal Revenue Service have joined forces in a "misclassification initiative" that will target small business employers who misclassify employees as independent contractors. How serious is this initiative? Well, President Obama's proposed 2011 budget allocates $25 million for this initiative. This additional funding will allow the Department of Labor to hire 100 more enforcement agents, and will also support grants at the state level to fund various incentive programs. The failure to properly classify an employee will result in heavy fines and penalties against employers. Why does the government care so much about this issue? Because the misclassification is costing the government billions in uncollected taxes; FICA and FUTA obligations.

Complicating the analysis of whether your workers are independent contractors or employees in Pennsylvania is that the state and federal courts focus on different factors. Even more troublesome, in some instances the state itself may have different tests depending upon which state agency you are before. For example, worker's compensation and unemployment compensation are both Pennsylvania state agencies, but each agency looks to different factors when making their determination. As the employer, you must be certain that your decision will satisfy all applicable criteria for the agency or department most likely to be evaluating your business. The analysis entails much more than just reviewing the old 20 part IRS control test. While many worker prefer an independent contractor classification, the risk to the business has just become too great to not conduct a thorough review and action plan.

Philadelphia Façade Ordinance Compels Action by Commercial Property Owners

Thu, 20 May 2010 14:36:58 -0500

Building Owners in Philadelphia need to be aware of the February 2010 Philadelphia façade ordinance. This ordinance was enacted in response to the recent high profile collapses of building façades that severely injured or even killed pedestrians walking on the sidewalks.

In a nutshell, the new ordinance affects building higher than 6 stories or that have appurtenances in excess of 60 feet in height. If your building falls into this category, and most of the tall Philadelphia buildings with their intricate ledges and facades do, then you will be required to hire a licensed professional who is experienced in building facades or structural engineering to evaluate your building. The engineer will deliver a report of "safe", "unsafe" or "safe with a repair and maintenance program." If preventative action is required, it must be performed within a very tight time schedule. All of these reports will be filed with the Philadelphia Department of Licenses and Inspections.

The inspection requirement will be phased in over the next 5 years based upon the age of the building. The oldest buildings will require certification by June 30, 2011, and re-inspection is required every 5 years after the initial report. Going forward, we are advising our clients that this will be an issue for both landlords and tenants, as inspections, certifications and repairs will impact tenant costs as well as creating potential business access issues.

Greater Philadelphia Area Commercial Lease Issues: Look Before You Rent

Thu, 06 May 2010 12:21:00 -0500

In this current economic climate, Philadelphia landlords are aggressively recruiting new tenants with offers of robust rent abatement and fit out allowances. Since the commercial lease is often one of a small business's primary expenses, it is a good idea to review any proposed lease carefully before signing or making changes to your existing deal.

A thorough lease review is important so you understand not only what the lease includes, but also what the lease does not include; and what terms are implied by law. Often, we see clients presented with lease agreements that contain terms which are unenforceable in court. Although rent, term, purchase options and security deposits are always the key business terms to any lessee, there are other legal issues which must be considered.

While not an exhaustive list, major issues that a tenant should consider prior to signing or renewing include:

1. Never enter into a commercial real estate lease in your individual capacity. If necessary, offer to personally guaranty part of the lease or pay a higher security deposit. Be wary of the landlord who states, "Don't worry. That is why you have insurance."
2. Pennsylvania law does not require a commercial landlord to mitigate his damages. That means the landlord can refuse to sign a replacement tenant and hold you liable for the unpaid rent. Therefore, make sure your lease requires the landlord to mitigate.
3. If a zoning change is required for you to operate your business, negotiate in advance under what circumstances the lease can be terminated if you are unable to obtain either a zoning change or variance. Also, be sure to include in your lease that your landlord has an obligation to cooperate and support you before the zoning board. This may seem like common sense, but you'd be surprised how often it becomes an issue.
4. You may be responsible under applicable law for environmental problems that occurred on the leased property prior to you getting there. Review the environmental and indemnification sections of your lease carefully and ask questions concerning prior "uses" of the property.
5. Be sure that you have meaningful rights if your landlord sells the property.

Email Policies for Small Businesses in the Greater Philadelphia Region

Fri, 16 Apr 2010 13:50:34 -0500

The New Jersey Supreme Court recently held that an employee has a reasonable expectation of privacy for emails sent through a personal email account (name@gmail.com for example) over her employer's network. This is significant because prior law had held just the opposite-namely that the employer did have access to anything an employee was sending over the employer's network. While this case focused extensively on the relationship between the attorney client privilege (because the personal email the employee sent was to her lawyer about a lawsuit against her employer) and the employer's right to review company email -- this case should give pause to human resource departments that it might be a good time to update or perhaps create your employee manuals.

At our Philadelphia business law firm, we like to think of an employee handbook as not only benefiting the employee, but also providing tremendous legal benefits for the employer. By having a clearly defined policy or procedure in place, along with defined consequences for the failure to meet them, exposure to litigation is greatly reduced. In fact, business insurance carriers will often reduce your premium if you have clearly defined policies for email, communication, sexual harassment, and anti-discrimination.

As a result of this case we are now advising our clients to have communication policies in place that provide notice to employees that personal email accounts (name@gmail or name@yahoo.com for example) are subject to monitoring when sent over the company network. In addition, even if you elect not to monitor personal emails sent over the company's network, everyone should be aware that records of such emails may be discoverable in litigation. This could lead to very embarrassing situations for you and your employees. Any company, whether it is small or large, can benefit by having a strong electronic communications policy in effect to reduce company exposure in litigation.

New Lead Paint Rules for Contractors

Thu, 15 Apr 2010 12:24:28 -0500

Beginning April 22, 2010 all home improvement contractors are required to comply with the EPA's new rules to prevent lead poisoning. The new rules, which have actually been public for 2 years, mandate that all contractors and sub's working on homes built prior to 1978 (with a few exceptions) be certified by the EPA. Contractors will have to take a training course and submit an application to the EPA to become certified. Since the EPA could take as long as 3 months to issue the certification, we're anticipating potential complaints this summer becoming an issue.

The fines for non-certified contractors doing renovation work are substantial, running up to tens of thousands of dollars a day. From the contractor's perspective, not following the rules could lead to homeowners refusing to pay for renovation projects or even lawsuits down the road, in addition to the fines. From the homeowner's perspective, these rules will provide a degree of comfort that lead poisoning risks are being mitigated, although it will also most likely add to the total costs of renovations.

In Pennsylvania, we're still dealing with the effects of the relatively recent Home Improvement consumer Protection Act. At Danziger Shapiro & Leavitt, PC we have guided numerous clients through the new licensing requirements imposed on the renovation industry, and we've collectively learned that while there are a few hiccups, the process is not as difficult as everyone feared it would be at the start. Even more important to homeowners, we're also starting to see the effects of the new laws on lawsuits brought against unlicensed and unqualified developers and scam artists within the industry. Our firm has helped numerous homeowners over the years prosecuting these claims, and these new regulations will add more teeth to their cases.

Owner Liability for Corporate Acts, or Piercing the Corporate Veil

Tue, 23 Feb 2010 11:23:48 -0500

Companies fail, as the news reminds us everyday now. But if you're an entrepreneur sued in commercial litigation, are you personally responsible for your company's debts? There's no shortage of business lawyers in Philadelphia writing about this issue, but we often hear that most of the articles are difficult for the average business owner to understand, because the answer unfortunately really rests on the facts of your case.

The general rule is that Pennsylvania courts are hesitant to hold owners responsible for something the company does, called piercing the corporate veil in legalese. The main exceptions are:

(1) when an owner doesn't treat the company as a separate entity, doing things like making random withdraws from the business account instead of taking a salary;
(2) when the company is used in a fraud, such as for an investment scam or contractors who take deposits but never intend to do the work;
(3) when the company doesn't follow the corporate formalities, such as forgetting to maintain the minute books every year, even if there is only one shareholder; or
(4) when the company is undercapitalized from the start.

To some degree, with the exception of the fraud rule, probably every small business in America is guilty of violating these rules. We get distracted running our businesses, serving customers, and forget to sign the form waiving the annual shareholder meeting or we never raise the initial capital we needed to get the business on the right track from the start. Does this mean you're automatically liable if someone sues your company?

Fortunately, the answer is no. It means you need to speak with a business lawyer soon, someone who understands the rules for the states where you do business. Ideally, you're making that call before you get sued, because its much easier and cheaper to have a business lawyer help you follow the rules correctly in the first place, rather than defend you after something has gone wrong.

If you're at that point where something has already gone wrong, and your being sued personally, you need to get help quickly. The right commercial lawyer might be able to explain to a judge why your circumstances make your case different from the general rules.

Business Bloggers Liability for their Posts

Mon, 15 Feb 2010 11:51:00 -0500

I thought it made sense to start off this blog with a post about the risks of blogging itself. More and more businesses are using both blogs and social media (such as Facebook, Twitter and others) to expand their brand visibility and attract new customers. While there are numerous seminars to teach you how to use all this stuff to your advantage, there are a few legal points you need to keep in mind.

The 3rd Circuit (the appellate court for PA, NJ, DE, and the Virgin Islands) held a few years ago in Dimeo v Max that bloggers are not liable for comments other people post on their sites. Like everything in the law, there are exceptions, but the general rule is that unless you wrote it or had someone else write it on your behalf you're not responsible.

So the next question is, what about the stuff you write yourself? Blogs are supposed to be open exchanges of information, and the best of them often break news quickly. Does this mean as a blogger you are now a full fledged member of the media, entitled to source protection and back stage passes? Not according to a recent case in New Jersey. In Too Much Media v Hale, the defendant in a defamation case argued that she could protect her sources under NJ's press shield law. In a decision that relied more on an analysis of the facts of Ms. Hale's actions rather than a verdict against bloggers as a whole, the court found a distinction between her posts and those of someone in the business of disseminating news for the general public. While this is good news for companies who are the target of online smear campaigns, it raises some real questions about liability for those bloggers who regularly intersperse news with commentary.