Congratulations! Your Oregon small business is successful enough that you can afford to hire some help. Hiring your first employee is a monumental step on your journey to grow your business into the next Google (well, okay, I embellish for dramatic flare, but it’s a big step nonetheless). Now just make sure you don’t fall victim to the pratfalls of failing to comply with Oregon and federal employment laws.
Something as seemingly innocuous as screening and interviewing potential employees needs to be approached carefully. Numerous state and federal statutes exist to protect employees and prospective employees from illegal discrimination. Do your homework! And follow this little axiom: Don’t ask any question to a potential employee unless it’s relevant to the job he or she will perform, ESPECIALLY if the question relates to a protected class or status. And after you’ve hired someone, do not, do not, do not, make advancement decisions or create policies that disfavor or disadvantage members of a protected class.
And as long as we’re putting important things in bold: remember that unlike most federal statutes, Oregon law prohibits discriminating against protected classes even if you only have one employee. New employees are great, but disgruntled employees or rejected interviewees who have grounds to sue you are not! This section discusses protected classes that you need to be aware of when making hiring and advancement decisions and in crafting employment policies.
Protected classes under federal and Oregon law
The protected classes outlined under Title VII of the 1964 Civil Rights Act kick in when an employer employees 15 employees. The Oregon protections, however, kick in after the first employee (I know I already mentioned this, but it’s important).
Federally protected employee classes under Title VII
- Race
- Color
- Gender
- National Origin
- Religion
- Association with the above protected classes
- Retaliation (you cannot take adverse action against an employee who objects to unlawful employment practices, files a complaint, or otherwise exercises his or her rights under federal law).
But wait, there’s more federally protected employee classes
- Disability under the ADA
- Military and veteran’s status under the USERRA (applies even if you only have one employee)
- Age if the applicant or employee is over 40 (must have over 20 employees to be applicable)
- Family and medical leave under FMLA (over 50 employees)
Oregon protected employee classes
- Race
- Color
- Gender
- National origin
- Religion
- Sexual orientation and gender identity
- Association with the above protected classes
- Retaliation
- Age if over 18
- Oregon family and medical leave (25 or more employees)
- Physical or mental disability (six or more employees)
Additional Oregon statutory protections for employees:
- Marital Status
- Family Relationship
- Prohibition on Genetic Screening and Brain-wave Testing
- Right to Testify at Employment Division Hearings
- Access to Employer-owned Housing
- Right to Report Health Care Violations
- Volunteer firefighter leave, ORS 476.574
- Expunged Juvenile Record
- Prohibition on Polygraph Exams
- Limits on Breathalyzer and Blood Alcohol testing
- Leave to Donate Bone Marrow
- Victims of Domestic Violence
- Leave for Victims of Domestic Violence
- Injured Workers (six or more employees)
- Leave for spouses of military service members called to active duty (in companies with 25+ employees)
- Military services member status
- Veterans status
- Veterans’ preference in public employment
- Child support garnishment, ORS 25.424
Categories: Employment Law · Small Business Law
Tagged: Civil Rights Act, Employment Law, Oregon, oregon business attorney, oregon business lawyer, oregon employment attorney, oregon employment lawyer, Portland, protected class, small business, Title VII
Let us not seek to satisfy our thirst for freedom by drinking from the cup of bitterness and hatred. We must forever conduct our struggle on the high plane of dignity and discipline.
Categories: Uncategorized
The Florida Bar Journal recently included an article titled: Five Compelling Reasons to Build a Presuit Mediation Clause Into Your Business Contracts. The article’s author, Mike Christiansen, comes down in favor of mediation clauses in business contracts because mediation is:
- Fast;
- Cheap;
- Informal;
- Empowering; and
- Confidential
Frankly, I have mixed feelings about contracting for mandatory mediation in business contracts. Mediation is great for resolving business contract disputes between rational people, especially if they have a history of dealing with each other and plan to continue dealing with each other into the foreseeable future (a retail business and a supplier, for example). But, if both parties are already too far apart on the issue of performance, then neither party is likely to come to mediation with an open mind, making the process something of a farce.
Mediation pros
Confidentiality
I’m going to start with number 5 on Mr. Christiansen’s list, because it might be the most compelling. In Oregon, and anywhere else for that matter, if you file a suit in a county circuit court, the pleadings and transcripts of hearings and trials are public records. Sometimes you don’t want to advertise your disputes. Whether it’s personal, cultural, or purely for business reasons, mediation is a way to resolve problems without filing anything public. In the first place, mediation, like all other settlement negotiations in Oregon, are not admissible in court under ORS 36.222, so you needn’t worry about your mediation efforts being used against you later. Secondly, and more importantly if you really value discreteness, you and the other party can agree that all mediation communications and the terms of the agreement are confidential as provided in ORS 36.220.
Expediency and cost
Mediation can be resolved much quicker than full-blown litigation. The list of private mediators in Oregon is lengthy, and you can certainly find one to handle your business contract dispute without much delay. Although you’ll likely need multiple sessions and have to pay the mediator for his time, you’re still going to spend far less and get an agreement reached (assuming both parties are willing to negotiate in good faith) much more quickly than you would through arbitration or the circuit courts. 10 hours of mediation at $150 an hour is $1,500 or $750 for each side. The filing fee alone for claims of $10,000-$50,000 in Multnomah County is $197; bump that up to $335 if you’re seeking damages between $50,000 and $149,000; and add $50 for each motion; oh, and of course there are the usual attorney fees, which average $230 per hour in Oregon. 10 hours of legal fees at that rate would be $2,230. Do the math.
Informal
If you’ve never had the privilege of seeing the inside of a courtroom, let’s just say that mediation doesn’t have quite the same stuffy, formal, rigamarole. You won’t be questioned and cross examined by attorneys. In fact, you probably won’t even have attorneys present at the actual mediation sessions. You won’t be sworn in, and there won’t be a judge or jury. You can speak frankly and the mediator will do his best to facilitate communication. Mediation sessions are usually done at the mediator’s office, which is a little less intimidating than the inside of the courthouse.
Mediation cons
Requires an open mind
Successful mediation requires two sides to open-minded, respectful, and willing to negotiate in good faith. In a high-conflict case with irrational parties, mediation probably won’t be very successful. This is something to consider before you commit yourself to mediation in every contract your Oregon business enters into. You may want to consider limiting the issues subject to mediation so that an obvious material breach like non-payment needn’t be subject to a fruitless negotiation.
Mediation is non-binding
A mediator does not have the same authority as an arbitrator or a judge. Mediators cannot decide for you and, until the agreement is formalized into a contractual settlement for consideration, the results of mediation are non-binding. This means that if you come to an understanding during mediation contingent upon the parties’ lawyer drafting an agreement and something falls through, your agreement isn’t enforceable.
The verdict
Pre-suit mediation can, and that’s a qualified can, be a good idea for your standard Oregon business contracts. The downside is minimal, and possible quick, cheap, and confidential resolution make mediation a good first step in any contract dispute. But be careful to handcuff yourself to mediation in every contractual agreement over every term of the contract. The last thing you want is to drag someone into mediation when the only dispute is about when they’re going to pay for the service or goods you’ve already provided. In that situation, anything standing in the way of you and a favorable arbitration result or judgment is just a hassle.
Categories: Contracts · Small Business Law · mediation
Tagged: business law, mediation, oregon business attorney, oregon business lawyer, oregon small business attorney, oregon small business lawyer, portland small business attorney
Small business breakups are a lot like divorce. One minute things are going good, you and your business partners see eye-to-eye, and the next thing you know all hell has broken loose and you’re fighting over every last scrap of the business. Poor planning for disagreements over the management of an LLC, particularly a two-member LLC with 50/50 ownership and voting rights, can be disastrous. Without a solution to management deadlock, dissolution of the LLC may be the only choice.
An all too-common hypothetical: friends doing business don’t plan for deadlock and the business dissolves as a result
Two friends, Joe and Bob, start up an Oregon LLC. They file their articles of organization with the Secretary of State Corporation Division online, and create Hypothetical Restaurant LLC (this is a hypothetical, so the name seems appropriate). They’ve been friends for years, agree on all aspects of the new business, and can’t wait to get started. And here’s where they went wrong:
- They don’t draft an operating agreement or a buy-sell agreement, believing that they’ll be able to work any disagreements out amongst themselves.
- They don’t consult with an Oregon small business lawyer because they can’t envision a situation where they won’t be able to figure things out for themselves.
- They are now subject to the default provisions of the Oregon Limited Liability Company Act. Each member has a proportional ownership of the business at 50 percent, and each has an equal say in how the business is run.
Let’s say Hypothetical Restaurant LLC’s two members face the following dilemma: after opening 3 years ago they were a smash hit. Business was booming, and they opened up a second location. They secured a loan, and each of them is a personal guarantor for the loan. They signed a 5-year lease on the new space. After another two years, the second location isn’t performing. They’re losing money by staying open and it’s draining their savings. Bob wants to close down and sublet the space to recoup costs, but Joe wants to ride out the down cycle and wait for the second location to become more profitable. Our two friends, who have never had a disagreement over the future of the business until now, are at a management deadlock.
Without deadlock provisions or a suitable buy-sell arrangement, dissolution rears its ugly head
The problem is, the Oregon Limited Liability Company Act doesn’t provide guidance or provisions that apply to deadlock. LLC members are free to contract for whatever legally acceptable provisions they want, and these provisions can be put into an operating agreement that governs the LLC. When Oregon LLC members fail to draft their own deadlock provisions, and they ultimately arrive at a fork in the road and can’t come to agreement, the business comes to a grinding halt. Common operating agreement mechanisms to resolve deadlock include mediation or arbitration. A buy-sell agreement can also assist in planning for the exit of one partner who no longer wishes to continue in the business because he wants to take it in a different direction.
In the case of our two friends, neither one can afford to buy the other out, and neither one wants to go along with the other’s plans. They each have an equal say in how the business is run, and they have nowhere to go but to court. ORS 63.661(2) provides that judicial dissolution of an LLC is appropriate when it is “not reasonably practicable to carry on the business of the limited liability company in conformance with its articles of organization or any operating agreement. If two members are at odds to the point of management deadlock with no governing provisions to resolve deadlock, judicial dissolution is the likely result as soon as one partner gives up trying to convince the other of the error of his ways.
ORS 63.661 Grounds for judicial dissolution.
The circuit courts may dissolve a limited liability company:
(1) In a proceeding by the Attorney General if it is established that:
(a) The limited liability company obtained its articles of organization through fraud; or
(b) The limited liability company has continued to exceed or abuse the authority conferred upon it by law.
(2) In a proceeding by or for a member if it is established that it is not reasonably practicable to carry on the business of the limited liability company in conformance with its articles of organization or any operating agreement.
(3) In a proceeding by the limited liability company to have its voluntary dissolution continued under court supervision. [1993 c.173 §66]
Categories: Buy-Sell Agreements · Dissolution · Limited Liability Companies · Small Business Law
Tagged: deadlock, Dissolution, limited liability company, management deadlock, oregon business attorney, oregon business lawyer, oregon llc, portland small business attorney, portland small business lawyer
First a caveat: whenever you’re considering a business venture, especially one with 2 or more owners, consulting an attorney is probably still a good fist step. Multiple owners mean different goals and perspectives than a single owner LLC. Having said that, these are the basics for getting an limited liability company up and running in Portland, Oregon.
- Check the Oregon Corporation Division’s Business Registry to see if your desired LLC name is available.
- Decide if your LLC will be member-managed or manager-managed.
- File your articles of incorporation with the Oregon Secretary of State at filinginoregon.com.
- Apply for an employer identification number from the IRS via their online application process.
- Apply for applicable Portland/Multnomah County business licenses (or other applicable city and counties)
- Draft an operating agreement.
- Draft a buy-sell agreement.
- Obtain necessary insurance and bonds.
- Put all new contributions into the name and control of the LLC.
- Research applicable zoning laws.
- Visit the Oregon Workers Compensation site and set up an account if you plan of having employees.
- Draft an employee policy manual (not a requirement, but probably a good idea).
The above list is not exhaustive, but it’s a good outline of the steps required to start your new Oregon LLC. Now go forth and channel your inner entrepreneur!
See also:
- IRS checklist for starting a business
- Portland new business guide
- Oregon license information
Categories: Limited Liability Companies · Small Business Law
Tagged: articles of incorporation, incorporating, incorporating in Oregon, operating agreement, oregon llc, oregon small business attorney, oregon small business lawyer, portland small business attorney, portland small business lawyer, startups
Avoiding payroll taxes and Oregon and federal regulatory requirements by staffing independent contractors instead of employees is a common tactic for startup companies. Of course, simply calling your staff independent contractors doesn’t make them any less of an employee depending on the facts.
If you answer too many of these questions with a yes, you’ve got yourself some employees!
- Do you control the means and manner of the work?
- Do you directly supervise your workers?
- Do workers perform their jobs on site at your business?
- Do your workers only work for you?
- Do you set the wages and hours for your workers?
- Do you provide your workers with materials and supplies for the job?
- Do you retain the right to terminate your workers at will with no contract describing the work to be done?
Although no one factor is determinative, if you retain the right to direct and control the work being performed, you’re probably an employer and your worker is an employee. The Oregon statute defining independent contractors is ORS 670.600.
Categories: Employment Law · Independent Contractors · Limited Liability Companies · Small Business Law
Tagged: employees, Independent Contractors, oregon employment law, oregon llc, oregon small business attorney, oregon small business lawyer, portland small business attorney, portland small business lawyer, startups, supervision, wage and hour
December 16, 2009 · 1 Comment
What are buy-sell agreements?
Buy-sell agreements may be the most important documents Oregon small business owners create upon forming a new company. I’ll let that sink in for a moment… Buy-sell agreementss are contracts between business owners that spell out the rights each owner to transfer his interest in the business. Buy-sell agreements generally come in three flavors:
- Redemption Agreements. Agreements where the company has the option or obligation to purchase an owner’s interest in the company upon the occurrence of certain triggering events (e.g. retirement, death, disability, or divorce).
- Cross-Purchase Agreements. Agreements where each owner has the right or obligation to purchase another owner’s interest upon certain triggering events.
- Hybrid Agreements. Agreements that contain some combination of redemption and cross-purchase terms.
Why you want need a buy-sell agreement to for your closely held Oregon business
Buy-sell agreements are particularly important in small and closely held businesses because they provide answers to questions that you’re not asking at the beginning of a business venture, but almost certainly will have to ask at some point down the road, such as:
- When can an owner transfer his interest in the company?
- Who can an owner transfer his interest in the company to?
- How is an owner’s interest in the company valued?
Keep reading →
Categories: Buy-Sell Agreements · Contracts · Small Business Law
Tagged: business documents, Buy-Sell Agreements, contracts, LLC, Oregon, oregon llc, Portland, small business attorney, Small Business Law, small business lawyer
If you’re not sure which Oregon business entity to form, the LLC may be right for you. A hybrid combining the limited liability of a corporation with the pass-through taxation of a partnership, the LLC is the Prius of business world. Another bonus, LLCs aren’t subject to some of the formalities of the Business Corporation Act, making their operation and maintenance less time-consuming.
Here’s the gist:
Limited liability
If you’re in business for yourself, you want to limit your personal exposure for the debts and liabilities of your business, whether large or small. Becoming a corporation is the best way to do this, as partnerships and sole proprietorships do not insulate you in the same way. Although a limited liability partnership, or an LLP, would accomplish nearly same thing as LLC, LLPs in Oregon are limited to professionals (e.g. doctors, lawyers, and CPAs). In a limited liability partnership however, one partner must be subject to personal liability for the partnership. An LLC has no similar requirement.
Only taxed once
LLCs also avoid the tax problems of corporations. Generally speaking, you’ll pay a price for your limited liability corporate status: double taxation. Unlike regular corporations, LLCs in Oregon are not subject to entity-level taxes on operating profits, liquidation, or distributions to the LLC’s members. LLCs also aren’t subject to limits on the number of members and types of equity interests like S corporations are. In an LLC, members are only taxed on their individual incomes from the LLC.
Categories: Limited Liability Companies · Small Business Law
Tagged: business entity, business formation, business law, entity formation, LLC, Oregon, Portland, small business attorney, Small Business Law, small business lawyer
Good news for all sellers of intoxicating intoxicants and their happy hour-loving customers: the administrative guard dog charged with barking at local bars and their patrons about their alcohol-loving ways (read: the Oregon Liquor Control Commission) may be retracting its fangs about happy hour advertisements. The OLCC voted to initiate rule-making on October 15 and is currently soliciting opinions from licensees and industry representatives (and probably those god-awful moderation groups who think happy hour leads to looser morals, binge drinking, car accidents, unplanned pregnancy, and the breakdown of civilization as we know it).
As those in the business of pouring tasty libations in Oregon will attest, the OLCC has traditionally been a head case about advertising discounted drinks for happy hours. Under the current rule, OAR 845-007-0020, a liquor-serving business in Oregon may not advertise temporary discounts on alcohol outside of its place of business. As ridiculous as this sounds, even using the words “happy hour” in reference to alcohol is prohibited under the current rule.
The proposed revision, available here, would read:
(2) The Commission prohibits any advertising of the promotional practices that are prohibited under OAR 845-006-0345(10). In addition, the Commission prohibits advertising outside the licensed premises that contains the price of an alcoholic beverage to be consumed on the premises if the advertised price is a temporarily reduced price (for example, $2.00 draft beer on Fridays or $4.50 well drinks 4:00 – 6:00 p.m.).
Although this revision would still prohibit references to the actual price of the alcoholic beverage in question, it’s still a considerable improvement from the current nonsense, which reads:
(2) The Commission prohibits references to temporary price reductions for alcoholic beverages to be consumed on the licensed premises. These references include “happy hour,” “dimers,” “two-for-one,” “social adjustment hour,” “free,” or similar terms. The licensee may make references to temporary price reductions inside the licensed premises if the reference is not visible from the outside.
Before you get too excited, the revision has little to do with the OLCC changing it’s liquor-loathing ways and more to do with practicality: the OLCC simply lacks the resources to enforce the current rule across the wide spectrum of advertising mediums available to the modern Oregon bar. Conventional print media, online advertising, social media sites, Twitter streams, and the like bombard Oregon consumers with potential places to whet their whistles after work. The OLCC currently employs only 49 liquor inspectors.
At least we can all look forward to ads for the “cheapest PBR in town,” even if we don’t know exactly how cheap.
Categories: Small Business Law
Tagged: administrative law, advertising, bars, happy hour, law, OLCC, Oregon, oregon attorney, oregon lawyer, Oregon Liquor Control Commission, Portland, restaurants, small business lawyer
While you were sitting at home watching football on Sunday, a stranger is knocking on your front door. It’s a rainy Portland, winter day, and you’re watching the Civil War game. Oregon and Oregon State are tied at the half. Getting up does not sound appealing, but lucky for the stranger, this is halftime and you need a distraction.
Upon opening the door, he hands you a bundle of papers. Your curiosity is piqued. Hmm, maybe it’s some sort of prize.
“What’s this?” you ask with a sense of mild excitement.
“A summons. You’ve just been served,” replies the stranger, who is in fact, a process server. Your hopes of winning a million-dollar sweepstakes dashed, your mind begins racing. Now what?
Dos
- Read it. This is probably a good idea. If someone is suing you, you might as well know why.
- Talk with an attorney. Assuming you’ve never been sued before, it never hurts to get the advice of a professional suer lawyer.
- Stay calm. Remember to breathe, and see Don’t Number 3 below.
- Be honest with your attorney. To help you at all, your attorney needs to know everything you know, and he needs to know the truth.
- Be honest with yourself. Looking at your own actions through rose-colored glasses is human nature, but it an also be your downfall in litigation. The constant in most lawsuits is that the truth lies somewhere in the middle.
Don’ts
- Throw it away and say: “If I don’t see it, it’ll be like it never happened.” This is not advisable. In Oregon, failure to respond to a complaint in 30 days may result in a default judgment being entered against you. This means the other side gets whatever it was asking for, even if the suit is completely frivolous.
- Call the opposing attorney and ask questions. First of all, he probably won’t want to talk to you. Lawyers don’t like to talk to pro se litigants (read: people they’re suing who don’t have lawyers) for fear of creating even the appearance of impropriety. Secondly, and I cannot stress this enough, he’s not your lawyer and he can’t give you legal advice! Talking to opposing counsel is like talking to a police officer. Anything you say is an admission and likely to be used against you.
- Get emotional. I get it, being sued sucks. But overreacting and taking every legal proceeding as some kind of personal attack against your humanity will serve neither you, nor your lawyer very well. You both need to take a step back and objectively review your case and decide how to proceed, whether that means trying to settle or declaring war. NOTE: That’s just a euphemism. Assassinating the opposing party or counsel is highly frowned upon.
- Hide things from your attorney to make your case seem more winnable. This goes without saying, but nothing will sabotage your case faster than lying to your attorney.
- Defend yourself by relying on legal TV shows. I could use the old adage–any man who defends himself has a fool for a client–but that seems too easy and not always true. For a number of reasons that should be carefully considered, you very well might end up defending yourself. And if you do, safely assume that if you behave the way TV lawyers do you’ll either get slapped with contempt or sabotage your defense in ways you can’t even imagine.
Categories: Civil Litigation
Tagged: Attorney, complaint, lawsuit, Lawyer, Oregon, Portland, summons
