Business Law

Misrepresentations of Criminal Record on Job Applications

Posted by on Nov 25, 2014 in Business Law | 0 comments

Misrepresentations of Criminal Record on Job Applications

In McCorkle v. Schenker Logistics, Inc., 2014 WL 5020598 (M.D.Pa. Oct. 8, 2014) a federal district court ruled that an employer, Schenker, did not violate the Pennsylvania Criminal History Record Information Act (the “Act”) when it revoked a contingent offer of employment due to the job applicant’s failure to disclose misdemeanor and summary convictions in violation of employer’s policy. Schenker’s employment policy included a provision that misrepresentations on job applications may disqualify applicants from employment.  McCorkle disclosed on his application a conviction for stalking and harassment, and also acknowledged that providing false information was grounds for disqualification from employment.  He did not disclose convictions or guilty pleas to numerous misdemeanor and summary offenses, including possession of drug paraphernalia, DUI, and possession of controlled substances.  Schenker, after extending a contingent offer of employment, conducted a criminal history check on McCorkle which revealed the additional convictions and guilty pleas.  Upon discovery, Schenker asked McCorkle to review his application and identify any errors or omissions.  McCorkle failed to identify any, and Schenker notified him his application was disqualified due to misrepresentations regarding his criminal history.     McCorkle instituted an action alleging Schenker violated the Act by revoking his contingent offer of employment due to misdemeanor and summary offenses unrelated to his suitability for employment and failing to notify him in writing that employment was revoked due to his criminal history.  The Act generally prohibits employers from considering past convictions as a bar to employment unless they relate to the applicant’s suitability for the position.  The court found that Schenker did not disqualify McCorkle’s application because of the convictions and guilty pleas, rather it found that his application was disqualified for intentional misrepresentations made on his job application related to his criminal history.  The court expressly held Schenker “had a reasonable basis to revoke his offer of employment pursuant to the terms of the conditional offer and its hiring policies and was under no obligation to consider whether [McCorkle’s] convictions were related to his suitability for the position.”   If you have any questions regarding this article, or any other employment matters, please contact Andrew Miller, *protected email*, or Christian Miller, *protected email*, by email or phone at (717) 845-1524....

Read More

Legislative Update on Mechanic’s Lien Law of 1963

Posted by on Jul 14, 2014 in Business Law | 0 comments

Legislative Update on Mechanic’s Lien Law of 1963

On July 9, 2014, Governor Corbett signed into law Senate Bill 145 (the “Bill”) providing amendments to the current Pennsylvania Mechanic’s Lien Law of 1963.  Notably, the Bill provides relief for residential owners from mechanic’s liens on their residential property filed by subcontractors and/or material suppliers where the contractor was paid in full.  The Bill does not change the ability to lien improvements to non-residential property (including investment properties) or the ability for a contractor to lien a residential property for lack of payment.  The Bill specifically states that a subcontractor, which definition includes any material provider or supplier, does not have the right to put a lien on a residential property where an improvement has been completed and the owner has paid the contract price to the contractor.  In the event a subcontractor liens a residential property for lack of payment, the Bill permits the owner to discharge such lien by filing a petition or motion with the court and providing  adequate proof the contract price was paid in full to the contractor.  Where only a portion of the contract price was paid, the owner may still petition the court to have the subcontractor’s lien reduced to the unpaid portion of the total contract price.  The Bill does not provide any penalties for subcontractors that file mechanic’s liens on residential properties where the owner has paid the contractor in full, likely because the subcontractor has no way to know if payment has been made. Check back for updates on SB 145 and for other legislative updates concerning business and construction law. Questions or comments on this article or general construction law can be directed to Christian Miller at *protected email* or (717) 845-1524 ext....

Read More

Employees’ Management Status and the Creation of a Fiduciary Duty

Posted by on Jul 5, 2013 in Business Law | 0 comments

Employees’ Management Status and the Creation of a Fiduciary Duty

Employers are routinely concerned with a departing employee’s competitive rights the employer’s business, especially when the ex-employee held a management position with employer.  In PTSI, Inc. v. Haley, PICS, Case No. 13-1178 (Pa.Super. May 24, 2013), the Pennsylvania Superior Court helped to define these rights where the ex-employee was considered at-will.  Generally speaking, no fiduciary duty exists between an employer and management level employee simply by virtue of the employment relationship, and such ex-employee is free to compete against the former employer. In PTSI, Inc., two management level employees of a sports training business decided to open their own sports training business which directly competed with their former employer’s business.  Both of the former employees were considered at-will and were not subject to non-compete, non-disclosure or non-solicitation agreements.  Prior to their resignations, the two employees incorporated a new business entity, leased a facility, and informed their current clients that they were starting their own sports training business.  In an effort to stop the two employees’ competition, the original employer filed suit for conversion, breach of the duty of loyalty, and breach of the fiduciary duty of loyalty.  The case was dismissed in favor of the former employees holding that no cause of action existed. The Pennsylvania Superior Court upheld the dismissal. Pennsylvania law generally imposes a fiduciary duty on officers and directors which stand in a fiduciary relation to the corporation or similar business entity.  Contrary to the fiduciary relationship that exists with officers and directors, the Court in PTSI, Inc. found that no fiduciary duty is owed by an employee to an employer simply by virtue of their employment relationship as a manager, absent a showing that the employee committed some fraudulent, unfair or wrongful act in the course of employment.  The generally recognized rule is that an employer cannot restrict the post employment activities of an at-will employee, or prevent them, while employed, from looking for other employment, including with a competing business.  However, this rule only applies to at-will employees and not to employees subject to employment contracts. In Pennsylvania, the rule is clear that the solicitation of customers and use of customer lists is permissible unless there is a breach of an express contract or violation of some confidence.  Even before the termination of employment, an employee is entitled to make arrangements to compete, with the one caveat that he/she may not use confidential information peculiar to the employer’s business and acquired during employment.  As such, before the end of employment, an employee can properly purchase/create a rival business and, upon termination of employment, immediately compete with the former employer. The acquisition of the former employer’s clients is not invalid or illegal so long as the act does not violate any express agreement or involve any fraud or misrepresentation inducing the clients to leave the former employer. In order to protect against immediate competition, employers are permitted to enter preventive contracts with employees that restrict competition.  As a caution, employment agreements utilizing restrictive covenants must be carefully drafted in order to avoid various pitfalls that the courts routinely use to strike them down. As with most employment law cases, the facts and individual circumstances will affect the outcome of each case.  An attorney should always be consulted prior to relying on any of the information provided above. If you have a question regarding the actions of a former employee or former employer, or a different employment law question, please contact Christian Miller at *protected email* or (717) 845-1524 ext....

Read More

Amendments to UCC Article 9 Effective July 1, 2013

Posted by on Jun 21, 2013 in Business Law | 0 comments

Amendments to UCC Article 9 Effective July 1, 2013

Article 9 of the Uniform Construction Code (the “UCC”) governs secured transactions and is an integral part of most business and commercial transactions.  UCC Article 9 was substantially revised in 1998 and eventually adopted in all 50 states.  Now, more than a decade on, UCC Article 9 is being revised again to clarify some issues that remained uncertain after the revisions of the late 1990’s.  The new changes will be effective July 1, 2013 in at least 26 states, including Maryland and New York.  Pennsylvania currently has legislation pending to adopt the amendments, but the legislation may not be adopted until after July1, so Pennsylvania creditors will need to stay tuned. UCC Article 9 currently requires the name of a party on a UCC financing statement to match the name of the entity on a “public record.”  Because of the uncertainty about what constitutes a “public record,” the amendments to UCC Article 9 provide for using the name that appears on a “public organic record” which will include records filed with or issued by the state to form the entity (i.e., articles of incorporation, certiifcate of organization or certificate of limited partnership).  The amendments to UCC Article 9 will also clarify the identification of individual debtorsto be named on a financing statement.  The amendment offers two alternatives for each state: Alternative A (the “only if” option) provides for the use of the debtor’s name as it appears on a driver’s license issued by the state where the financing statement is to be filed.  If the debtor does not have a driver’s license, either the debtor’s actual name or the debtor’s surname and first personal name may be used. Alternative B (the “safe harbor” option) provides that any of the above-mentioned three options may be used. These amendments will give secured parties more certainty when determining the proper names to use on a financing statement and should provide an additional level of comfort to filers. The amendments to UCC Article 9 also clarify the rules for determining where to file against a federally-organized entity (e.g. banks and other legal entities created by federal charter or statute).  Under the new rules, the financing statement will be filed in the organization’s “main office” or “home office.” The amendments to UCC Article 9 also eliminate the requirement that a financing statement include the debtor’s type of organization, jurisdiction of organization and organizational identification number.  The changes will make it easier to file a financing statement without fear of it being rejected.  We, however, still recommend a secured party include this information to more clearly identify the debtor.  The information has proven very useful in past transactions to differentiate between debtors when doing lien searches. The amendments to UCC Article 9 also change the name of the UCC-5 Correction Statement to an Information Statement which may now be filed by a debtor or a secured party when information contained on a financing statement needs to be clarified.  Despite the name change, the Information Statement will continue to have no legal force or effect. The amendments to UCC Article 9 will also provide greater protection for an existing secured party having a security interest in after-acquired property when a debtor relocates to another state or merges with another entity. The Uniform Law commission has also proposed new national forms for UCC filings that incorporate these changes. Remember the revisions to UCC Article 9 will go into effect on July 1, 2013 in most states.  Creditors with debtors in Pennsylvania stay tuned for the effective date! If you have any questions regarding the amendments to UCC Article 9, or for any other secured transaction...

Read More

Pennsylvania Benefit Corporations

Posted by on May 20, 2013 in Business Law | 0 comments

Pennsylvania Benefit Corporations

On October 24, 2012, Pennsylvania became the twelfth state to amend its business corporation law to provide for a new type of corporation known as the “benefit corporation”.  Benefit corporations are intended to be for-profit corporations with a social conscience.  Why should you business become a benefit corporation?  Social investing and social responsibility is becoming a major trend in the financial and business world.  Many investors and consumers want to invest in or buy from companies that have a moral compass.  The benefit corporation law is intended to create standards for social responsibility that investors and consumers can use to make decisions about the moral and social propriety of the companies they invest in.  An election to be a benefit corporation may allow you to raise capital from socially responsible investors and attract socially conscious consumers. The new Pennsylvania statute assures benefit corporations will maintain a social conscience in several ways:  (1) a benefit corporation must have a corporate purpose to create a material, positive impact on society and the environment in addition to the obligation to make a profit; (2) the officers and directors of the benefit corporation have a newly-created fiduciary duty to consider nonfinancial interests; and (3) a benefit corporation must file an annual statement available to the public used to assess its overall social and environmental performance against independent third-party standards. A benefit corporation may elect to have a general public benefit or a specific public benefit.  Specific public benefits must be set forth in the articles of incorporation.  The specific public benefits listed in the statute include: Providing low-income or underserved individuals or communities with beneficial products or services; Promoting economic opportunity for individuals or communities beyond the creation of jobs in the normal course of business; Preserving the environment; Improving human health; Promoting the arts, sciences or advancement of knowledge; Promoting economic development through support of initiatives that increase access to capital for emerging and growing technology enterprises, facilitate the transfer and commercial adoption of new technologies, provide technical and business support to emerging and growing technology enterprises or form support partnerships that support those objectives; Increasing the flow of capital to entities with a public benefit purpose; and Conferring any other particular benefit on society or the environment. A business may become a benefit corporation in several ways.  A business may elect to be a benefit corporation at the time of its initial filing of articles of incorporation; or an existing corporation may elect to be a benefit corporation by amending its articles of incorporation with the approval of at least a two-thirds majority of its shareholders; or an existing corporation may become a benefit corporation by a fundamental transaction such as merger, division, consolidation or share exchange.  Importantly, the election to be a benefit corporation does not change the federal or state tax status of a corporation, so if your business is a c-corporation or an s-corporation you will maintain that status. If you want your business model to include consideration of general or specific public benefits, a benefit corporation may be a good choice for your corporate structure.  To explore the aspects of a public benefit corporation, please contact Andrew Miller, at MPL Law Firm, *protected email* for more...

Read More

Member-Managed or Manager-Managed Limited Liability Company (LLC): What’s the difference?

Posted by on May 20, 2013 in Business Law | 0 comments

Member-Managed or Manager-Managed Limited Liability Company (LLC):  What’s the difference?

Limited liability companies are intended to provide liability protection to owners (known as members) while at the same time giving the members maximum flexibility in corporate governance.  One of the choices an LLC must make when organized is whether to be “manager-managed” or “member-managed”. A manager-managed LLC delegates management responsibility to one or more “managers” who will have fiduciary duties to the members of the LLC.  The LLC may be structured like a limited partnership in which one or more managers exercise all management control and make all day-to-day operational decisions of the LLC.  The members would be similar to limited partners with very limited or restricted say in the affairs of the LLC.  Alternatively, the LLC may be structured like a corporation where managers serve in a capacity similar to a board of directors (the managers may even compose a “board of managers”) that provides oversight and governance of the LLC, but delegates day-to-day operations to officers such as a president and one or more vice-presidents.  The members elect the board of managers and typically retain authority to vote on fundamental transactions of the LLC. A member-managed LLC retains all management responsibility among the members who function like general partners in a general partnership.  Each member has a fiduciary duty to the other members.  The operating agreement must carefully set forth restrictions on the authority of a member to bind the LLC or otherwise take action on behalf of the LLC without approval by member vote.  For example, in a true general partnership each general partner may bind the partnership by its actions.  In most member-managed LLCs a member may only bind the LLC within certain limits with all other decisions requiring approval by a majority or supermajority of the members. A member-managed LLC is useful for joint ventures or small, closely held LLCs with only a few members that do not intend to grow or expand through addition of new members.  The member-managed LLC structure allows more efficient and easier day-to-day operation of the LLC.  On the other hand, a Manager-managed LLC is more useful for an LLC that may want to delegate all responsibilities to one person or a small core of persons who do not need to seek approval from the members for major decisions.  A manager-managed LLC is also useful for LLCs that intend to undertake capital raises from sophisticated investors who will not want to run the LLC, but will demand seats on a board of managers in order to closely monitor their investment and provide guidance to grow their investment. For more information on the operational structure of LLCs, please contact Andrew Miller, at (717) 845-1524 or *protected...

Read More