Employment Law and the Entrepreneur

Since I’m new to entreVIEW, I decided to do some homework, make sure that I knew something about being an entrepreneur (and how to spell the word entrepreneur). So in my own entrepreneurial fashion, I researched my market.

The first place I started was startupsanonymous.com, a blog where anyone involved in a startup can share their stories and ask questions. The first post I read was What Happens After You Fail. Holy moly. This candid picture of failure exemplifies why I admire entrepreneurs so much. The heart this person put in – the courage – is breathtaking.

I next sought information from a friend who works with entrepreneurs. He explained that he’s seen every personality type and motivation for starting a business. But they all share one overwhelming trait – courage.  

Entrepreneurs are willing to take great risk.  While launching a new company, you may or may not know what your risks are or are simply too focused on that launch to see or address the risks. That’s where people like me fit in.

Every attorney is a Negative Nelly to some degree. We have to explain to entrepreneurs all the possible risks – from creating a legal entity to protect their personal assets to making sure they’ve signed up for Minnesota’s unemployment services when their hire their first employee. We explain legal failure, the failure to do or not do what the law says. We repeat, “If you don’t do this, this may happen.” Most of us are not negative people, and we know that no one likes to be told what to do. Instead of telling you what to do, we advise.

When it comes to employment law, the risks for start ups can’t be overcome with perseverance and courage alone. Here are a few:

 Choosing to engage individuals as independent contractors instead of employees. No doubt about it, the independent contractor relationship is much easier from an administrative perspective – no tax withholding, no unemployment reporting, no requirement to monitor hours worked, etc. – however, agencies like the Minnesota Department of Employment and Economic Development (MnDEED) are becoming increasingly savvy at and utterly determined to investigate companies who misclassify workers. Here’s a brief overview of misclassification analysis.

 Doing the paperwork. Once a startup has an employee, the sea of paper is daunting for anyone, especially an entrepreneur focused on a new product or service. Unemployment, worker comp, employee benefits, I-9s, harassment and discrimination policies, overtime, recordkeeping, tax withholding and reporting – forms, fees, and fun! More employees = more paperwork. 

 Protecting the ideas. A startup relies on its new ideas – a new product, service, delivery, etc. By entering into noncompetition, nonsolicitation, and assignment of inventions agreements with workers, entrepreneurs can protect those ideas and their success. While trust is fantastic, a contract has teeth.

Now these issues carry some risk – MnDEED investigation and penalties, a lawsuit, trade secret misappropriation, etc. Even though the risk may be low – you may believe all new staff members are family members – fending off the risk and facing the risk can be costly and will shift time and resources away from business success.

In addition to the courage, drive, and focus, entrepreneurs understand one thing that makes life for employment lawyers easy. You understand that your people are a key to your success. They too share your courage since they too are making an investment in your new business. In fact, some commentators wish all employers would follow suit and create entrepreneur-like workplace culture. Knock on wood, appendages crossed, that investment, courage, and perseverance will all pay off.

A Post by Kate Bischoff, Guest Blogger

Martin Luther King Goes to the Movies

In anticipation of Martin Luther King Day on January 20, I thought it would be interesting to learn more about Dr. King.   Something about his life out of the public eye – his childhood, education, family.  We would be dog-sitting for the weekend (adding to our own two dogs), it was cold outside, and it would be a perfect weekend for a movie.  I assumed that there would be cable offerings like crazy so I would have plenty to choose from.  

Not so.  There aren’t any movies about Dr. King!  Okay, there are some documentaries, and there’s a three-part miniseries that aired in 1978, but it wasn’t well received at the time, and I couldn’t find any channel carrying it on what should have been a prime weekend for broadcast.

There are, however, at least three King projects in development, but none yet in production.    

Director Paul Greengrass (most recently of Captain Phillips fame) has been working on “Memphis,” in which actor Forest Whitaker would play Dr. King.  At one point there was talk of a 2012 release date to coincide with the 50th anniversary of the ““I Have a Dream” speech, but in 2011 Universal pulled its funding from the project claiming a scheduling conflict.  Other sources stated that the King estate was critical of certain elements of the intended script, and threatened public denouncement of the film.  The project is supposedly still in the works but, at last look, does not show up as a “future project” on Greengrass’s Wikipedia page.

“Selma” is another project in the works for some time, slated to be directed by Lee Daniels (The Butler), and with a cast that was to have David Oyelowo (Lincoln, Jack Reacher, The Butler) in the lead role, and Hugh Jackman, Liam Neeson, Robert DeNiro, Cedric The Entertainer and Lenny Kravitz. This project has also had apparent criticism from the King estate, and Daniels recently dropped out, to be replaced by Ava DuVernay, an up and coming director who earned recognition at Sundance with Middle of Nowhere.  Last week, the project got a major shot of adrenalin when it was announced that Oprah Winfrey and Brad Pitt would produce the movie through Pitt’s production company Plan B Productions, the company that produced 12 Years a Slave.  Oyelowo is still slated to play King.

The third project in the pipeline is a proposed biography of King that DreamWorks has had in development since 2009 when it acquired “life rights” from the King estate.  For a couple of years, there was little or no noise about the project, but, somewhere along the line, Warner Bros. became a partner.  Last fall it was announced that Jamie Foxx would play MLK and Oliver Stone would direct.  Less than four months after this announcement, however, Oliver Stone dropped out of the project, claiming that he had been told that the King estate would not accept his script re-write.          

Three major projects, all sidetracked by the King family. All for apparently wanting to address issues that might paint Martin Luther King in less than a perfect light.  

If you had to bet which of these projects will reach the screen first, the DreamWorks project would have been a good place to put your money – at least up until 30 days ago.  No one wants to offend the King family, not just for public relations purposes, but because they are so darn litigious, even to the point of suing each other.  Because there is so much publicly available information about MLK, the “life rights” acquired from his estate are more likely an agreement for cooperation from the family as opposed to getting access to private information.  With the family’s express cooperation would be a tacit agreement not to sue over privacy, defamation or intellectual property issues.  The fact that King’s three children are signed on as executive producers of the film shouldn’t hurt either.  

But if Stone’s departure tells us anything, the participation of the King family could actually become a hindrance to the production – or at least to attracting an important director.  Anyone with some integrity is not going to want to be hindered by the King family’s obsessive control over the portrayal of their father.  This makes it interesting for the “Memphis”/Greengrass project which has none of the DreamWorks obligations to the King family, but still apparently lacks funding.  The game changer in all of this is Oprah Winfrey (and Brad Pitt).  Can she keep peace with the King estate, family and friends, while at the same time not pander to those who refuse to allow that Martin Luther King may have had human flaws?   I guess we can only wait and see.

What: Reed Timmer, Into the Storm: Violent Tornadoes, Killer Hurricanes, and Death-Defying Adventures in Extreme Weather (New York: Penguin, 2010)

Why: Almost any passion can fuel an entrepreneurial career.

Here in the upper Midwest, the weather is not just a topic for inoffensive small talk, as it tends to be elsewhere.  Around here we are genuinely interested in the weather.  Maybe this is a cultural remnant from our predominantly agrarian recent past, but, wherever it comes from, people up in this neck of the woods can—and do—more or less measure their lives by the seasons, as described by at least one acclaimed Minnesota author.

Some of us see ourselves as survivors—of the Polar Vortex, of oppressive heat and humidity, of ice and snow, of drought, of what have you.  Others have a more confrontational relationship with the weather.  Here at the northern end of Tornado Alley, almost all of us must confess to a fascination with extreme weather.  This is usually manifested by standing in the backyard looking at very dark green clouds when rational thought suggests that it might be better to be inside and underground.  

Others, like Reed Timmer, push much further, actively putting themselves in the path of extreme weather.  Into the Storm is Timmer’s autobiographical exploration of how a nerdy kid from Michigan has ended up with his own show on the Discovery Channel and otherwise has managed successfully to chase tornados for a living.  For arm-chair meteorologists, this is about as good as it gets.

So what does this have to do with entrepreneurs?  Plenty.  It’s clear that Timmer’s passion has driven him to success in creating a business niche that previously did not exist.  As is the case with most other entrepreneurs, the money has followed his whole-hearted pursuit of something he might otherwise have done anyway for free.  Perhaps most significant is his attitude toward work.  In an interview posted here, here’s how he sums it up: “I think jobs should always be results-oriented and not hours-based.”  I defy anyone to find a successful entrepreneur who does not share this world view.    

Are you an Extrovert, Introvert, or Ambivert?

A few months ago, my book club read Quiet: The Power of Introverts in a World That Can't Stop Talking, by Susan Cain. As an ambivert (someone who is in between an extrovert and introvert), I looked forward to reading the author’s argument on the value of introverts and how our society undervalues those characteristics. The common assumption might be that most successful entrepreneurs (who are often described as eccentric, direct, and sometimes crazy) are extroverts. After meeting with my book club, I question whether it is more beneficial as an entrepreneur to be an extrovert or an introvert. As with most things, there are benefits to both. Life is a set of tradeoffs.

Obviously, in any business, it is crucial to network and sell your product or service. If, as an introvert, you’re too timid or hesitant to present to a large group or find it difficult to present your elevator pitch, you may miss business opportunities.  In contrast, if as an extrovert, you bulldoze over others’ ideas or only listen to the loudest person in a meeting, you could be missing out on insightful comments from the introvert in the room. 

One story that resonated with me was about the author’s client, an introverted corporate lawyer. The corporate lawyer consulted the author for advice on how she should prepare for negotiating the terms of an endangered loan, while the senior lawyer on the deal was on vacation. As a junior associate, she had never negotiated by herself and was petrified to do so. 

So picture this – a scared, introverted corporate attorney sitting with her clients across the table from nine displeased investment bankers in expensive suits. The investment bankers’ counsel curtly professed that the corporate attorney’s clients should simply accept the bankers’ terms. The corporate attorney had no idea how to respond (something that would never happen to my introverted colleague and fellow entreVIEW author who handles many complex banking negotiations). She just sat there – staring blankly at the bankers’ counsel while awkward silence engulfed the room. 

Finally, the corporate attorney got her bearings and asked a few clarifying questions. She gradually became more confident with each question and began to push the bankers’ counsel for alternative solutions. After more negotiation and one banker who even stormed out of the room while throwing paper across the table, the two sides came to a deal. The bankers’ counsel was so impressed with the corporate attorney’s negotiation skills that she offered her a job the next day.

This story is a good lesson on the importance of staying true to your personality and strengths.  You should leverage these traits to increase your chances of being a successful entrepreneur.

Whether you are an extrovert, introvert, or ambivert (take a quick quiz here to find out!), this book is a fascinating read. 

A Not So High Flying Ending for Broadway’s “Spider-Man Turn Off the Dark”

In case you missed it, this past weekend was the final performance of “Spider-Man Turn Off the Dark” on Broadway. If you are a really long-time reader of entreVIEW, you may recall in one of my first posts ever that I wondered how the entrepreneurs involved in the development of this show were able to raise approximately $75 million for such a troubled production. 

I speculated way back in March of 2011 that, as the most expensive show in Broadway history, it would be difficult for a production like this ever to recoup such a large amount of capital. Of course, I would have had to eat my words if it turned into a mega hit like “Wicked,” which has grossed more than $3.2 billion worldwide and just broke the Broadway record for receipts by grossing over $3 million in one week, or “Phantom of the Opera,” which—even though I don’t even think it’s all that great—is the most successful piece of entertainment of any form (think movie, video game, etc.) of all time with over $5.6 billion in grosses and a slew of interesting facts and figures to go with its success.

Before you label me as the next Nostradamus, let me start with the “good news” for fans of “Spider-Man Turn Off the Dark”:

• It was the fastest show in Broadway history to reach one million audience members.
• Until it was recently surpassed by “Wicked,” it had the record for the highest single-week gross of any show in Broadway history and broke the single-week attendance record.  

Now for the bad news—even with a run (including the longest preview period ever) of over three years, the show has lost about $60 million and several investors admit they haven’t seen a penny of their investment and plan to write it off. Even though it survived for three years, certainly enough to ensure that it doesn’t land on Joe Allen's "wall of shame" for the biggest Broadway flops, it continued to experience plenty of problems (lawsuits, injuries, etc.) even during the last year.

The show is now reportedly bound for life in Las Vegas but, given the added costs of mounting a new production of a show that many, including me, didn’t think was great, it doesn’t seem any more likely that the bet in Vegas will pay off previous losses than the odds of consistently beating the house at a Vegas casino.

I can think of many entrepreneurs who, though less successful in raising capital than the “Spider-Man” producers, undoubtedly gave their investors a better chance to earn some return on their investment. It certainly isn’t clear to me that investing in a Broadway musical (even Andrew Lloyd Webber’s “Phantom” sequel, “Love Never Dies,” was a flop) isn’t riskier than taking a bet on the next great information technology or medical device developments.

Time will tell if the tangled web of this musical can fly higher in the Entertainment Capital of the World.

Observations on Good Board Practices

Happy New Year to all of our entreVIEW readers. Here’s hoping that 2014 will be your best and most prosperous year yet!

This is one of my favorite times of the year (if you don’t factor in our current weather). After all, ‘tis the season for lots of wonderful get togethers with family, friends and co-workers. ‘Tis also the season, apparently, for Board meetings. Over the last few weeks, I have attended several Board meetings and have a few more approaching in the next few weeks. After reflecting on all of these meetings, and preparing for the ones to come in the near future, I thought I would share a few simple observations of Boards that operate well.

I recommend regular meetings of the Board, if at all possible. Boards don’t need to meet monthly, but they should try to meet quarterly. The discipline of preparing for Board meetings, even though it can take time, is time usually well spent for management and Board members alike. For management, it allows them to reflect on key accomplishments during the period since the last Board meeting and, more importantly, forces them to focus on what they would like to accomplish during the period before the next meeting and beyond.  This permits management to be thoughtful and realistic about what has been accomplished, where they are, and where they are going. Regular Board meetings also help the Board fulfill their fiduciary obligations by getting regular updates from management.

It is a good idea to schedule regular Board meetings on the same day and at the same time each month or quarter. If you try to coordinate a date and time that will work for everyone’s calendars for each separate meeting, you will have to wait a long time and spend hours and hours scheduling and rescheduling. Everybody’s calendars are too packed to try and coordinate a day and time that works for everyone. A better approach, I think, is to set your meeting dates and times well in advance and on the same day and time. For example, if you have regular quarterly meetings, have them all on the same day of the quarter (e.g., at 10:00 am on the last Tuesday of the quarter). It is inevitable that there will be conflicts on one or more of those future dates but, by setting the meetings in advance, you allow people the opportunity to try and plan the rest of their schedule around the regular Board meetings.

Finally, try to have at least one meeting a year in person. It is easier to do, of course, when all Board members are located near each other. But even, and perhaps especially so, for Boards that have members scattered across the country (or world), regular in-person meetings (yearly, bi-annually, quarterly, whatever) are a good use of company time and resources. In-person meetings are good for Board chemistry and allow Board members to become more engaged and committed to the company’s success. One Board I work with has regularly scheduled monthly meetings. The first two meetings of each quarter are held by teleconference, and the last meeting of each quarter is held in person. The Board has members in a few different states, but they all make an effort to attend the quarterly meetings in person, which I think has allowed them to become more involved with the company.

Some of these suggestions probably seem obvious to well-functioning Boards. However, if your Board is not currently having regular meetings, at regularly scheduled times, with at least one in-person meeting, you may want to consider changing that practice to relieve some administrative hassle, as well as to permit your Board to become more engaged and involved in your company’s success. Consider it a New Year’s resolution for a more successful Board in 2014!

Snowden, Drones, and Downton Abbey: Musings of a Privacy Professional for 2014

The year ahead promises to be one full of interesting and provocative legal cases involving privacy and data security.

• Target continues to deal with the legal and public relations nightmare of one of the largest ever data security breaches.

• In December two federal judges issued decisions regarding the National Security Agency (NSA) surveillance program exposed by Edward Snowden.  One found the program unconstitutional and the other determined that it is a legitimate and appropriate tool to combat terrorism. 

• Another federal judge is considering whether or not the Federal Trade Commission has the authority to investigate and take enforcement actions against businesses with lax data security systems.

• Finally, North Dakota was selected this week by the Federal Aviation Agency to host a commercial drone test site.

The following quotations suggest the disparate views likely to be expressed in the spirited discussions and debates surrounding these controversies: 

“First electricity, now telephones. Sometimes I feel as if I were living in an HG Wells novel. But the young are all so calm about change aren’t they?”

--Violet, the dowager countess in Downton Abbey (circa 1912) 

“You have zero privacy. Get over it!”

--Scott McNealy, then CEO of Sun Microsystems, at a press conference announcing the latest company products (June 6, 1999)

“I cannot in good conscience allow the United States government to destroy privacy, internet freedom and basic liberties for people around the world with this massive surveillance machine they’re secretly building.”

--Edward Snowden, former technical assistant for the CIA who worked for the NSA as a contract employee, after disclosing secret and confidential information about the NSA surveillance program in an interview with British newspaper The Guardian (June 10, 2013)   

“The government does not cite a single instance in which analysis of the NSA’s bulk data collection actually stopped an imminent attack.”

--United States District Court Judge Richard J. Leon describing the “indiscriminately and arbitrary invasion” of the fourth amendment of the constitution protection from unreasonable search of vast databases of phone call records and referring to it as the use of “Orwellian technology” (December 16, 2013)

“When a person voluntarily conveys information to a third party he forfeits his right to privacy in the information.”

--Just eleven days after Judge Leon found the NSA program likely unconstitutional, another federal judge,  William Pauley, determined that  the NSA mass collection of telephone data was legal and a legitimate and necessary method for government to combat terrorism (December 27, 2013)

“We just don’t have our arms around what the proper use of this technology is going to be. We don’t want to stifle jobs and business unnecessarily, but yet also balance individual privacy rights.”

--Minnesota State Senator Sean Nienow, who would like to have more discussion on how to balance the economic benefits of commercial use of drone technology with privacy concerns (quoted in the Minneapolis Star Tribune, January 2, 2014)