Greg Sutliff | Entrepreneur of the Month | January 2019

By: Gregory Archibald

I have the great honor to introduce you to Greg Sutliff, our January, 2019 featured entrepreneur. “Sutliff” is a name familiar to most individuals living in Pennsylvania. Many drivers across the state have purchased their vehicles from one of the Sutliff car dealerships or at the very least heard their catchy jingles over their radios as they cruise down the highway. Greg Sutliff, is just as well-known in the entrepreneurial community. I was fortunate enough to have the opportunity to interview him and gain insight into his views on the entrepreneurial mind and how to raise a successful business.

Greg Sutliff began working for his family’s business, Sutliff Chevrolet, in 1947. However, he did not move straight into the working world after graduating from high school. Mr. Sutliff graduated from Brown University in 1953 with his BA in Economics, and soon after served in the U.S. Navy until 1956. After his departure from the Navy, Mr. Sutliff attended Dickinson Law School and obtained his Juris Doctorate in 1959. By 1962, Greg Sutliff returned to Sutliff Chevrolet as the general manager of the company.

Entrepreneurs and law students who would like to represent entrepreneurs can learn from Mr. Sutliff.  “…the law student needs to be able to fill in the blanks for the entrepreneur.”  Click here to hear Mr. Sutliff elaborate.

A Valuable Lesson

 “The first thing you need to know about is who you are.”

Throughout our interview, it became clear that Greg Sutliff was truly a man of “firsts,” and was not one to shy away from new ideas or advancements in the industry. In fact, he credits most of his success to being open-minded and adaptive. In the 1960s, Sutliff Chevrolet became one of the first car dealerships to have a computer for keeping track of payroll and inventory. As it was one of the earliest IBM models, no one had developed a program to complete such tasks. To solve this problem, Mr. Sutliff self-learned computer programming and programmed Sutliff Chevrolet’s computer.

In the 1970s, Mr. Sutliff brought an idea he had learned in law school to the automotive business. The “Last in First Out” (LIFO) accounting method, at that time, was not commonly used to organize automotive inventory. However, Mr. Sutliff felt that switching to the LIFO accounting method, though novel, may help his business. When he saw its success, he was quick to bring the new method to accounting firms and other dealerships in the area to allow them to share in the usefulness of his idea.

Hear it (and more) from Mr. Sutliff here.

The Entrepreneurial Mind

“The entrepreneurial mind is a sailing mind. You don’t know what’s going to happen, you don’t know what the wind is going to be, but you figure it out as you go. You have a destination in mind, but the way you go today is not the way you go tomorrow.”

           One key element to success that Mr. Sutliff shared was the importance of knowing not only your own skill sets, but also the skill sets of those around you. He was quick to admit that although he knew he was a strong manager, he was aware that he did not have the skills to work effectively in sales. As such, he knew from an early stage that it was important for him to find employees who possessed this skill set to not only sell cars, but to also teach other employees how to properly sell a car.

Early in his role as general manager of Sutliff Chevrolet, Mr. Sutliff came into contact with an organization that administered a type of workplace personality test that would indicate an individual’s work ethic, as well as the area of the company in which they would be most effective. Mr. Sutliff credits this test with a large portion of the company’s success. When he placed an employee in a position with the test results to back it up, he was confident that the employee would be a productive member of the company.

Watch Mr. Sutliff’s explanation here.

The Element for Success

 What is most important?  Honesty.  “An honest man will not work for a dishonest man.”

When I asked Mr. Sutliff what separated successful entrepreneurs from the rest of the pack, his answer was simple: successful people make themselves different. New ideas happen every day in the business world, but it is the ideas that make a company truly stand out from their competition that provide the foundation for success. For example, Mr. Sutliff and Sutliff Chevrolet offered extended warranties on their vehicles, despite the fact that these same warranties were completely unprofitable for their competition. The idea was a simple one, but Sutliff Chevrolet stood out from the crowd because they made it work. Mr. Sutliff developed a system that allowed customers to prove that they had given their cars the proper routine maintenance. If the cars were properly taken care of, the warranty would be honored, and an inconvenienced customer would be transformed into a loyal client.

Watch the interview here.

Success

 “You need to have dedication. You need to have vision. You need to have a persona that will attract quality people to work for you.”

In addition to the original Sutliff Chevrolet location, Greg Sutliff has operated a Volkswagen store, a Buick GMC Cadillac store, a Cadillac Hummer Saab store, a Ford Store, a national car rental franchise, and helped to develop the Saturn brand. At its peak, Mr. Sutliff had five Saturn stores throughout central Pennsylvania, and sold more Saturn vehicles than all other franchises put together: approximately 48,000 total.

Mr. Sutliff has received the GM Dealer of the Year Award twice, and has presided as president of the National Chevrolet Dealer Council. Mr. Sutliff is a community philanthropist, and has consistently provided generous donations to United Way. Throughout his life, he learned how to sail and became an experienced pilot, all while raising a family.

Hear Mr. Sutliff’s advice for today’s entrepreneurs and lawyers.

Videos containing Mr. Sutliff’s great insights can be viewed through links in the above article.

This post was authored on January 5, 2019.


Greg Archibald, at the time of this post, is a second-year law student at Penn State Dickinson Law. He is from Central Pennsylvania and is interested in civil litigation. Greg is a founding member of the Business Law Society and is currently an Associate Editor of the Dickinson Law Review

A Crack in the Glass Ceiling: California’s New Corporations Law

By: Anahita Anvari

Supreme Court Justice Ruth Bader Ginsburg once said, “There will be enough women on the Supreme Court when there are nine.” Justice Ginsburg’s statement reflects the current push toward gender equality. People across the country are calling for change.

In California, breaking the glass ceiling will start in the corporate boardroom. The state recently passed Senate Bill 826 (“Bill”), which aims to promote gender diversity and equality in the workplace. The Bill will increase gender equality in California, enhance company performance, and draw nationwide attention to gender disparity. This post will give a general overview of the Bill, discuss its positive impacts, and address the concerns of the Bill’s opponents.

The Bill Will Promote Gender Equality by Adding More Women to Corporate Boards

The Bill adds section 301.3 (“Section”) to the California Corporations Code (“Code”). The new section sets forth requirements for the number of women on corporate boards.

By December 31, 2019, any corporation that is subject to the new law must have at least one female on its board of directors. By December 31, 2021, a corporation with a board of five directors must have at least two female directors on its board, and a corporation with a board of six or more directors must have at least 3 female directors. Corporations must increase their total number of board members if no seats on the board become available to females by the effective date. For the purposes of the Bill, a “female” is an individual who identifies as a woman, regardless of their designated sex at birth.

The Bill applies to any domestic or foreign publicly held corporation whose principal executive office (“PEO”) is in California. A publicly held corporation is any corporation with shares on a major United States stock exchange. The PEO is defined by the Securities Exchange Commission as the location of the office where the officers, partners, or managers direct, control, and coordinate business.

The Code does not require California corporations to have their PEO in California. This means that California corporations will not need to comply if their PEO is in a different state. However, foreign corporations and businesses incorporated in a different state will be subject to the Bill if they are publicly held and have a PEO in California.

The Bill also imposes fines for violations. Failure to comply with the law will result in a $100,000 fine in the first year of violation, and $300,000 fine for any subsequent years of noncompliance.

The Bill is Necessary Because of the Prevalence of Gender Inequality in the Workplace

Gender inequality remains widespread in the workplace, as demonstrated by the lack of women on corporate boards and the distinct gender pay gap. The inequality will continue to prevail without an immediate change. For this reason, all companies should consider including women on their Boards rather regardless of whether the Bill applies or not.

Women Are Missing on Corporate Boards

Women are grossly underrepresented on California’s corporate boards, regardless of the size of the corporation.

The Russell 3000 Index (“Index”) tracks the 3,000 largest publicly held companies in the United States. A quarter of California-headquartered companies on the Index have no women on their board of directors. The remaining companies have at least one woman on their board, but these women make up only fifteen percent of the total board seats available.

Smaller companies fare even worse. Women hold roughly eight percent of the board seats of the fifty lowest-revenue California companies. Half of these companies have no women on their board at all.

Women are Paid Significantly Less than Men Throughout Their Careers

Women earn significantly less than men despite occupying roughly the same percent of United States jobs. On average, women earn half of men’s income in the United States – that is fifty cents to the dollar that a man makes.

California is generally performing better, with the pay gap at eighty-nine cents to every man’s dollar. However, an elimination of even a small pay gap would significantly add to the quality of life for women. For instance, without the additional pay to close the pay gap, women in California could afford almost eight additional months of child care or four additional months of rent per year.

Moreover, studies show that the pay gap begins early on in women’s careers. The average woman’s first job post-graduation pays less than a man’s, even though women generally tend to have higher grades in both high school and college. Corporations nationwide promote men at a thirty percent higher rate than they promote women.

Failure to Act Now Will Lead to Harmful Results

Studies have predicted that it could take almost fifty years to achieve gender equality without an immediate change. That could mean no equality until 2055. This date seems especially alarming given the increase in women obtaining higher education. Reports show that higher number of women have been enrolling in college than men for over twenty years.

California can achieve gender equality much sooner by mandating women on corporate boards. women at the highest level will likely have a pipeline effect, encouraging the hiring of more women in leadership roles throughout the company.

The Bill is Beneficial Because Corporations Perform Better When They Have a Woman on Their Board

Corporations that have a woman on their board perform better than those that do not. Profitability is one example. United States corporations with three or more female directors have a forty-five percent higher earnings per share than those who do not. Corporations with at least one woman on their board have a two-percent higher average return on equity than those companies who do not have at least one woman on their board. In fact, all the fifty largest California corporations have at least one woman on their board.

The Policy Behind the Bill Should Supersede the Arguments Against the Bill

  Opponents speculate that the Bill will fail if challenged in court for two reasons: The Equal Protection Clause (“EPC”) and the Internal Affairs Doctrine (“IAD”).

Arguments that the Bill will Violate the Equal Protection Clause are Based on Mere Speculation

The Bill raises questions under the EPC of both the California and United States Constitutions. The EPC of the United States Constitution requires gender-based legislation to pass intermediate scrutiny, meaning that the legislation must advance a substantial government interest. The California EPC applies strict scrutiny. This means that the legislation must serve a compelling government interest and must be the best way to meet that interest.

Opponents argue that the Bill violates both EPC’s because it discriminates based on an individual’s gender. However, the Bill does not exclude males. Rather, the Bill is inclusive of females and promotes equality of both genders. Additionally, the opponents’ argument fails because of its speculation and assumption. The argument assumes that promoting gender equality would not be a significant enough government interest for a court to uphold. The thought that gender equality lacks significance further emphasizes the need to address to the issue. This mindset and gender disparity will prevail without active efforts to change it.

Furthering Equality on Any Level Will Have a Positive Impact Regardless of Internal Affairs Doctrine Limitations

The Internal Affairs Doctrine is a choice of law provision under which a court will apply the law of a corporation’s state of incorporation to its internal affairs. This means that if a corporation is incorporated in Delaware but sued in California, a court would likely apply the laws of Delaware to the case regardless of the PEO existing in California. Opponents to the Bill say that this rule will severely limit the application of the Bill to less than one-hundred corporations.

This argument is also speculative. It is unclear whether corporations with a PEO in California and incorporation in a different state will challenge the Bill in court. Additionally, while the Bill has flaws, strong policy supports it. Governor Jerry Brown noted when he signed the Bill into law that its passage was necessary to draw attention to the prevalent and crippling issue of gender inequality. The Bill will achieve its main goal of drawing attention to the gender parity issue regardless of its outcome if challenged in court.

Conclusion

While it will take more than just one crack to break the corporate glass ceiling of gender inequality, California’s Senate Bill 826 is the first step towards the final shatter. The Bill will make a positive impact on California companies and will draw awareness to the issue of gender inequality.


*This post was authored on December 14, 2018.

Anahita Anvari, at the time of this post, is a second-year law student at Penn State’s Dickinson Law. She is from Southern California and is interested in health care law. Anahita founded the Health Law and Policy Society and is currently serving as an Associate Editor of the Dickinson Law Review.

 

Statutes and Legislative Materials

U.S. Const. amend. XIV, § 1.

C.A. Const. art. I, § 7.

Cal. Corp. Code (2018).

Sen. Bill No. 826 (2017-2018).

Governor Edmund G. Brown, Jr., Office of the Governor: Senate Bill 826 Signing Message, available at https://www.gov.ca.gov/wp-content/uploads/2018/09/SB-826-signing-message.pdf

Photo source: https://www.equilar.com/reports/50-gender-diversity-index-q2-2017.html

Please contact us if you’d like a complete source list.

Is Your Business Data Secure from a Breach? What to do.

By: Kamron Abedi
https://www.omm.com

Every day businesses have their data compromised due to hacking, natural disasters, and human error. In 2017, there were 1,579 publicly recorded data breaches effecting 1.9 billion consumer records and cost the businesses involved an average of $3.62 million in damages. Fires, hurricanes, and other similar natural disasters destroy paper files and servers that store data. Finally, the leading cause of data loss is human error. People make mistakes and delete massive amounts of data accidentally. These incidents can happen to any business, large or small, so it is important to take the necessary steps to make sure your data is secure and backed up. It’s important to know what to do from a legal perspective when this happens.  Below are four steps to take to ensure that your business’ data is protected from hacking, natural disasters, and human error, together with comments from a legal perspective.

Determine What Data Needs to be Secured

Most businesses have employee records, client records, trade secrets, proprietary information, financial records, and marketing information that need to be secure in order for the business to perform successfully and maintain compliance with privacy laws. For example, employee records relating to your employees’ health are protected by HIPPA, and disclosure of those records come with penalties and fines for your business. Trade secrets and proprietary information are crucial to the success of your business and if those records are compromised it can be financially disastrous for your business.  Even though trade secrets and proprietary information are protected by statutes, once they are out,  there is no going back. Therefore, it is important that you identify the information that your business needs to protect before deciding how to protect that information.

Create a Lean Data Retention Plan

Once you have identified the type of data that your business needs to retain and secure, implement a plan to keep only the necessary data and purge all unnecessary data from your business’ files and servers. Keeping unnecessary records and data will only make it more difficult and costly to secure and backup your business’ data. An effective data retention plan ensures that your business’ data is safe and allows your business to focus as little energy and resources to data retention as possible. When the data retention plan is in place, make sure that all of your employees are trained and understand the process.

Backup and Secure the Data

https://www.websta.org/tag/DigitalSafety

It is important to backup your data in multiple locations in order to ensure that your data is not lost completely if one of your storage locations is compromised. If your business has paper files, it is imperative that you electronically backup all of your important or confidential files. A simple pipe burst or even a fire in a neighboring building can destroy paper files, and without a digital backup, they are lost forever. Depending on the amount of data your business needs to backup, you can use a flash drive, external hard drive, cloud backup, or other online data management service. Do not store your backup of your files in the same place where you keep the primary copy of the files as a natural disaster or accident can destroy both copies of your data.

Next, ensure that your data is secured, both in your primary storage space and your backup storage space. When keeping paper files, ensure that you keep them in a locked space and only grant access to the employees that absolutely need access to the records. In the case of a cloud backup or online data management service, ensure that the company you are using to store your has an effective data security plan that will keep your files encrypted and out of the hands of hackers.

Privacy law Updates and Changes

Finally, be sure to keep up with updates in privacy laws and changes in your business’ data retention needs. A data security plan is not effective unless it adapts to the growth of a business and any new regulations that effect the business.

What to do if your data has been breached?

In all states of the USA, there are data breach laws.  There are also federal regulations that apply.   These laws require businesses to notify individuals who have been impacted by security breaches that may compromise their personally identifiable information. It’s important to know when and how you are required to inform individuals who have been impacted.  In some states, you are required to notify individuals within 45 days.  Most states also require written notice.  While it would be impossible to sum all of this up in one short blog post, you can see the complete state-by-state data breach guide here.

Note that if you do business in Europe, the GDPR has laws that apply to you as well.  See Inside Entrepreneurship Law blog post:  What Every Entrepreneur Needs to Know About the GDPR.

In closing, if you have had a breach, contact an attorney who is familiar in this area to help you immediately.  Time is of the essence when it comes to compliance in this area.


Kamron Abedi, at the time of this post, is a third year law student at Penn State’s Dickinson Law. He is originally from Southern California and will start his legal career at Stevens & Lee in Reading, PA as an associate in their Corporate practice group. He is also the Founder & President of the Business Law Society at Dickinson Law.

 

Sources:

https://www.ftc.gov/news-events/blogs/business-blog/2018/09/your-business-prepared-emergency-your-data

https://www.ispartnersllc.com/blog/5-steps-developing-data-retention-policy/

http://www.govtech.com/blogs/lohrmann-on-cybersecurity/new-guide-on-state-data-breach-laws.html

https://www.computerweekly.com/news/450297535/Human-error-causes-more-data-loss-than-malicious-attacks

Was I supposed to provide a “reasonable accommodation” for that?

By: Christopher Harris*

When? Where? What? How Long? and Why? If you are reading this blog post then chances are you are in one of three situations: 1) an Employee is suing you under the Americans with Disabilities Act (“ADA”) for failing to provide a reasonable accommodation; 2) an Employee asked for sick leave or extended leave under the Family Medical Leave Act (“FMLA”) and is now asking for an extension; or 3) an Employee made a comment to you and that comment has made you wonder if you should be doing more. This post is going to focus more on the last two scenarios because if you are being sued for failing to make a reasonable accommodation, you should seek an Attorney pretty fast to ensure you are preserving your best defenses from the beginning.

I also want to make a couple of assumptions known before continuing – this post assumes that you are a qualified employer, the employee is a qualified employee, and your company is subject to the ADA. This is a crucial first step when even determining if a reasonable accommodation, or the interactive process, is needed, but is one that will not be discussed here. Lastly, this is a very broad overview of reasonable accommodations – this subject is very fact intensive and should be analyzed further by an Attorney if you are truly worried.

The ADA is a federal law which does in fact create preferential treatment of one employee over another. In fact, courts have said that by definition, the ADA requires employers to treat employees with disabilities differently that employees without one. Due to this, you have to be careful about what is being asked of you.

When to begin the Interactive Process

FMLA Leave or Sick Leave

As an entrepreneur that is subject to the FMLA and ADA requirements, you may not have known that the two federal regulations could cross paths. Even if you did everything right under the FMLA regulations, you may have failed under the ADA requirements. When an Employee is out on extended leave, or FMLA leave, their disability could qualify under the “covered employee” definition of the ADA. When this happens, you have to be careful with conversations. The Employee may not be knowingly making an ADA request for a reasonable accommodation today, but could find out tomorrow after you have denied it.

Here is one type of scenario that you need to be concerned with. When you receive an FMLA request to be out for the full 12 weeks, and you grant it, you may be required to extend that leave another couple weeks or months.

If an employee brings a doctor’s note to you and the note tells you that the employee is almost ready to come back to work but really needs a couple more weeks off, this should send alarms off in your head. Just because the employee has used all of their sick leave, personal leave, and has exhausted their FMLA leave, you may be required to give them more leave under the ADA’s reasonable accommodation. This is because the courts have found that extending leave is “reasonable” when it is not an “indefinite leave.”

This of course gets a little trickier when the employee has been out for 12 weeks and is then coming back in and asking for an additional 8 months of leave. Or, better yet, the doctor’s note tells you that the employee cannot come back tomorrow and she is unsure when the employee will be able to come back. When you’re dealing with these situations, call your Attorney.

Random Request for an Accommodation

You have to be listening to your employees when they come in and make complaints about their back hurting, or not being able to drive at night time, or not being able to hear or see while at work, or not being able to concentrate without their pet snake being beside them. What you may dismiss as a common complaint could turn around and bite you tomorrow because you dismissed it.

Best practice is to say, “How can I help you?”

That’s right – when an employee comes forward and says something to the effect of “Man, I could really use [Insert Anything Here] because of my [Insert any Condition Here],” you should immediately be wondering if the ADA applies. Worst case scenario, the ADA applied and you ignored it – now having to pay an Attorney to fix everything.

The next most important thing to do is, DOCUMENT EVERYTHING. This part is so important that I am going to bold, italicize, and underline it. As soon as the employee made the request – I could really use X – you should be taking notes about what the employee said and what you said to help. This way, you can send the notes to your attorney and your attorney can make sure you’re protected.

Just because an employee has asked for a specific accommodation, “I could really use my pet snake at work to help me calm down,” does not mean you have to give that specific accommodation! (Let’s be real, who wants to work when their co-worker has a pet snake slithering around!) As the employer, you have the right of choosing what is reasonable. You just have to go through that interactive process of talking it over with the employee.

For a more thorough analysis, check out the EEOC’s Guidance on Accommodations.


* This post was reproduced with permission by author Christopher Harris. Original post dated Dec. 2, 2018 can be found here.

Chris Harris, a Texas native, is a recent grad of Dickinson Law.  He received a B.A. in History from Southern Arkansas University in 2013 and his Master of Laws degree from Radboud University, Nijmegen, Netherlands. He is now an Associate at Stock and Leader, LLP in York, PA.  A more complete bio can be found here.

 

Sources:

Photo source: http://theemplawyerologist.com/2017/02/23/fmla-leave-reasonable-accommodation/

https://www.eeoc.gov/policy/docs/accommodation.html

The Americans with Disabilities Act of 1990, as amended,  42 USCS §§ 12101 et seq

EEOC Fact Sheet – “The FMLA, the ADA, and Title VII of the Civil Rights Act of 1964”

U.S. Airways Inc. v. Barnett, 53 U.S. 391, 122 S. Ct. 1516 (2002).

Ruggiero v. Mount Nittany Medical Center, 2018 US App. LEXIS 15056 (3rd Cir. 2018)(unpublished)

Sessoms v. University of Pennsylvania, 2018 US App. LEXIS 16611 (3rd Cir. 2018)(unpublished)

Financial Assistance for Agricultural Entrepreneurs

By: Sarah Phillips

Starting your own agricultural business, whether it be agritourism, a microbrewery, organic farm, etc., can be a daunting task. Not only do you have typical start-up considerations but you will also need land, access to equipment, labor, a plan for managing your crops, and avenues to market and sell your product. In addition, you need to have the proper infrastructure, which can be the most expensive aspect of building an agricultural business. If you were not born in the 2% of American farm families, you might be left wondering how you could possibly access all that you need to start your business. If you are lucky enough to be part of a farm family, you may be wondering how you can access the expensive specialty tools and equipment that a standard farm operation may not have.

The United States Department of Agriculture (USDA) offers many funding programs aimed at facilitating the growth and success of agricultural businesses through grants and loans. The Specialty Crop Block Grant Program, the Farmers Market Promotion Program and the Organic Cost Share Program are all financial assistance opportunities that agricultural entrepreneurs are able to take advantage of in order to put their ideas into practice.

What are my Funding Options?

It can be overwhelming to read through all the options while trying to figure out which avenue is best for you and your business. How do you know which one to pick? The Specialty Crop Block Grant Program, the Farmers Market Promotion Program and the Organic Cost Share Program are three programs that all agricultural entrepreneurs should look at first because they cover a wide range of potential businesses and they recognize non-traditional agricultural opportunities.

     1. Specialty Crop Block Grant Program

Interested in opening your own microbrewery? Then this program is for you! The goal of this grant is to help agricultural entrepreneurs enhance the competitiveness of specialty crops. Specialty crops are considered to be fruits and vegetables, tree nuts, dried fruits, horticulture and nursery crops (including floriculture). If you are planning on growing any of these plants and want to apply for funding through the Specialty Crop Block Grant Program (SCBGP), your plants must be cultivated or managed and used by people for food, medicinal purposes and/or aesthetic gratification. The funding you receive could assist in purchasing the tools and equipment needed for proper cultivation of crops or support an increased marketing effort.

The USDA provides a sample list of plants considered to be specialty crops (hops are included), as well as a list of ineligible crops. To apply for this grant, applications must be submitted to your State Department of Agriculture. Applications are gathered only for a certain time period every year, which can vary by state, but the collection usually takes place at the beginning of each calendar year.

     2. Farmers Market Promotion Program

If you are an agricultural entrepreneur who wants to increase consumers’ access to locally grown produce or develop agritourism programs that generate consumer awareness and education, funding through the Farmers Market Promotion Program (FMPP) might be right for you. Grants dispersed through the FMPP are meant to help improve and expand farmers markets, community supported agriculture (CSA) programs and other agritourism efforts. They can also assist in developing, expanding, and supporting new producer-to-consumer marketing opportunities. Applicants must be domestic entities that are owned, operated and located within the 50 United States or the District of Columbia, American Samoa, Guam, the Commonwealth of the Northern Mariana Islands, the Commonwealth of Puerto Rico, or the U.S. Virgin Islands. Like the SCBGP, applications are open at the beginning of each calendar year.

     3. Organic Cost Share Program

If you are already a certified organic producer or handler, and live in a participating state, then you may be able to take advantage of one of the two available Organic Certification Cost Share Programs (OCCSP). As an agricultural entrepreneur, being able to market you product as organic will likely have a positive financial impact on your balance sheet. But in order to take advantage of the highly sought-after organic label, you must complete the USDA organic certification program, The National Organic Program, which has a high cost and takes many years to complete. The first program option is the National Organic Certification Cost Share Program (NOCCSP), which provides financial assistance to organic producers and handlers who are obtaining or renewing their organic certification. You could receive up to 75% of certification costs through this program.

The other program option is the Agricultural Management Assistance (AMA) Organic Certification Cost Share Program. This program can help agricultural entrepreneurs provide sustainable care for their land and crops by facilitating funding to address water management, water quality and erosion issues. Program participants can receive up to 75% of the cost of installing conservation practices on their operation, and additional funding is possible if you are a member of a historically underserved producer group.

OCCSP applications are accepted on a rolling basis through your county’s Farm Service Agency (FSA) office or your state department of agriculture.

What if I Have More Questions?

If you have additional questions about these programs, the availability of other programs, how to apply, or if your agricultural operation is eligible to receive funding, you should reach out to your local FSA office or county extension office. A program specialist who is familiar with relevant state or county program variations will be able to help any agricultural entrepreneur find the right funding!

For a list of state and local FSA offices, click here: https://www.fsa.usda.gov/state-offices/index


Sarah Phillips, at the time of this blog post, is a second year law student at Penn State’s Dickinson Law. She is from West Amwell, New Jersey and has interests in agricultural, land use and business transactional law. She is currently serving as a Honor Code Representative and a Law Lion Ambassador.

 

Sources:

https://www.usda.gov/topics/farming/grants-and-loans

https://www.ams.usda.gov/services/grants/scbgp

https://www.ams.usda.gov/sites/default/files/media/Combined%20Grants%20Decision%20Trees.pdf

https://www.ams.usda.gov/services/grants/fmpp

https://www.thebalancesmb.com/get-usda-organic-certification-2538057

https://www.ams.usda.gov/services/grants/occsp

https://www.fsa.usda.gov/programs-and-services/occsp/index

https://www.nrcs.usda.gov/wps/portal/nrcs/main/national/programs/financial/ama/

Picture Sources:

https://thrivecarolinas.com/event/farmers-market-creations/attachment/farmers-market/

https://www.thefarmhousebrewery.com/hours

Dynamic Delegation: When to use your accountant versus your attorney

By: Robert Heary*

One of the challenges that entrepreneurs and small business owners face is how to best use their small business attorney and small business accountant. Both small business attorneys and small business accountants are invaluable to entrepreneurs and small business owners and provide a range of overlapping services to their clients. However, these services come with different costs and benefits. In particular, attorneys cost more but come with the benefit of legal expertise, while accountants cost less but lack a legal background. This post will explain what accountants and attorneys do, the similarities and differences between them, and advice on how to best use each.

What Accountants do

Accountants are numbers oriented, and they mostly focus backward in time. An accountant helps to track and record the income and expenses of a business. They record what a business has done in the past and can use that information to plan for the future. Their primary goal is to help you make your business as profitable as possible.  They are able to prepare tax returns and financial statements and make budgets for businesses.

What Attorneys do

Attorneys are law oriented and focus mostly forwards in time. Attorneys understand how laws and regulations affect a business. They identify the risks and liabilities a business may face and use that information to avoid or minimize those risk and liabilities. Their first goal is to keep you out of court and out of jail, with profitability being a close second. Attorneys are able to negotiate, write, and review documents and advise clients on legal issues.

Overlaps

The biggest area of overlap of services that accountants and attorneys provide is the area of general business advice. General business advice ranges from whether to run a particular promotional campaign, hire more people, or acquire other businesses or assets. However, an accountant and an attorney will advise through different lenses, with the accountant focusing primarily on numbers and the attorney on legal issues. Finally, both an attorney and an accountant, provided the accountant is a Certified Public Accountant, may contact IRS on your behalf.

Differences

Despite the similarities, there are important differences between the accountants and attorneys. The three biggest differences involve attorney-client privilege, legal versus business advice, and preparation of tax returns.

First, attorney-client privilege protects your communications with an attorney. While some states recognize accountant-client privilege, such privilege is often limited and does not apply in federal court. Thus, if you talk to your accountant about issues involving liability or legal issues, those discussions could be admissible in a lawsuit.

Second, the discussion of legal issues brings up the other difference: only attorneys may provide legal advice. While an accountant knows how to identify and understand financial liability and risk, their training does not include identifying or understanding legal liability or risks. Because of their lack of legal training, it is illegal for accountants to give legal advice or practice law. The practice of law includes preparing and filing documents.

Third, accountants specialize in giving tax advice and preparing tax returns. While an attorney may be able to do either of these, it is cheaper to have an accountant do it. If your business requires the expertise of a tax attorney for tax advice or planning, your accountant or attorney will tell you to consult one.

Takeaways

Accountants are excellent at providing advice on business issues that focus on finances or issues that solely involve the business. Examples include deciding whom to target for advertising, how many employees to add, choosing between suppliers, and how much money the business needs to raise for financing. Attorneys may also provide this kind of advice; however, it does come at a higher cost. Because accountants can provide such advice at a lower cost, entrepreneurs and small business owners should think about taking advantage of accountants for these kinds of issues.

Anything that involves legal liability, third parties, or written agreements is for your attorney.  Examples of issues you should consult an attorney for include warnings your advertisements might require, creating an employee handbook, negotiating and drafting supplier contracts, and complying with laws when raising money from investors. Your attorney should handle anything involving start-up documents, non-competes, confidentiality agreements, or protecting intellectual property. Additionally, the more complex an issue or more it could negatively affect your business, the more you should consider consulting your attorney.

Accountants and attorneys often refer clients to each other for assistance or work on issues together.  Both accountants and attorneys are professionals, if one directs you to consult the other; it is because they believe it is in your best interests to do so.

Finally, if you are ever in doubt as to who to ask, go to your attorney, it is better to pay a little more and be safe than to risk losing your business or worse.


* This post was reproduced with permission by author Robert E. Heary.  Original post dated Nov. 16, 2018 can be found here.

Robert Heary, at the time of this post, is a third year law student at Penn State’s Dickinson Law.  He is from Buffalo, New York and has interests in business transactional law.  He is currently serving as the Vice President of the Student Bar Association and the Executive Chair of the Moot Court Board.  A more complete bio can be found here.

Sources:

Accountants vs. Lawyers: Using the Right Tools for the Job

CPA vs. Tax Attorney: What’s the Difference?

Lawyer vs Accountant

Tax Attorney vs. CPA: Why Not Hire A Two-In-One?

What is Accountant-Client Privilege?

Photo source: https://www.pexels.com/photo/silver-and-gold-coins-128867/

Photo source: https://www.pexels.com/photo/abstract-blackboard-bulb-chalk-355948/

What Every Entrepreneur Needs to Know About the GDPR

By: Alana Goycochea

Even American companies that have a website need to comply with the EU’s GDPR laws. The General Data Protection Regulation (GDPR) is the European Union’s new data protection regulation. The GDPR  went into effect in May 2018. The regulation aims to give consumers control over their personal data. American entrepreneurs are probably wondering what an EU regulation has to do with them if their business is located in the US. They have nothing to worry about, right?

Not true.

The GDPR has an expansive scope, with strict compliance standards, and  significant penalties for noncompliance.

Who does the GDPR Apply to?

The GDPR applies to any company that has a website that markets their products online. You are subject to the GDPR even if you are located in Pennsylvania and regardless of if you ever sell a product to someone in the EU. As soon as you collect personal data of an individual that lives in the EU, you are subject to the stringent requirements of the GDPR.

What is “personal data”?

Personal data is any information relating to a person, including the person’s name, email address, photo, banking information, cookie ID, social media information, and even an IP address.

How to Comply With GDPR?

To comply with the requirements of GDPR, your business must consider what data it needs from customers, obtain affirmative consent for that data collection, update the company website, respect the rights of consumers that want to be forgotten, and inform customers of any data breaches.

   a. How to Determine What Data to Collect?

The determination of what data to collect is extremely company specific. First, figure out how you will use any data collected before deciding what data you should collect. As part of formulating a data strategy, you should create a company policy for data disposal. Under the GDPR, it is unlawful to keep data for an infinite time frame. Your policy must consider the useful lifetime of the data and weigh that against the consumer’s need for data protection.

   b. How to Obtain Affirmative Consent?

 Providing your site’s privacy policy is not enough. EU consumers must affirmatively consent to your data collection. Amongst other requirements, you must inform EU consumers of who your company is, why your company needs their data, the legal justification for processing their data, how long the data will be kept, who can and will receive their data, as well as an explanation of their legal rights regarding the data. After informing the consumer of these required disclosures, you must have them consent to this collection.

   c. How to Update the Company Website?

The UK has recently also passed a Cookie Law, requiring websites to inform consumers regarding any cookies on your site and how to opt out or change their cookie settings. Your cookie policy should also explain what cookies are active on your site, what data they track, and what the purpose is of the data collected.

   d. How to Respect the Right to Erasure?

 If you have been following the headlines, you may have seen some articles about a right to be forgotten. When the GDPR was adopted, the phrase changed to the right to erasure. Essentially, EU consumers have a right to opt out of data collection at any time. Your company must respect these requests and delete the data off the system. Remember to stop using the data for any other company purpose.

   e. How to Inform Consumers of a Data Breach?

The best practice is to notify impacted consumers via email or mail with a description of the nature of the data breach, the likely consequences of the breach, the contact information for the company’s Data Protection Officer or other contact person, and information regarding how the company plans to address the breach.

What is the penalty for not complying?

If a company has infringed on the GDPR, it could face a temporary or definitive ban on processing data.  In addition, a fine could be assessed up to €20 million (approximately 22.7 million US dollars) or 4% of the company’s total annual worldwide turnover.  If a company has likely infringed on the GDPR, a warning may be issued.

Lasting Impact of GDPR on American Companies

Many international companies have adopted the privacy standards established by the GDPR. As a result, some have labeled this as the “Brussels effect,” a phenomenon in which European regulations become a global baseline.  This impact has led to much speculation that American legislators will pass similar legislation. At the time of this blog post, the US federal government is yet to pass similar legislation, however, California recently passed a bill similar to the GDPR. Companies should be mindful that more states may pass privacy bills in the future. While some companies have circumvented the GDPR by blocking all EU traffic from their site, all companies should consider creating a data policy.


*This post was authored on November 11, 2018.

Alana Goycochea, at the time of this post, is a second year law student at Penn State’s Dickinson Law. She is from Southern California and is interested in entrepreneurship law. Alana is currently serving as President of the Women’s Law Caucus.

 

Sources:

Photo servers: https://pxhere.com/en/photo/1241325

Photo GDPR: https://pxhere.com/en/photo/1435307

Photo Keyboard & Gavel: https://www.maxpixel.net/Privacy-Policy-Keyboard-Sure-Security-Secure-510739

https://ec.europa.eu/info/law/law-topic/data-protection/reform/rules-business-and-organisations_en

https://www.forbes.com/sites/forbestechcouncil/2017/12/04/yes-the-gdpr-will-affect-your-u-s-based-business/#233b92816ff2

https://www.codeinwp.com/blog/gdpr-compliance/

https://techcrunch.com/2018/05/05/unroll-me-to-close-to-eu-users-saying-it-cant-comply-with-gdpr/

https://www.techradar.com/news/how-to-make-a-website-gdpr-compliant

The Health Care Entrepreneur’s Guide to Important Laws: Part 1

By: Anahita Anvari

Health Care Entrepreneurs need to know about The Anti-Kickback Statute and Stark Law.  At a recent event, “Health Law 101: Key Legal Issues for Health Care Companies,” speakers identified the top five legal and regulatory issues for health care entrepreneurs to be aware of: The Anti-Kickback Statute, Stark Law, False Claims Act, Qui Tam Provisions, and HIPAA.

This post aims to provide a general overview of the first two laws: The Anti-Kickback Statute and Stark Law, although it is appropriate to flag that violations of either of these laws can form the basis of a False Claims Act violation as well.

What is the Anti-Kickback Statute (AKS) and What Does It Mean for Me?

The AKS is a criminal statute intended to protect against health care fraud and abuse. The law makes it illegal to offer, pay, solicit, or receive a remuneration to induce a referral or generate business of a federal health care program. Therefore, you may not give or receive, or attempt to give or receive, anything of value in return for such referrals or business.

a.  Are There Any Exceptions to the AKS?

The AKS includes several “safe harbor” exceptions. Not meeting a safe harbor does not mean that an arrangement automatically violates the AKS. However, a business arrangement will not be an AKS violation if it meets all the requirements of a safe harbor. Therefore, you should consult with an attorney to determine whether your business arrangement falls squarely within a safe harbor, or how to structure future business arrangements so that they do fall within the safe harbor.

b. What Are Some Examples of AKS Violations?

Examples of kickbacks that may violate the AKS include: cash payments, free meals or gifts provided to physicians, and certain arrangements where payments to a physician exceed the fair market value. This list is not exhaustive and other arrangements may be an AKS violation.

What is the Physician Self-Referral (Stark) Law and What Does It Mean for Me?

 The Stark Law prohibits physicians from referring patients to receive designated health services (DHS), payable by Medicare or Medicaid, from an entity in which the physician or immediate family member has a financial relationship. A list of DHS’ can be found here.

Defined broadly, a “financial relationship” means an ownership or investment interest in an entity, or a compensation arrangement between a physician and an entity. For example, such investment interest could be through ownership of shares in the entity providing the DHS, or an interest in a different entity that holds an ownership or investment interest in the entity providing the DHS. More information about financial arrangements can be found here.

There is no intent requirement to violate the Stark Law.  This means that you may be in violation of the Stark Law even if you did not know of the violation or it was by accident. Therefore, you should consult with an attorney to determine if your business arrangement complies with the Stark Law.

a. Are There Any Exceptions to the Stark Law?

The Stark Law provides over thirty general exceptions, such as referring a patient to another doctor in the same practice group, certain rentals of office space or equipment, and ownership of some publicly traded securities and mutual funds. You should consult with an attorney to determine if your business arrangement meets a Stark Law exception.

b. What Are Some Examples of a Stark Law Violation?

Examples of Stark Law violations include referring patients to a facility in which you have a financial interest, retention of Medicare or Medicaid overpayments, miscoding health care claims to obtain greater reimbursement, billing Medicare of Medicaid for services that did not occur, referring patients for medically unnecessary procedures, and paying physician salaries and bonuses far above the fair market value. This list is not exhaustive and other arrangements may be a Stark Law violation.

What are the consequences of violating the AKS or Stark law?

A violation of the AKS can lead to criminal penalties and administrative sanctions, including imprisonment, civil monetary penalties of potentially $50,000 for each violation, and exclusion from further participation in federal health care programs. A violation of the Stark Law can lead to additional penalties. Depending on the situation, these penalties may be up to $15,000 for each improper claim billed to Medicare or Medicaid, or up to $100,000 for each arrangement.

For example, a Pennsylvania hospital and a regional cardiology group were recently involved in a lawsuit for submitting claims to Medicare and Medicaid that violated the AKS and Stark Law. The claims were based on impermissible referrals from the cardiology group to the hospital. The companies agreed to a settlement totaling $20.75 million.

How Do I Comply with the AKS and Stark Law?

You should take appropriate steps to comply with the AKS and Stark Law by implementing and maintaining an effective compliance program. The Office of the Inspector General (OIG) of the Department of Health and Human Services has identified seven essential elements to create an effective compliance program:

  1. Implementing written policies, procedures, and standards of conduct.
  2. Designating a compliance officer and compliance committee.
  3. Conducting effective training and education.
  4. Developing effective lines of communication.
  5. Conducting internal monitoring and auditing.
  6. Enforcing standards through well-publicized disciplinary guidelines.
  7. Responding promptly to detected offenses and taking corrective action.

While OIG has noted that compliance programs are not “one size fits all,” businesses should put forward a meaningful effort to ensure adequate compliance. Implementing these seven elements into your business’ compliance program can help guarantee your compliance.

As a final note, be aware that some states have their own anti-kickback and self-referral laws. These state laws may be stricter than the federal laws, and may include business arrangements involving private health insurers, rather than just federal health care programs. You should consult with an attorney regarding the laws in your state.


*This post was authored on October 31, 2018.

Anahita Anvari, at the time of this post, is a second-year law student at Penn State’s Dickinson Law. She is from Southern California and is interested in health care law. Anahita founded the Health Law and Policy Society and is currently serving as an Associate Editor of the Dickinson Law Review.

 

Sources:

Dickinson Law Students on the Road – Entrepreneurship Workshop – A Great Success!

By: Samantha Prince

Reading, Berks County, PA.  Eight members of our Business Law Society and I traveled to Penn State’s Langan Launchbox last week to lead a workshop designed to inform entrepreneurs and Penn State Berks engineering students on how to decide whether to license an invention or start a company.  The workshop included a presentation entitled “I Created Something – Now What? Licensing and Creating a Start-up” by the President of the Business Law Society, Kamron Abedi ’19.

Following the presentation, law students engaged in casual Q&A conversations with entrepreneurs and students.  There were approximately 45 attendees and each law student spoke with several individuals.  Conversations included: the best entity to create for the entrepreneur, formation documents such as LLC Operating Agreements, what happens when you change a business’ purpose, company name selection, exclusivity in licensing deals, tax ramifications of operating out of your home, and trademark protection.

Some of the exciting innovations that these entrepreneurs are a part of included: a device to assist amputees in putting on socks, a new type of wheelchair that allows for better maneuvering through urban environments, 3D printing technology, and custom-built motorcycles.

Attendees on both sides benefited. Dr. Amir Barakati, Berks Professor of Mechanical Engineering, said, “I believe the presentation was very informative to all my students who attended the event especially to those who intend to turn their ideas into a business.  Providing an opportunity to ask questions and discuss individual experiences after the presentation was also absolutely helpful.”

Law students observed the benefits as well.  Christian Wolgemuth ’20, stated that it was nice to talk with people who “have a specific idea they are trying to foster and grow, and to be able to provide some insight and guidance on how to make it a reality.”

Bob Heary, ’19, stated, “The biggest positive for me was the opportunity to interact with the students who were interested in being, or already were, entrepreneurs. These interactions bring the practice of law to life.”

Greg Archibald ’20, reflected, “The students and entrepreneurs were wonderfully engaging, and everyone seemed to enjoy the experience. I was very excited to have the opportunity to apply what I have learned through class and BLS to help real-life people achieve their business goals. I am looking forward to the next workshop!”

“As a founding member of the Business Law Society, I had a vision of helping aspiring entrepreneurs with their start-up businesses. The workshop was a great opportunity for us as law students to not just educate but build professional relationships with entrepreneurs in our community.” Sarah Zomaya ’20, Business Law Society Vice President.

The Business Law Society members who participated in this event are: Kamron Abedi ‘20, Greg Archibald ‘20, Doris Baxley ‘19, Laura Bortnick ‘19, Bob Heary ‘19, Cameron Plaster ‘19, Christian Wolgemuth ‘20, Sarah Zomaya ’20. For those who have authored blog posts, hyperlinks are provided.

Our entrepreneurship law students and the BLS members are ambitious and well positioned to help entrepreneurs and the community through a variety of methods.  Many of the students write for this blog.  Others participate in workshops and provide lectures in classrooms.  All three of these activities further our service and community missions by providing ways that entrepreneurs can gain valuable insight about different areas of the law.  If your organization or class is interested in hosting a workshop or lecture, please either contact us at: https://dickinsonlaw.psu.edu/entrepreneurship-workshops or me directly at sjp15@psu.edu.

The Langan LaunchBox is a partnership between Penn State Berks and Penn State Health St. Joseph. Founded in April 2016, its goals include: enhancing community and industry relationships; promoting entrepreneurship among Penn State Berks students; utilizing entrepreneurship to accelerate business development in medical and health sectors; and providing resources that encourage entrepreneurship across diverse populations in the City of Reading.

So You’ve Invented Something… Now What? (Licensing Your Product)

By: Kamron Abedi
Photo credit: https://www.score.org/blog/product-licensing-beginners

Many people think that if you invent something you should start a company.  But you actually have two options: start a company or license the product to another company.  Starting a company can be costly and inefficient for singular products or products in certain industries, so it’s important to keep your mind open to another alternative – Licensing.

Licensing entails partnering with another business that has the capacity to produce and sell your product. In establishing this kind of relationship, you will need a licensing agreement. In licensing relationships, you as the inventor will be the “licensor” and the person you enter into the contract with is the “licensee.” In return for the use of your product, the licensee will pay you a negotiated percentage of all product sales revenues in the form of royalties. The main reason licensing is so attractive is because you do not have to do the work, and you still receive a percentage of the revenue generated from the use or sale of your product or invention.

How do you decide what to do?

Photo Credit: ipwatchdog.com

It’s helpful for you to decide whether you will be able to bring in more revenue producing your product yourself, or if you will be able to create a larger stream of revenue by licensing your product to an established company. Once you determine that licensing is the best avenue, the three main issues to consider are: protection of intellectual property, finding a licensee, and negotiating the agreement.

Protecting your intellectual property prior to licensing

 If you are licensing a brand name, logo, art, or a product that is eligible to be patented, you should ensure that your intellectual property is protected and registered with the United States Patent & Trademark Office prior to beginning licensing negotiations. This process requires consulting an intellectual property attorney who can take the proper steps to register your intellectual property. If you begin to negotiate contracts with other companies prior to registering your patent or trademark, then your potential business partners could steal your invention and become a competitor. Once the intellectual property is protected, you can begin to enter into negotiations to license your product.

Requiring potential business partners to sign Confidentiality agreements is a good idea as well.

How do you choose a licensee?

 After you have protected your intellectual property, the next step is to decide who will be the licensee. Many licensing agreements have an exclusivity clause, which means that the licensee will have the exclusive rights to your product. For this reason, it is important to choose the licensee that can generate the most profit possible. You should research potential licensees to confirm that they have the operational capabilities to distribute the product to a wide enough share of the market (your attorney will refer to this research as due diligence). Inquiries into the potential licensee’s past sales records, supply chain data, and overall reputation in the industry will reveal whether the potential licensee has the capabilities to produce and/or distribute the product.  It’s usually a good idea to ask the potential licensee to provide sale projections as well.

If you license a product to a company that cannot properly distribute the product, then the licensing agreement will be detrimental to both parties.

Negotiating the licensing agreement

Photo Credit: http://crosnt.com/management-team/business-deal/

 There are certain provisions you need to negotiate and include in your licensing agreement.  You should discuss royalty computations with your attorney to determine the best strategy possible for your situation. Sometimes it makes sense to take a straight percentage of revenue, however, royalty computations can be much more complicated depending on the industry and circumstances.

Most licensing agreements provide protection for the licensor by including sales performance requirements.  Such requirements allow you to assess penalties or even terminate the agreement if a licensee fails to meet agreed upon requirements. Performance requirements can vary depending on what is being licensed and what the industry is. For example, in the toy industry, licensors may require that the licensee meet certain sales goals. Such sales performance requirements allow for you to take a larger share of the profits if the licensee fails to meet them.

If a potential licensee fails to agree to performance clauses, you should reconsider entering into an exclusive licensing agreement with that licensee. It raises concerns when a potential licensee doesn’t have the confidence to agree to performance levels.  To maximize potential revenue, it would be more prudent to reserve the ability to work with additional licensees rather than one exclusively. In these circumstances it is customary to allow exclusivity only in certain markets or territories.  Sometimes no exclusivity is granted at all.

In most cases, the protection of intellectual property, finding a licensee, and negotiating the agreement are the most important issues to tackle, but they are not the only issues to consider before entering a licensing agreement. If you are looking to license a product, brand, or other intellectual property, consult an attorney prior to entering into any agreement.  An attorney can be instrumental in drafting and negotiating the best agreement possible.


*This post was authored on October 21, 2018.

Kamron Abedi, at the time of this post, is a third year law student at Penn State’s Dickinson Law. He is originally from Southern California and will start his legal career at Stevens & Lee in Reading, PA as an associate in their Corporate practice group. He is also the Founder & President of the Business Law Society at Dickinson Law.

 

Sources:

https://www.upcounsel.com/blog/top-things-to-consider-when-entering-into-licensing-agreements

https://www.entrepreneur.com/article/230557

https://www.amanet.org/training/articles/intellectual-property-licensing-and-confidentiality-agreements-an-overview.aspx

https://www.inc.com/stephen-key/why-having-a-performance-clause-is-more-critical-than-your-royalty-rate.html