Dickinson Law's Inside Entrepreneurship Law Blog

Kicked to the Street: FTC Makes the Non-compete Obsolete – For Now

By: Tim Azizkhan

After 26,000 public comments, FTC to vote on rule banning noncompete agreements - OPB Walt Disney once said that the “way to get started is to quit talking and begin doing.” It seems the Federal Trade Commission (FTC) was listening. The FTC finally quit talking about banning non-competes and began doing it on April 23, 2024.

The much-anticipated final rule issued by the FTC would lift employment restrictions from millions of Americans, and according to the FTC’s projections, would increase new business formation, raise wages, lower health care costs, and spur a rise in patents. Yet what does the final rule actually say? Is the final rule even legally enforceable? What should business owners do? This blog will break down the FTC’s final rule and answer all these questions. Let’s jump right in!

What is a Non-compete?

A “non-compete” is a contractual agreement that restricts a worker’s ability to compete against an employer during or after current employment. Employers can enter into non-competes with employees, independent contractors, interns, volunteers, and more. These agreements prohibit workers from seeking employment with competitors or from starting their own competing businesses. However, these restrictions are often limited by duration, industry, geography, and scope. Supporters tout non-competes as tools that protect an employer’s trade secrets, confidential information, client lists, and internal talent. Opponents decry non-competes as unfair burdens to workers, impediments to wage growth, and threats to competition.

The FTC’s official definition of a non-compete can be found in its final rule.

Summary of the FTC’s Final Rule

The FTC recently issued a final rule declaring the use of non-compete clauses as an unfair method of competition. The rule establishes a nationwide ban on the use of non-compete agreements with most of the American workforce. The new regulation would be effective 120 days after its publication in the Federal Register.

Employers would no longer be permitted to enter into any new non-compete agreements with workers. The rule does not apply to non-competes entered into by a person pursuant to a bona fide sale of a business entity. The ban would also make the vast majority of existing non-competes unenforceable. Only existing agreements between employers and senior executives would remain in effect. Senior executives are individuals in “policy-making” positions who make more than $151,164 annually.

The final rule will not apply where a cause of action related to a non-compete accrued prior to the effective date.

What Requirements Do Businesses Have Under the Final Rule?

The final rule requires employers to provide notice to affected workers that such agreements are now unenforceable. Notice must be provided before the final rule’s effective date and sent individually to each impacted worker. Acceptable communication methods include text message, email, or written correspondence. The FTC has provided businesses with model language (see page 556) that is approved as compliant under the final rule.

Will the Final Rule be Legally Challenged?

Free legal services for Veterans, service members - VA News Several legal challenges to the final rule are expected before the rule’s effective date, with two legal challenges already being filed in court. Parties are seeking injunctive relief against the rule, which if granted, would prevent the FTC’s final rule from becoming effective and enforceable until litigation commences. Legal arguments are likely to center around two central themes: 1) the constitutionality of the final rule itself and 2) whether the FTC has the legal authority to issue such a rule. The opposition’s goal with legal challenge is to delay the effective date of the rule, limit the final rule’s scope, and/or to have the rule eliminated completely.

How Should Business Owner’s Prepare for Possible Change?

Monitor the News

newspapers rolled up on a table The first thing that business owners should do is closely monitor the news for further developments, especially court rulings. The current form of the rule could be upheld, limited in scope, readapted, or struck down completely. Business owners should pay close attention to how any of these potential outcomes might change business compliance requirements. Legal counsel can also assist businesses is achieving compliance under the final rule.

Be Aware of State Laws

Business owners must still consider the implications of state law on their businesses. The FTC’s final rule only preempts (overrules) state laws that conflict with the rule itself. State law may still prohibit activities allowed under the final rule. For example, non-solicitation agreements are permitted under the FTC’s final rule but would still be prohibited by California law.

Become Familiar with Alternatives to Non-competes

Business owners should begin familiarizing themselves with alternative tools and strategies that can be used in place of non-competes. There are many alternatives that businesses can adopt to achieve similar objectives. A few are listed below:

Non-disclosure Agreements and Trade Secret Laws

4 things you should know about non-disclosure agreements ... Businesses worried about protecting confidential information can enter into non-disclosure agreements or may be protected by trade secret laws. Non-disclosure agreements create a confidential relationship that would prohibit disclosure of sensitive information by parties to the agreement. Trade secret laws create civil and criminal penalties for the “misappropriation” of trade secrets.

Non-solicitation Agreements

Businesses worried about preventing their customers, clients, or employees from being poached by former employees can enter into non-solicitation agreements. These agreements prevent a current employee from soliciting the above-mentioned parties after leaving the company.

Improving Wages, Working Conditions, and Employee Benefits

Businesses worried about retaining talent should consider improving wages, working conditions, and employee benefits offerings. Employees stay at companies when they feel valued, and offering competitive and fair compensation is a great measure of that value. It costs employers an average of 33% of a worker’s annual salary to replace them, so employers may get a two for one here as they will save money and retain talent.

Conclusion

The story of the FTC’s final rule didn’t end on April 23, 2024. In fact, it was just the beginning of what has already proven to be a complicated and hotly contested issue. Significant legal challenges make the future of the FTC’s final rule hard to predict, but one thing is for certain: We are in for a wild ride!

This post has been reproduced and updated with the author’s permission. It was originally authored on May 6, 2024 and can be found here.

Tim Azizkhan, at the time of this post, is a second-year J.D./M.B.A. candidate at Penn State Dickinson Law. He is from Mechanicsburg, PA and is a proud graduate of Gettysburg College. Tim is a research assistant and the treasurer of the Business Law Society. He aspires to open his own business. Tim can be reached at the following email: tazizkhan@psu.edu

Sources:

NELP: FAQ on Non-compete Agreements

Economic Policy Institute: Non-compete Agreements

NOLO: Understanding Non-solicitation Agreements

Sayfarth: FTC Non-Compete Ban: What You Need to Know

JacksonLewis: Federal Trade Commission’s Sweeping Final Rule to Ban Non-Competes: What You Need to Know

FTC: Final Rule

ApolloTechnical: 19 Employee Retention Statistics That Will Surprise You

Indeed: Employee Retention: Strategies to Keep Employees

BrainyQuote: Walt Disney Quotes

OPB: FTC Image

Wikimedia Commons: Cancel Image

Thomas Reuters: Non-disclosure Image

Axiom: Non-solicitation Image

Social Media Advertising – Best Practices

By: Maggie Huang

Social media has become a key source of advertising. Going viral on TikTok could be the equivalent of a business getting fast-tracked to success. The hype around the product often turns into dollar signs, so it can be smart for companies to hire content creators to feature their products. However, the Federal Trade Commission (FTC) has disclosure regulations that can get creators in trouble if they advertise on social media platforms without proper disclosures. Creators must understand that under these regulations, social media advertising is subject to the same rules as traditional advertising. This post sheds some light on how business owners, entrepreneurs, and social media content creators can minimize legal risks associated with modern marketing.

6(B) OrderS – The FTC Examines the Content Process

In March 2023, the FTC issued 6(b) orders seeking information from social media platforms about how the platforms protect their audiences from paid commercial advertising that is deceptive or otherwise harmful. The FTC orders required companies like Meta, Instagram, TikTok, YouTube, Snapchat, Twitter, Twitch, and Pinterest to comply by law. The FTC sought information on how the platforms examine and/or block such advertising, including fraudulent products, scams, counterfeit goods, or other types of fraud. The FTC’s primary goal was to gather updated information about the social media companies’ standards and policies for paid advertising. The order specifically asked about the companies’ advertising policies and how they monitor compliance with such policies. For example, how is technology used in this process? When does an issue escalate to requiring human review? The FTC’s broader interest was to learn how social media platforms assist their audiences in identifying content as advertisements.

In recent years, there has been traction on this investigation because social media is currently the number one source of fraud. In 2022, consumers reported losing over 1.2 billion dollars to social media fraud. Social media fraud is a fraud that originates on a social media platform. While there is currently no public information about the results of the March 2023 FTC orders, deceptive advertising appears to be a top priority for the FTC when it comes to social media. The FTC is paying more attention to exactly how platforms sift through uploaded content to ensure that consumers are adequately aware that the content they are watching is advertising.

Entrepreneurs and small business owners must be aware of the continued crackdown on social media advertising. Entrepreneurs and small business owners should know that certain topics will bring more scrutiny in advertising. For example, the March 2023 FTC orders required social media platforms to hand over information, such as ad revenue, number of views, and other metrics, for advertising that touts potential income opportunities. Thus, if you’re advertising on TikTok about a possible sales job at your clothing store, you should know that such content is being looked at quite carefully by TikTok and, by extension, the FTC.

Unfortunately, social media is an avenue for perpetuating shams and scams, and these expansive information-gathering orders from the FTC are consistent steps in the right direction.

Best Practices

So how does one ensure they stay on the safe side when dabbling in social media advertising? There is a one-word answer: disclosures! The advertising law landscape can appear to be quite treacherous, with a vast amount of laws and regulations, for brands and influencers alike. However, one solid practice tip is to use clear language to disclose the brand relationship.

When do you need to disclose?

If you are working with a brand to endorse a product on social media, your endorsement message should make that relationship (often called a “material connection”) obvious. This relationship could be of a personal, family, employment, or financial nature. A simple example is if your clothing store gifts a discounted handbag to a content creator to mention the brand or bag in a video, the video must disclose that relationship. It is important to note that financial relationships do not necessarily refer to a brand paying a creator for a video. Business owners should disclose a relationship if anything of value, including a free/discounted item or other perk, was exchanged to mention the product in a video.

How do you disclose?

The rule of thumb is to clearly state that there is a financial, employment, personal, or family relationship with the brand. If the disclosure is written, the text should be hard to miss. So, if the advertisement is a picture or another type of post where text can be included, put the disclosure somewhere people are not likely to miss.

What about advertising in videos?

The disclosure should occur both during the video (in audio and text) as well as in the video description.

Screenshot of YouTube video in which advertising disclosures have been made.

The image to the left is from the Competition and Markets Authority page in the United Kingdom as an example of a good video endorsement that would likely comply with advertising requirements. In the image, you can see a clear indication of the “Includes advertisement” text in the top left corner. A viewer is unlikely to miss such a notation. The creator also explicitly mentions that the video is sponsored by the makeup company, as seen in the closed captioning.

What about advertising during live streams?

Screenshot of a livestream advertising makeup products.

Repeat the disclosure periodically! Live streams are live transmissions via the Internet. Live streams allow creators to broadcast their video and audio in real time. The FTC does not define what constitutes “periodical” disclosure, but to be safe, the creator should repeat the disclosure enough times that people joining the stream late will know they are in advertising territory.

When do you NOT have to disclose?

If there is no brand relationship, then no disclosure is required. Again, brand relationships can be personal, financial, family, or employment relationships. For example, if a social media creator simply purchased a water bottle and shared a video about how much they liked it, the creator does not need to disclose anything. In fact, the FTC does not require the creator to declare that there is no brand relationship either.

Conclusion

Entrepreneurs, small business owners, and content creators must work together to clearly communicate their material connections when advertising on social media. As social media advertising becomes an increasingly hot topic with agencies like the FTC, entrepreneurs, small business owners, and content creators must ensure they follow all requirements. It should be noted that the FTC is moving in the right direction by holding entrepreneurs, business owners, and influencers accountable for any unclear communication of their relationships. Clearly revealing these material connections allows the public to weigh endorsements more accurately, which means the public can make more reasoned purchasing decisions.

This post has been reproduced and updated with the author’s permission. It was originally authored on January 24, 2024 and can be found here.

At the time of this post, Maggie Huang is a 3L student at Penn State Dickinson Law. She is originally from Quincy, Massachusetts, and graduated from Bentley University in 2021 with a bachelor’s degree in Corporate Finance and Accounting. Maggie is interested in pursuing a career in business law.

Sources:

FTC Issues Orders to Social Media and Video Streaming Platforms Regarding Efforts to Address Surge in Advertising for Fraudulent Products and Scams

Disclosures 101 for Social Media Influencers

Advertising FAQ’s: A Guide for Small Business

Advertising on Social Media Regulation: Comments from an FTC Official

Expanding Your Food-Based Business: Food Trucks

By: Alexandra Keen-Tellez

There inevitably comes a time when every restauranteur or catering owner considers expanding their business. Food trucks are not only an increasingly trending way to sell food but also a smart way to expand an existing restaurant or catering business.

Choosing to open a food truck instead of a more traditional path to expand your business has several advantages, like less overhead costs. Presently, 30% to 40% of existing food trucks are owned and operated by established restaurants. Food trucks can broaden your customer base, increase profits, and allow for more creative flexibility. However, navigating this path can be confusing even for the most seasoned restauranteur. This post compiles a list of resources and guidelines for opening a food truck in Pennsylvania to assist you on this path. While it is not a comprehensive list, it is a great starting point for you and your potential new food truck.

The Good News?

Already having your own established restaurant or catering business gives you an edge. You already understand the industry, food safety, and health guidelines. You also already have an established reputation. Your food truck will require separate licensure but similar, if not the same, safety standard requirements. For example, you must adhere to fire codes and waste disposal requirements. Licensing and registering your food truck in Pennsylvania will be significantly easier with your experience, although it will not be without challenges.

Licensing and Permits

Pennsylvania requires food trucks to have the following licenses and permits:

- - Business License
  - Public Health License
  - Food Handlers License
  - Mobile Food Facility Permit

You will need a separate business license for your food truck from your already established business. You will also need to comply with all Department of Motor Vehicle requirements, such as a valid driver’s license and insurance for your vehicle. Hopefully, you are already familiar with Pennsylvania’s food handlers license (employee health permit) which is the necessary food safety certification that all employees handling food must obtain.

Unfortunately, there is no state standardization for local health department licensing, which means that specific and individual registration in each jurisdiction’s local health department where you want to sell food is required. Notably, Philadelphia and Berks County do not operate under the Department of Agriculture. Instead, they have their own requirements for licensing and permits to operate a food truck in their jurisdictions.

While your restaurant or catering business needs a retail food facility license, food trucks require a Mobile Food Facility Permit (MFFP). All mobile food facilities selling food that is not commercially prepackaged require an MFFP. The Department of Agriculture issues the MFFP permits and classifies them into four types. An MFFP permit ranges from $103-$241. Your food truck will likely be classified as a Type 3 or Type 4 MFFP, although it will largely depend on the food you want to sell. A Type 4 MFFP is for any complex food preparation or ‘a kitchen on wheels.’ Whereas, a Type 3 MFFP is for more simple cooking procedures like reheating a commercially processed food item. A Type 3 MFFP may require a commissary depending on the approval of your application and inspection. However, a Type 4 MFFP will absolutely require a commissary.

Do I need a commissary for my food truck?

You will more than likely need a commissary for your food truck. In PA, the commissary requirement depends on the classification of your food truck. What is a commissary? A commissary is a permanent and fixed operating base location to which your food truck returns to regularly to help or maintain the operation of said food truck. Maintenance can include: discharging liquid or solid wastes, vehicle and equipment cleaning, refilling water tanks and ice bins, and boarding food. A commercial commissary cannot be a residential, personal-use kitchen.

The personal-use exclusion means that having a pre-established restaurant or catering business will give you an edge since you do not have to worry about the separate costs of a commissary. Instead, you can register your commercial-grade kitchen as a commissary for your food truck. However, this will require the floor plan and all relevant information about your kitchen, now commissary, to be submitted with your application. During this process, there might be an additional food establishment application required.

It should be noted that the Department of Agriculture has a lot of discretion in approving your MFFP, including potentially restricting the proposed menu based on the limitations of your food truck.

FINAL considerations

There are several benefits to opening a food truck to expand your business, such as increased flexibility and lower operating costs. However, there are two important considerations to keep in mind while planning your food truck, such as where you hope to operate and for how long.

Where do you want to operate?

As mentioned earlier, several counties in Pennsylvania have their own process for licensing and registering your mobile food business. Some jurisdictions, like Bucks County, require a permanent commissary for any food truck to operate regardless of the classification type. Therefore, you must consider where you want to run your food truck, as it could mean several different licensing and permit requirements.

How long would you like to operate?

If you want to set up your food truck in a permanent lot or in a fixed place for long periods, it may require separate licensure as it may no longer be classified as ‘mobile’. Currently, a mobile food business is limited to 14 days or less in one fixed location. Additionally, operating your food truck at a special event or fair may require a temporary event license.

Conclusion

Opening a food truck is a great way to expand your restaurant or catering business. It can be significantly cheaper and provide more flexibility than your standard brick-and-mortar restaurant. It can allow for more creativity in the kitchen by giving you an opportunity to expand or change your menu and ‘test’ new recipes more frequently. Operating a mobile restaurant allows you to broaden your current customer base, such as reaching customers who might never have had the opportunity to try or experience your food. While a food truck can have its separate challenges, diligence, planning, and an adaptable mindset will help you and your food truck thrive.

This post has been reproduced and updated with the author’s permission. It was originally authored on February 8, 2024 and can be found here.

Alex Keen-Tellez, at the time of this post, is a second-year law student at Penn State Dickinson Law. She is interested in practicing business and corporate law. In her free time, she enjoys writing, baking, and cooking. Her favorite past time is traveling and she aspires to go to South Korea someday.

Sources:

PA Department of Agriculture – Mobile Food Facilities Application Packet

Food Truck Laws and Regulations

Park Up In PA: Your Ultimate Guide To Food Trucks In Pennsylvania

Supplemental Income: How to Expand Your Restaurant with a Food Truck

5 Food Truck Licenses and Permits Required in Pennsylvania

Curious How Much It Costs to Start a Food Truck?

Mobile Food Facilities, Fairs and Temporary Events

PA General Assembly – Title 3

Pennsylvania Online Business Tax Registration

How To Get A Business License In Pennsylvania

Food Employee Certification

Employers Beware: Things to Keep in Mind for Job Advertisements

By: Savannah Parsons

Were you aware that employment discrimination does not only apply to current employees? Employment discrimination also applies to potential employees. Therefore, avoiding liability for employment discrimination starts with job advertisements.

Depending on how they are written, in-person and online job advertisements can impact employment discrimination claims. Potential employees may use job advertisements to help prove hiring discrimination claims, and the information provided in the job advertisement may even have consequences for claims of discrimination from current employees. To avoid discrimination claims, employers must be acutely aware of their hiring process which includes keeping track of how they advertise available jobs and who they advertise those jobs to. This article discusses what employers need to know when drafting their job advertisements.

How Employment Discrimination Claims Work

Hand picking out man from a lineup of 8 people.

The first thing employers need to understand about employment discrimination is that it is illegal to discriminate against current and potential employees based on their race, color, religion, sex (gender identity, sexual orientation, and pregnancy), national origin, age (40 years or older), disability, or genetic information. It is important to note that employment discrimination laws prevent facial and facially neutral discrimination based on these protected categories. Discrimination in an employment context means an employer has unfairly treated or harassed current or potential employees for belonging to a protected category, denied reasonable workplace accommodations, or asked improper questions about medical information.

The first step in an employment discrimination claim is for a current or potential employee to file a charge with the proper governmental agency, like the U.S. Equal Employment Opportunity Commission. Each state has its own version of the federal agency where claims can be filed or cross-filed between the state and federal agencies. Sometimes, like when an employer has very few employees, the employee must file the claim with a state agency. Additionally, in some states and with certain types of claims, the employee may file the claims privately without involving an agency. The agency assesses the claim and determines whether there is probable cause to file a lawsuit during the second step of the claims process. If the agency determines probable cause exists, they will inform the claimant of their decision. The claimant then has 90 days to file suit.

Things to consider in Job Advertisements

Avoid Facial Discrimination

The first and most obvious thing to avoid is posting job advertisements that are explicitly discriminatory. Job advertisements should never post requirements directly related to the categories protected by employment discrimination laws. As a reminder, the protected categories are race, color, religion, sex (gender identity, sexual orientation, and pregnancy), national origin, age (40 years or older), disability, and genetic information.

Explicitly discriminatory job advertisements are easy to avoid, especially when the employer familiarizes themselves with the federally protected categories and any additional categories protected by state laws. To ensure a job advertisement is not explicitly discriminatory, avoid posting requirements like “female candidates only,” “Americans only,” or “native English speaker needed.”

Avoid Facially Neutral Discrimination

While most employers probably know not to use the facially discriminatory language discussed above, there are some nuanced job requirements that employers should also check for before posting. Some job requirements seem innocent, but when a critical eye examines them, the requirements show signs of discrimination. For example, a job advertisement that uses phrases like “recent college grad,” “proficient experience with technology,” or “fresh and vibrant personality” in its requirement section raises red flags for potential age discrimination. Although the job advertisement itself may not be enough to hold an employer liable for discrimination, should a person over 40 years old bring a claim using the above advertisement in conjunction with other proof of discrimination, the advertisement may help them be successful in their claim.

Only List Real Requirements

Since current employees can use job advertisements to prove employment discrimination and potential employees can use them to prove hiring discrimination, employers need to make sure they only list job requirements that are really requirements. The requirement section of a job advertisement should never list pretextual requirements meant to disqualify a certain type of candidate. Pretextual requirements will likely open up the employer to hiring discrimination liability. For instance, stating that frequent travel is a requirement for the job when it is not really a requirement could be seen as a way to dissuade pregnant people, older individuals, or persons with disabilities from applying.

Advertise to Everyone

Employers should also avoid exclusively advertising to particular demographics. Exclusively advertising to some people but not others will likely result in potential employees who belong to one or more protected categories being left out of the hiring process. For example, only advertising to a specific age group, a particular sex, or a specific religious group can cause potential issues. In practice, employers should post job advertisements in a variety of places, accessible to many kinds of people, to avoid exclusive advertising.

Hire Employees that Match the Posted Job Requirements

Employers wanting to avoid discrimination claims will do more than just ensure their job advertisements do not discriminate through facially discriminatory, facially neutral, or pretextual language. A cautious employer will follow through on hiring employees who possess the requirements in their posted job advertisements. Employers hiring employees who do not meet the posted job requirements put themselves at risk of a potential employee filing a discrimination claim using the job advertisement as proof that the requirements had a discriminatory purpose.

Final Thoughts

Overall, employers must avoid posting job advertisements that include explicitly discriminatory job requirements, requirements that have discriminatory implications, and requirements that are not real requirements. Employers should also make sure they vary where they post job advertisements and only hire employees who fit the posted job requirements. This article is in no way an exhaustive or definitive list of things to avoid in job advertisements. Rather, these are just some things to consider. It is always best for employers to consult with an employment discrimination attorney for specific questions and guidance on what they should or should not put in a job advertisement.

This post has been reproduced with the author’s permission. It was originally authored on February 11, 2022, and can be found here.

Savannah Parsons, at the time of this post, is a Penn State Dickinson Law graduate. She is originally from Bath, New York, and graduated from Troy University. Savannah is interested in family and disability law.

Sources:

Prohibited employment policies/practices, U.S. Equal Employment Opportunity Commission. (n.d.). Retrieved February 11, 2022.

What is employment discrimination? U.S. Equal Employment Opportunity Commission. (n.d.). Retrieved February 11, 2022.

Workplace fairness. Midwest New Media, L. L. C. (n.d.). Retrieved February 11, 2022.

Online Seller’s Guide to Sales and Use Tax

By: Aaron Holland

Hands coming out of computer screens to exchange money for an item.

Only two things in our lives are certain: death and taxes. One occurs at the end of our lives, and the other occurs throughout our lives wherever there is an exchange of money. Sales and use tax is a specific tax that affects every purchaser, from the middle-aged person buying a new Corvette to the 10-year-old buying a Coke from the local convenience store. All entrepreneurs, especially those selling goods online, need to understand sales and use taxes in the state(s) that they are legally connected to.

Basics of Sales and Use Tax

There are two types of taxes that every purchaser is subject to. Purchasers pay sales tax on certain goods and services when buying products within a state that imposes the tax. On top of that, purchasers may be subject to taxes even when they purchase goods in a jurisdiction that does not charge tax. Specifically, a purchaser may be required to pay a use tax to a taxing state when they use or consume taxable items they obtained from a non-taxing jurisdiction. For example, if a consumer buys manufacturing goods in Delaware (a state without sales tax) and then uses those goods to create a product in Pennsylvania, the consumer owes a use tax. In this situation, the use tax forces the consumer to pay the Pennsylvania Department of Revenue the appropriate amount since they never paid tax on the item in Delaware.

A Link Between States

Sales and use taxes are not federally adopted. Instead, individual states and their local jurisdictions decide whether these taxes will be imposed and collected. Due to the localized nature of these taxes, the United States showcases a variety of tax percentages and collection methods. As examples of the varied tax percentages, Pennsylvania has a flat 6% sales and use tax, with a few local jurisdictions, such as Philadelphia and Alleghany County, adding 1% or 2%, respectively. This percentage varies in other states, for example, California taxes 7%, Maryland taxes 6%, New York taxes 4% with an additional average local sales tax of 4%, Florida taxes 6%, and Oregon taxes 0%.

These tax percentages are important for businesses to know as they must pay sales tax to the state(s) in which they operate. For the traditional brick-and-mortar business, the state in which the business operates is easy to understand. However, determining a legal connection to a state can be more difficult when your business operates online. Typically, creating, selling, or packaging goods in a state forms a legal connection between your business and that state. Notice that a business can form legal connections to multiple states and may, therefore, be required to pay sales tax to all those states. Understanding the states that your business has connections with is especially important if your business (1) has workers that work remotely from different states or (2) utilizes a fulfillment service, such as Amazon, that houses your products and ships them from a different state. Situations like these may make your business responsible for paying sales tax to those states.

Responsibility for the Taxes

The business or individual selling goods or providing services is responsible for the sales and use tax that the taxing state charges. The sales and use tax, as seen when buying a new iPhone, is often passed on to the customer during purchase and tracked by the seller for end-of-the-year tax purposes. For certain small businesses or individuals selling goods in low amounts, not passing the tax on to the customer may be a business decision to keep the cost of your goods low. If you choose this option, you should calculate the sales tax at the end of the year to determine how much you owe your connected states.

Failing to pay owed sales and use tax to your connected states can lead to financial penalties, interest accumulation, and other fees. For example, in Pennsylvania, penalties are assessed for late filings, understating the amount of sales tax owed, and other major understatings in the filing. These penalties can account for excessive amounts levied against a business when the business fails to pay the correct sales and use tax to the state.

Is it Time to Pay?

Businesses can be required to file their sales and use tax reports at different frequencies, depending on the type of business, the goods sold, and the rules of the taxing state. Pennsylvania requires sellers to file monthly, quarterly, or semi-annually. Keeping an eye on the tax timeline is helpful as there may be discounts for filing and paying these taxes early.

There are many exemptions to the requirement to pay sales and use tax to connected states. In many states, an exemption applies to certain items, such as groceries and wearable clothing, freeing those items from sales tax. Purchasers may also be exempt from sales tax. For example, certain manufacturers and non-profit organizations are exempt from paying sales and use taxes. Common resellers of goods are also usually exempt from sales tax upon the purchase, but not the sale of, the goods they resell. Therefore, if your business sells goods to resellers, the sales tax may not apply to those sales. Reviewing the exemptions to the sales and use tax can save your business time and money if you or your purchasers fall into one of the many exemptions states provide.

Final Thoughts for Entrepreneurs

- Keep track of the sales and use tax your business owes
- Learn what states your business has a legal connection to
- Know those states’ requirements for sales and use tax
- Understand your state’s exemptions and utilize all that may apply
- Receive legal assistance for specific sales and use tax advice

This post has been reproduced and updated with the author’s permission. It was originally authored on February 10, 2022 and can be found here.

At the time of this post, Aaron Holland was a 3L student at Penn State Dickinson Law. He had an interest in all things business law, especially in the assistance of start-up businesses and new entrepreneurs. He previously spent 6 years with the United States Marine Corps as a Military Police Officer.

The Most Valuable Secrets Must Be Kept Secret – Why Successful Startups Should Utilize Non-Disclosure Agreements

By: Madeleine Kuhns-Baione

Startups that do not utilize Non-Disclosure Agreements (“NDA”) are at higher risk for financial instability or failure. Even if an entrepreneur feels that they can trust others, utilizing NDAs is one of the easiest yet most effective ways to protect a business.

What aRE ndaS?

Non-Disclosure Agreements, commonly called confidentiality agreements, are binding agreements where parties are legally required to keep specific information confidential. Parties to the NDA cannot share the information with third parties or use it for their benefit. NDAs are useful for all aspects of business, including sales meetings, negotiations, discussions with financiers, product suppliers, etc. Most commonly though, NDAs are used with employees and business partners.

What are THE BENEFITS OF ndAS?

1. Protect Intellectual Property

NDAs protect confidential information including, but not limited to – trade secrets, client information, marketing strategies, proprietary processes, coding techniques, and other sensitive information. NDAs give business owners the power to decide what information is confidential and protected. With this power, business owners can establish employee expectations regarding what information is protected and the consequences of violations.

2. May Minimize Competition

If a startup utilizes an NDA, the parties to the NDA are legally bound to keep confidential information from competitors. In addition, they may not legally use this confidential information to start their own competing business while utilizing the same processes, trade secrets, clients, etc. However, NDAs are not the “end all, be all” to minimize competition. NDAs only assure that a business’s confidential information is legally protected.

3. Provide the Ability to Pursue Legal Recourse

The utilization and enforcement of NDAs are particularly helpful for setting employee expectations and legally binding employees and third parties to abide by the agreement. However, an NDA’s effectiveness within a business is never guaranteed, as employees and third parties may choose to violate the NDA. Luckily, NDAs provide fairly easy legal recourse when a breach occurs.

If confidential information is shared in violation of an NDA, a business may file one of the following claims: breach of contract, breach of fiduciary duty, misappropriation of trade secrets, copyright infringement, or other intellectual property law violations. It is important to note that NDAs offer broad protection. Within an NDA, a business may include proprietary and non-public information that does not meet the standard of a “trade secret,” that other claims require. For example, a misappropriation claim would require that the confidential information meets elemental requirements for a trade secret, while an NDA may not.

If a business does not use an NDA and confidential information is shared, proving that the information is a trade secret may be more difficult. With an NDA violation, a business may file a breach of contract claim, seek an injunction to prevent the employee or third party from further violating the NDA, or the business may file a lawsuit for financial damages for the losses they suffered resulting from the breach.

HOW Can You Ensure That the NDA Is Enforceable?

An NDA is an enforceable contract. For contracts to be enforceable, there must be consideration. In plain language, contracts require a bargain between the employer and the employee or third party. In the case of an NDA for employment, the employer is receiving the protection of confidential information. To enforce the NDA, the employee must receive something in exchange. Some courts have held that at-will employment is sufficient for the NDA to be enforceable. Regardless of the circumstances, NDAs should always be thoroughly reviewed with an attorney, if necessary, to ensure that the NDA will be enforceable.

Even if an NDA appears enforceable, a court may find it is not. This finding may occur when the NDA includes broad language, information that is not confidential, or something illegal. To mitigate these issues, language and word choice should be extremely precise and specify what information is considered confidential under the agreement. Further, if the information stated within the agreement has been widely disclosed or is public knowledge, it is extremely unlikely that a court will uphold the NDA. Lastly, NDAs cannot force employees to engage in illegal conduct, such as legally forcing them to withhold reports of something they are required to report by law.

Although NDAs are easy to draft and utilize, businesses should give them significant time and effort to ensure they will be enforceable. If an entrepreneur utilizes an enforceable NDA, they are taking a big step toward protecting their business and preventing the disclosure of sensitive and confidential information.

This post has been reproduced and updated with the author’s permission. It was originally authored on February 1, 2023 and can be found here.

Madeleine is a 3L at Penn State Dickinson Law pursuing a joint JD/MBA degree. Madeleine studied International Business and Management at Dickinson College for her undergraduate education. Before attending law school, Madeleine worked as a Claim Manager at a 9/11 Victim Compensation law firm in NYC. Madeleine is interested in pursuing a career in business and/or healthcare law.

Dropshipping Awareness: The Legal Liability Nightmare of the Low-Cost Business Model

by Anthony Austin

Online businesses have made life significantly more convenient for people worldwide. Today, thanks to E-commerce, buyers can go online and find almost anything they want and have it shipped to their homes with relative ease.

E-commerce, defined as buying and selling goods and services through the Internet, has been growing and evolving exponentially. Entrepreneurs everywhere have benefited from the growth of E-commerce since they can sell goods and services with far more efficiency than ever before. While many models of E-commerce business practices exist, dropshipping has emerged as one of the most popular and attractive ventures for new entrepreneurs.

What is Dropshipping?

Dropshipping enables retailers to sell products without holding any inventory. The retailer gets an order from a customer, contacts their supplier for the product, and that supplier sends the product directly to the customer.

This business model is attractive because of the low start-up costs, ease of making an online store, and the convenience of not worrying about inventory, shipping, or handling. Instead, the business owner can focus on building a store, finding products, and gaining traffic. The owner can then rely on their supplier to fulfill their orders for them. Dropshipping can be operated from one individual’s laptop and is both flexible and scalable. Dropshipping sounds straightforward but it isn’t as simple as many entrepreneurs believe.

The Misconceptions

Dropshipping can be a very lucrative and accessible business, with relatively low barriers to entry, making it a highly competitive industry. However, most entrepreneurs who utilize this business model do so without considering any of the legal ramifications that may come from their online business activity. Many businesses use the dropshipping business model in unethical and borderline illegal ways. These businesses may have no idea that they are partaking in wrongful actions. Many entrepreneurs believe that they don’t need to worry about legal issues until their business grows and begins making a larger profit.

They are grossly mistaken.

The dropshipping business model and community encourage “asking for forgiveness instead of permission,” causing many entrepreneurs in this field to violate regulations regarding operating a business in America. By continuing down that path, these businesses are exposing themselves to considerable risks and liabilities. Below are some of the common legal risks that come with dropshipping.

The Legal Risks

Product Liability

Many entrepreneurs sell products they haven’t touched or seen in person before, especially when they first start dropshipping. This practice is problematic because even though the entrepreneur does not handle manufacturing or shipping, they could still be held liable for any harm the product does to the consumer. Product liability in the U.S. is a strict liability tort, meaning the entrepreneur could be found liable regardless of their intent or knowledge of the product’s deficiency.

To make matters worse, the entrepreneur would be personally liable for the harm done by the product if they do not have a registered entity that shields them from liability. Many entrepreneurs don’t bother registering their online businesses, looking for the fastest way to get started. They fail to realize that they have just created a business entity that provides them with no liability protection. If they get sued, they could lose everything their business has and all their personal assets as well. Registering a dropshipping business shields personal assets from consumers and should be done before any marketing, especially the marketing of products that have yet to be vetted.

IP Infringements

When entrepreneurs start dropshipping, they usually use existing photos, videos, and reviews to make advertisements and build out their online store’s product pages. These actions rarely get done with the original creator’s permission, violating U.S. copyright law. Those images and videos are the intellectual property of the original creator. For use of those images and videos, the original creator must give their explicit permission. It would be best for entrepreneurs to create their own images and videos of the product by buying it and taking their own photos. Still, many don’t have the budget to produce their own content. But, regardless of cost, businesses should not use product content without permission.

Dropshipping clearly branded products will also get entrepreneurs into trouble. Companies like Disney are very quick to send out cease-and-desist letters or sue businesses that use any of their copyrighted materials. Many suppliers from other countries will manufacture and sell products that violate copyright in the U.S., so it’s best not to try and dropship them.

Taxes

Everyone knows we need to pay taxes on all income gained in a taxable year. However, entrepreneurs need to be aware of their state’s tax policies and how many times per year they may need to file, depending on their business structure.

Ethical Marketing & Misrepresentation of Products

As stated above, the dropshipping community often uses existing content for advertising products. Sometimes, sellers go as far as advertising products that aren’t their own or using misleading descriptions when explaining the product’s features and quality. These actions constitute unethical practice and borderline misrepresentation that could be grounds for a breach of contract lawsuit. Businesses should only market the exact product they are selling and should avoid being dishonest while describing the product and where it is from.

Navigating the Legal Minefield

Although there are plenty of legal risks that would make a risk-averse person abandon the dropshipping model, plenty of entrepreneurs will charge onward, regardless of the dangers ahead. It would be wise of them to watch where they step and to consider the risks as they traverse this E-commerce business model. By adhering to regulations from the start and avoiding common mistakes, entrepreneurs can save themselves from the stress of dealing with legal action against them and their businesses.

This post has been reproduced and updated with the author’s permission. It was originally authored on February 3, 2023 and can be found here.

Anthony Austin, at the time of this post, is a 3L at Penn State Dickinson Law. He was born and raised in Levittown, Pennsylvania, and has a bachelor’s degree in Business Management from Penn State Harrisburg. Anthony is currently interested in practicing corporate and entrepreneurial law and has interned as a summer associate with Stevens & Lee. Anthony spends his free time engaging in hip-hop and ballroom dance, cooking, and obstacle course races.

Sources:

What Is Ecommerce? A Comprehensive Guide (2023)

What Is Dropshipping? Everything You Need To Know

Product Liability

Disney is Suing a Kissimmee Business for Knockoff Disney Merch and Copyright Infringement

Dropshipping Risks: How to Avoid Copyright Infringement Issues

Product liability – Shopify

Magic Internet Money is the Future of Businesses

by Alec Shields

Does cryptocurrency have the potential to transform today’s reality and how the world does business? Many believe so! More than 2,300 US businesses accept Bitcoin as a form of payment, according to a late 2020 estimate. Some say that Bitcoin and other cryptocurrencies will positively affect businesses in both the present and the future by providing a decentralized digital form of payment that is fast, secure, and global. Here, I will explore some ways a business can prosper using cryptocurrencies for business transactions.

Understanding Blockchain Technology

To fully wrap one’s head around cryptocurrency, one must understand that cryptocurrencies are decentralized digital currencies that use blockchain technology to ensure the security and integrity of transactions. So, what does that mean exactly?

In essence, blockchain technology works by maintaining a continuously growing list of records, called blocks, that are linked and secured using secret writing, aka cryptography. Each block contains a cryptographic hash of the previous block, a timestamp, and transaction data. This purposeful design is integral to the system. The open distributed ledger that records the transactions between two parties is verifiable, permanent, and cannot be altered or modified in any way. This process creates a network controlled not by a single entity but by a group of nodes, also called miners or validators. Any alteration to the blockchain would require more than 50% of the validators to agree with the alteration, thus making it almost impossible to alter data on the blockchain.

Advantages of accepting Cryptocurrency

Lower Transaction Costs

How can a business use this technology to gain the upper hand? One of the main benefits of accepting cryptocurrency is the potential to reduce transaction costs from credit card payment providers. On average, these payment providers charge 3-4% for every purchase a customer makes. Due to these charges, some merchants, like Kroger and Starbucks, have chosen to accept or intend to accept blockchain-based payments. This decision allows the merchant to accept the cryptocurrency and convert their revenue to fiat currency for less than 1%. Saving 2-3% on all transactions would ensure a higher profitability for any business.

No Chargebacks

When allowing debit or credit card purchases, businesses often deal with bank chargebacks. Ultimately, businesses suffer the consequences of these chargebacks. Specifically, businesses may pay additional fees, receive fines, and spend valuable time fighting chargebacks from fraudulent activity.

Unlike credit or debit cards, cryptocurrencies have no bank chargebacks. Once the transaction on the blockchain is complete, the transaction is immutable and irreversible. Therefore, it would be impossible for a customer to reverse the transaction. Customers cannot pull the money from your account and put it back into theirs without question.

Although the immutable nature of cryptocurrency has potential drawbacks, such as a merchant selling an unsatisfactory product and refusing to return the cryptocurrency received, online reviews of the company and product would likely solve this issue quickly. If a business decided to operate that way, individuals would shop elsewhere, forcing any business operating in a shady fashion to close down. Therefore, the risk of the drawbacks is so low that cryptocurrency is still the best payment option for a business.

More Data Security

From a security and privacy standpoint, paying with a credit card is inherently more dangerous. When a customer pays with a credit card, they reveal their data to the merchant, the acquiring bank, the card service, and the issuer. When paying with cryptocurrency, a customer does not disclose any private information, making it harder to steal.

Attracting New Customers

Businesses using blockchain technology and accepting cryptocurrencies also position themselves well for reaping the rewards of an emerging space that potentially includes a Central Bank Digital Currency (CBDC). Accepting cryptocurrency provides access to a new demographic of customers who value transparency in their transactions. A recent study from leading research and advisory firm Forrester Consulting revealed that businesses that integrated BitPay, a cryptocurrency payment provider, saw an average return on investment of 327%. This return was no surprise to BitPay’s CEO, stating, “accepting bitcoin and other cryptocurrencies through BitPay saves merchants considerably on fees and unlocks a whole new customer base.” The study also revealed that 40% of customers paying with cryptocurrency were new customers, and their purchase amounts were twice that of credit card purchases. The study clearly shows that many individuals are looking to spend their money via cryptocurrency.

Conclusion

Cryptocurrency, sometimes called magic internet money, is here to stay. Businesses in every field stand to prosper from the use and acceptance of it. Accepting cryptocurrency payments will raise the bottom line of any business by excluding high rates charged by credit card companies, avoiding chargebacks from banks, attracting new customer bases, and boosting a business’s average return on investment. Therefore, it would behoove all businesses to understand how the world of “magic internet money” really works while working to allow cryptocurrency payment methods. If you want to learn more, here is a quick video breaking down how to accept Bitcoin in your business: Bitcoin 101 for Small Business

This post has been reproduced and updated with the author’s permission. It was originally authored on January 29, 2023 and can be found here.

Alec Shields, at the time of this post, is a third-year student at Penn State Dickinson Law. He works as a research assistant at Penn State Dickinson Law for Professor Katherine Pearson. Alec is interested in tax, crypto, and helping start-up companies navigate this new economy. He looks forward to starting his own firm one day.

Sources:

Study Shows Merchants That Accept Bitcoin Attract New Customers and Sales

The Use of Cryptocurrency in Business

Benefits Of Accepting Bitcoin And Other Crypto For Your Business

Why Bitcoin is a Big Deal for Small Businesses

Credit Card vs. Bitcoin Payments

Trademark Dilution – Can I advertise my Bluetooth earbuds by comparing them with Apple’s?

by Diane Hong

Advertisement plays an integral role in the success of any business. Large corporations allocate significant budgets annually to promote their products and services to customers. The rationale behind this investment is that even a minor impression can lead to an actual purchase. Therefore, the key to effective advertising lies in implanting brand awareness in potential customers.

What would be an easy, reliable, yet effective method of advertising? There are several options, but comparing products and services with others, especially those of well-known brands, proves convenient. If I sell a similar product or offer a similar service, drawing a comparison to renowned companies allows customers to easily understand what I am selling.

Nevertheless, is it legally permissible to compare ourselves with these industry giants without their permission? In this article, we will delve into the definition and types of Trademark Dilution and explore the exceptions.

Trademark Dilution

A trademark is a legal protection that grants exclusive rights to its owner for a specific mark. Given this characteristic, trademark-related concerns primarily revolve around the “likelihood of confusion.” A trademark gives its owner the exclusive right to use that mark, eliminating any possibility of confusing customers. Trademarks ensure owners can safeguard their mark’s exclusivity and keep its reputation intact.

When someone utilizes an established mark without proper authority or approval, it can cause harm to the true owner of the mark. Such unauthorized use can lead to customer confusion, resulting in a customer accidentally purchasing alternative products or services. In more severe cases, it can generate a negative perception of the products or services. In legal terminology, this situation is called trademark dilution.

Trademark dilution can cause two types of harm: (1) blurring and (2) tarnishment. Both forms exist in the Federal Trademark Dilution Act, specifically under 15 U.S.C. § 1125(c), which allows for legal action, regardless of one’s location, within the United States.

Blurring

Blurring occurs when the distinctiveness of a famous mark becomes impaired. For instance, let’s consider the scenario where Jane has established a successful business selling her hot sauce. If John uses the same bottle design as Jane to sell his sauce, customers may associate the sauce bottle less strongly with Jane. The presence of the same design for John’s sauce weakens the exclusive connection between the bottle and Jane’s brand. Consequently, Jane’s mark loses its distinctiveness.

Tarnishment

Tarnishment, on the other hand, occurs when the reputation of a famous mark is impaired. Building upon the previous example, let’s assume that John sells an inferior-quality sauce in an identical bottle design to Jane’s. Customers who purchase John’s sauce may notice its subpar quality and associate it with Jane’s sauce due to its shared design. Consequently, Jane’s company’s reputation suffers as a result.

To protect individuals like Jane, Congress enacted the Federal Trademark Dilution Act. However, given the sheer number of trademarks registered annually in the United States, protecting every mark is challenging. To address this issue, Congress introduced a limitation to trademark dilution known as the “fame requirement.” The “fame requirement” ensures the protection of marks that are recognizable by the general public across the United States. Trademark dilution laws do not protect marks failing to meet this standard.

Exceptions to Trademark Dilution

Even if someone uses a famous mark without authorization or approval, they may not be liable for its use in certain exceptional situations. Recognized defenses to Trademark Dilution include comparative advertisement, fair use, and parody. Let’s explore each defense with illustrative examples.

Comparative Advertisement

One can utilize a famous mark to compare their products or services without causing any misrepresentation or likelihood of confusion. An example would be advertising a fragrance as a close match to a specific well-known fragrance.

Fair Use

It may be permissible for someone to use a famous mark in a descriptive or nominative manner to indicate the source of their products or services. For instance, a local mechanic offering services for Hyundai vehicles can use the Hyundai mark to advertise their services. Similarly, a second-hand shop specializing in Swarovski products can advertise using the Swarovski mark.

Parody

Using a famous mark may be allowed if the use is a successful parody. A successful parody occurs when the use of the famous mark does not impair its distinctiveness, cause confusion for customers, or fail to incorporate elements of satire. For example, if someone opens a pet toy store and sells products labeled as the “Chewy Vuitton” series, they might be permitted to sell and advertise these “Chewy Vuitton” items. Customers would have little difficulty distinguishing between “Chewy Vuitton” and “Louis Vuitton.” Plus, everyone can enjoy the pleasing satirical element involved.

Conclusion

If you intend to advertise your Bluetooth earbuds by comparing them to Apple’s AirPods, be aware that this could potentially lead to Trademark Dilution lawsuits. However, there are three exceptional circumstances when you may use Apple’s marks: comparative advertisement, fair use, or parody.

This post has been reproduced and updated with the author’s permission. It was originally authored on January 31, 2023 and can be found here.

Diane Hong, at the time of this post, is a 3L at Penn State Dickinson Law. She is from Seoul, South Korea where she received a Bachelor’s degree in Law. She is interested in practicing business law and cyber security & data privacy law. During her free time, she likes to play tennis and listen to classical music.

Sources:

Intellectual Property Law: Cases & Materials, Lydia Pallas Loren and Joseph Scott Miller, 2021

Trademark Dilution (Intended for a Non-Legal Audience)

Dilution (Trademark)

15 U.S.C. § 1125

Women in the Workplace: Why They Leave, and How to Make Them Stay

by Nitya Bodavala

According to a 2022 study by McKinsey and LeanIn.org that surveyed more than 40,000 employees, women hold 40% of entry-level positions but only 26% of C-Suite positions. The higher you go on the corporate ladder, the fewer women you see. For every woman at the director level that gets promoted, two female directors choose to leave the company. The case for more women in leadership positions is evident in the value that female leaders bring. The 2022 study found that companies with more women on their boards invest more in innovation, have higher company performance, and de-risk by contributing more to CSR (Corporate Social Responsibility) and ESG (Environmental Social and Governance). Overall, workforce equality in participation, recognition, and pay would make the world economy $28.4 trillion richer.

Why Are Women Leaving the Workplace?

There are three main reasons why women have been leaving the workplace by droves: (1) lack of pay and recognition, (2) toxic work cultures, and (3) lack of choices.

Unrecognized Work

Although women in leadership do more than their male counterparts to promote Diversity, Equity, and Inclusion (DEI) in the workplace and support employee well-being, they are recognized less for their efforts. Employee satisfaction and DEI efforts retain employees and attract new talent. By 2025, 47% of millennials will actively seek diversity in a potential workplace. With the next generation of leadership actively seeking diversity in the workplace, these policies and initiatives make a huge difference in attracting and retaining top talent. However, the time and energy spent on these efforts are not factored into women’s performance reviews and do not help them advance their careers. Further, women still make only 86 cents for every dollar a man makes, while black women make even less, at 68 cents for every dollar a man makes.

Toxic Work Culture

An MIT Sloan Management Review study found that toxic work culture was a big factor in high attrition rates. The study analyzed the language used by over 3 million U.S. employees in Glassdoor reviews to describe their employer between 2016 and 2021. The study defined toxic culture as disrespectful, non-inclusive, unethical, cutthroat, or abusive. Non-inclusive environments and disrespectful leadership were major factors in responses with the largest gender gaps. The disrespect that women face spans microaggressions, gaslighting, unfair hiring and promotion decisions, outright misogyny, sexual harassment, and sexism. Non-inclusivity may present itself in hiring practices, schedules, or allyship efforts. The study found that women are more averse to joining companies they perceive as non-inclusive, and prefer to find an organization that reflects their values.

Lack of Choice

Women want agency and choices. The option of a more flexible schedule goes a long way in providing a safe work environment. Only one in ten women prefer to spend most of their time on-site, citing work-from-home or hybrid work options as one of their top criteria while choosing an employer. Working from home allows for fewer microaggressions, which is especially obvious to women of color, LGBTQ+ women, and women with disabilities. These are the segments of women who are more likely to face demeaning or disrespectful treatment. Over 70% of HR leaders have said that offering remote work options has allowed their companies to hire and retain employees from diverse backgrounds. Lastly, remote work also keeps women from choosing between their personal and professional identities. They can be parents and employees without sacrificing one for the other.

What Can You Do as an Employer to Retain Female Talent?

Now that you understand what women bring to the table and why they are leaving, here is what you can do to prevent it.

- - Conduct sensitivity and sexual harassment training for all employees and have an action plan for dealing with sexual harassment complaints. Showing your employees that a process exists to help them allows them to feel safer and like they can trust you to deal with issues fairly.
  - Be more diverse in your hiring policies. It benefits you when your clients see themselves represented in your workplace. Plus, when you have a diverse workforce, your employees have a breadth of experience to capitalize on.
  - Have more holistic performance metrics. Accurately evaluate the place women occupy in your company, the work they do, and the value it results in. Get rid of outdated performance metrics and adapt to the changing needs of your employees.
  - Try to have flexible work schedules and offer childcare services for your employees who have young children. If that is not possible, provide dependent care assistance. No employee should feel punished for deciding to have children. Remember that even if these employees take some time off, they return with the knowledge that they have a supportive employer and will be happier, more productive employees. Not supporting them during this time will result in high employee turnover rates and endless hours of training new employees.
  - Offer more leadership training opportunities and pathways for women. Informal pathways for mentorship are fewer for women, so making initiatives like this a part of your institutional structure will make a significant positive impact.

This post has been reproduced and updated with the author’s permission. It was originally authored on March 28, 2023 and can be found here.

Nitya Bodavala, at the time of this post, is a 3L of Penn State Dickinson Law. She is from Hyderabad, India, and comes from a family of entrepreneurs. It was natural to gravitate toward working with entrepreneurs even within the law.

Sources:

https://www.forbes.com/sites/tomaspremuzic/2022/03/02/the-business-case-for-women-in-leadership/?sh=7d74b5769cbb

https://www.mckinsey.com/featured-insights/diversity-and-inclusion/women-in-the-workplace#/

https://www.forbes.com/sites/forbescommunicationscouncil/2022/03/03/the-importance-of-diversity-and-inclusion-for-todays-companies/?sh=5bd9569649df