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Legal Tips for Collecting and Retaining Revenue Chad E. Willits, Esq. 513-381-9297 Michael J. Chapman, Esq. 513-381-9336.

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Presentation on theme: "Legal Tips for Collecting and Retaining Revenue Chad E. Willits, Esq. 513-381-9297 Michael J. Chapman, Esq. 513-381-9336."— Presentation transcript:

1 Legal Tips for Collecting and Retaining Revenue Chad E. Willits, Esq. 513-381-9297 Michael J. Chapman, Esq. 513-381-9336 ABC Supply College of Knowledge January 30, 2015

2 How To Get Paid For Every Job Michael J. Chapman, Esq. January 30, 2015 ABC Supply College of Knowledge Disclaimer: The information provided below is intended to facilitate further discussion. Because local, state and international laws vary widely and are constantly changing, it is essential that you consult a local attorney to address any particular situations, contracts, issues, or remedies before relying on any of the information provided herein.

3 You Can Avoid Collections Problems Do you have a credit policy? Every business needs a written plan for accepting new clients and a written plan for collecting money when payments are late. By following the plan, you can avoid many collections problems.

4 What Do You Do When The Customer Is Late? Get your money!! 4

5 Do You Loan Money? Billing “net-30" means that the company is selling on credit and is actually making a loan. Stop lending money! 5

6 Do You Check References? Most business owners get too excited at the prospect of getting new business (or fear losing new business) that they do not take time to ask new clients to fill out credit applications or new-client, intake forms. Capture contact information, key players, bank information, etc. 6

7 Will Forming An LLC Help Me? Can I Sue An LLC? Yes and yes but…. An LLC is a great way to protect your personal assets but you need to follow some corporate formalities and avoid co- mingling assets. If you are making a claim against an LLC and it is insolvent, your chances of getting paid are slim. 7

8 Bankruptcy Happens Know how to predict bankruptcies and protect yourself when bankruptcies happen. The automatic stay is an automatic injunction against collections, effective when the bankruptcy petition is filed. 8

9 Mechanic’s Liens A Security Interest in Real Property. Available in all 50 states to almost anyone who furnishes labor, services, or materials to a real estate improvement. Strict compliance with local law is required. 9

10 I never agreed to that! Most disputes can be avoided with well-drafted, mutually signed contracts that clearly define the scope of the work, price, and other terms. Customers Vendors / Suppliers Subcontractors 10

11 CONTRACT ESSENTIALS Name and Address of all parties, and signatures! State the obvious. If the parties aren’t listed, the contract is not legally binding. Both the contractor and homeowner should have fully signed duplicate copies. 11

12 CONTRACT ESSENTIALS List the Location Another silly detail, but contracts often omit the site location where the work is to be performed. Which bathroom will be remodeled? 12

13 CONTRACT ESSENTIALS Scope of Services Commonly overlooked. State, in detail, the work to be performed. If using Xactware, attach and incorporate the drawings and estimates. 13

14 CONTRACT ESSENTIALS Total Costs and Terms of Payment This should be clearly and simply stated. Payments should be arranged at specific time periods and/or completion points. 14

15 CONTRACT ESSENTIALS Default Terms (to help you get paid) Interest at one and one-half percent (1½ %) per month. Attorney fees upon default (commercial debt). Personal guarantees for small businesses. 15

16 CONTRACT ESSENTIALS Guarantee of Workmanship What is guaranteed? One year from when? 16

17 CONTRACT ESSENTIALS Statement of Insurance Coverage Most homeowners want this. You want the homeowner and your subcontractors to carry insurance too. 17

18 CONTRACT ESSENTIALS Arbitration The goal is to avoid litigation. Unless carefully drafted, arbitration clauses do not always achieve the desired results. 18

19 CONTRACT ESSENTIALS Special Considerations or Waivers of Liability Is there anything out of the ordinary? Lead paint or asbestos? Will your ladders or scaffolding cause damage to plants? What about nails in the backyard or driveway? 19

20 CONTRACT ESSENTIALS Penalty clauses, otherwise known as “Liquidated Damages” Penalty clauses are difficult to enforce. They usually work against you but including provisions for reasonable delays for adverse weather can help you too. 20

21 CONTRACT ESSENTIALS Compliance with Laws The Subcontractor shall take reasonable safety precautions with respect to performance of this Subcontract, shall comply with safety measures initiated by the Contractor and with applicable laws, statutes, ordinances, codes, rules and regulations, and lawful orders of public authorities for the safety of persons and property. 21

22 CONTRACT ESSENTIALS Indemnity Each party shall indemnify, defend, and hold the other party harmless from and against any and all claims, actions, suits, demands… arising out of or relating to any operations, acts, or omissions of the indemnifying party or any of its employees, agents, and invitees in the exercise of the indemnifying party's performance of the indemnifying party's obligations under this agreement. 22

23 CONTRACT ESSENTIALS Limit your Liability In no event will contractor or its subcontractors be liable for consequential, incidental, indirect, punitive or special damages, or loss of profits, data, business, or goodwill… 23

24 CONTRACT ESSENTIALS Ohio’s Right to Cancel When applicable, Ohio’s Home Solicitation Sales Act gives consumers three days to cancel sales made in their homes or outside the seller’s regular place of business. 24

25 CONTRACT ESSENTIALS Estimates for Repairs In general, consumers have the right to a verbal or written estimate for repairs or services that will cost more than $25. The rules also require suppliers to obtain the consumer’s authorization for additional repairs or services that will cost more than 10 percent of the estimate. 25

26 CONTRACT ESSENTIALS Termination Give yourself a way out! –for Cause –for Convenience –upon Insolvency 26

27 CONTRACT ESSENTIALS Warranty Disclaimers Always disclaim any implied or express –warranty of merchantability, –warranty of fitness for a particular purpose, and –warranty of conformity to models or samples. Use conspicuous language and avoid open-ended or vague representations. 27

28 CONTRACT ESSENTIALS Require Written Modifications This agreement may be amended or modified only by a writing executed by both parties. Otherwise, you’ll be fighting over whether you made a subsequent oral modification to the contract. 28

29 Michael J. Chapman Rendigs Fry, Kiely & Dennis, LLP (513) 381-9336 29

30 Protecting Your Business – And Your Revenue – from Expensive Misclassification Errors 30 Chad E. Willits, Esq. 513-381-9297 ABC Supply College of Knowledge January 30, 2015

31 Worker Classification Employee –Employer controls manner & means of work –Answerable to employer for all those details –Withhold income & payroll taxes, FICA, Soc. Security, Medicare –All reflected in W-2 Independent Contractor –Brings own expertise and tools –Answerable only for result –No withholding / related obligations –Payment reflected in Form 1099 31

32 Why Use Independent Contractors? Employer gets the benefit of expertise, without responsibility for: –Wages and Salaries –Minimum Wage and Overtime –Workers Comp. and Unemployment –Fringe Benefits –Withholding payroll taxes and the like –Administrative burdens –Civil Tort liability –EEO obligations 32

33 Worker Classification and the MYTH of the “1099 Employee” 33

34 34

35 35 Why This Should Be A Priority for Every Business Financial and Other Costs of Defending a Claim

36 36 Financial and Other Costs of Defending a Claim

37 Financial & Other Claim Costs Unpaid wages (regular & overtime) Unpaid income & payroll tax withholding Unpaid contributions to Social Security & Medicare Potential contributions to retirement plans, 401K matching, and pension funds Unpaid Worker’s Compensation and Unemployment insurance premiums Unexpected exposure for Worker’s Compensation, Unemployment, and tort claims Fines, penalties, interest, “liquidated” damages 37

38 Other “Soft” Costs Private individual & “collective action” lawsuits by workers Civil lawsuits by Dept. of Labor Injunctive relief Criminal convictions & fines for “willful” violations Audits by DOL, IRS, parallel State Agencies 38

39 39 Why This Should Be A Priority for Every Business Financial and Other Costs of Defending a Claim Charges and Enforcement Efforts

40 Former Secretary of Labor Hilda Solace A key goal is to secure minimum and overtime wages and to help the middle class families remain in the middle class Misclassification of employees as independent contractors deprives employees of critical workplace protections and employment benefits DOL working with Vice President’s Middle Class Task Force & Treas. Dept. to develop strategies to address this issue Current DOL Secretary Thomas Perez vows to continue crack- down on “workplace fraud ” 40

41 The DOL Misclassification Initiative Department of Labor & Internal Revenue Service “Memorandum of Understanding” Agencies work together & share information To reduce misclassification & questionable tax practices & bolster legal protections to workers Additionally, 14 States have signed Memoranda of Understanding with the DOL Wage & Hour Division 41

42 42 Why This Should Be A Priority for Every Business Financial and Other Costs of Defending a Claim Charges and Enforcement Efforts Is Your Company At Risk? Your Company’s Future

43 How to Determine Whether a Worker is an Independent Contractor or Employee 43

44 Legal Standards Specific standards & requirements vary Few if any bright-line tests IRS, DOL, 6 th Circuit Court of Appeals, Ohio, Kentucky, Indiana Several common elements 44

45 Legal Standards Behavioral Control –“Manner & means” –Quality of work –Training, instruction, supervision –Independent judgment & discretion –Specifics (location, hours, etc.) Financial Control –Investment for tools & equipment –Method of Payment –Opportunity for profit/loss or accept other employment 45

46 Legal Standards True Nature of Relationship –Length / permanency –Individual vs. established business entity –Whether tasks performed are integral part of employer’s business / service to its clients - Look to economic reality 46

47 Best Practices 1.Ensure ALL agreements with independent contractors are in writing, and clearly identify the relationship, roles, responsibilities, and work, payment, and tax details. 47

48 Best Practices 2.Consider an established business entity rather than individuals, especially former employees. 3.Avoid independent contractors for your core business services to clients. 4.Independent contractors should acquire their skills on their own and bring their own equipment. 5.Contract work should be of limited duration and project- specific. 6.Pay independent contractors by the job or project, not by the hour. 48

49 Best Practices 5. Be careful bringing contractors into your place of business, unless the work involves a specific task that must be performed on your premises. 6. NEVER refer to an independent contractor as an employee or “1099 employee”. 7. Never list an independent contractor on your organizational chart as an employee or part of the business. 9. Perform periodic audits/self-audits to determine whether workers are appropriately classified using the guidelines listed above. 10. Seek outside guidance. 49


51 51 Chad E. Willits, Esq. (513) 381-9297 Michael J. Chapman, Esq. (513) 381-9336

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