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Category: Business

The Dangers of Online Business Incorporation

 

Because starting a business is generally expensive, many new business owners are tempted to incorporate by using an online do-it-yourself service. They believe they will save money by bypassing an attorney in favor of using the Internet. The popular television commercials make it look easy, and the price seems right. In reality, this type of “representation by search engine” contains numerous pitfalls.

It Is Not a Cost-Savings

Many of the online incorporation services advertise a deceptively low up-front rate, only to upsell or over-charge business owners for unnecessary services later on in the process. A new business owner who is unfamiliar with the laws in Arizona may not be aware of what is mandatory and what is optional. In many cases, an attorney is actually a more economical option.

Revolving Charges

If the Internet incorporation service requires the user to select the service as the user’s registered agent, the service will charge the user an ongoing annual fee. This fee might be much higher than the fee a business owner would pay by using a local attorney. These types of hidden charges are typically where Internet incorporation services make the bulk of their money.

Liability Risk

In their finished state, the forms offered by these websites have not been reviewed by licensed attorneys who practice in Arizona. Moreover, they are not even reviewed by an attorney licensed to practice in any state. The user submits information through a series of questions, which populates a pre-made form. The disclaimer page of one of the most popular form websites states that it “is not a substitute for the advice of an attorney” and “is prohibited from providing any kind of advice, explanation, opinion, or recommendation to a consumer about possible legal rights, remedies, defenses, options, selection of forms or strategies.” It goes on to state that it “can only provide self-help services at [the user’s] specific direction.” There is no guarantee that the forms provided will comply with the laws of Arizona.

© 2015 Matthew W. Harrison and Harrison Law, PLLC All Rights Reserved

This website has been prepared by Harrison Law, PLLC for informational purposes only and does not, and is not intended to, constitute legal advice. The information is not provided in the course of an attorney-client relationship and is not intended to substitute for legal advice from an attorney licensed in your jurisdiction.

Construction Delays and Damages

 

Founding father, Benjamin Franklin, is credited with a number of sayings that still resonate today. One of his most famous – “time is money” – is especially relevant in the world of construction. The construction industry is acutely aware that time delays will cost you. In commercial construction projects with large price tags, these costs can be enormous.

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Construction delays usually end up costing not only the contractor but the owner as well. Contractors pay as workers and equipment sit idle waiting to complete a phase of a project. Owners’ businesses suffer when they are unable to take possession of their property. With large sums of money at stake, it is no surprise that these construction delay disputes often end up in court, where the costs of litigation add even more to the final tab.

To guard against liability for construction delays, both owners and contractors frequently address delays in their bids and contracts. The majority of commercial construction contracts include liquidated damages clauses that assign a penalty for each day a project goes over its target completion date. Without careful drafting, however, even delay provisions and “no liability” clauses can fail to hold up in court.

Technology Construction, Inc. v. City of Kingman

In an Arizona case decided in June 2012, the Arizona Court of Appeals granted delay damages to the contractor, Technology Construction, Inc. (TCI), against the City of Kingman. The Court of Appeals upheld the trial court’s award of $324,933 plus prejudgment interest of $117,785 and post-judgment interest of 10 percent per year even though the City’s contract included a “no liability” provision and lacked a materials escalation clause.

The case, Technology Construction, Inc. (TCI) v. City of Kingman, 229 Ariz. 564, involved construction of a $5.2 million railroad underpass for the City of Kingman. The project was split into two phases, with the first phase slated to begin June 1, 2005. Work was delayed, however, when the City failed to present TCI with a contract until July 7, 2005. The project was pushed back even further when the City did not give TCI a notice to proceed until November 3, 2005. The court determined that TCI was not responsible for any of these delays.

During this time, Mother Nature threw the project another curveball when Hurricane Katrina hit the Gulf Coast in August 2005. The disaster caused the price of oil to skyrocket, which impacted construction projects all over the country – including the City of Kingman’s railroad underpass. Resulting from the increase in oil prices, TCI ended up paying more for asphalt, a material which was utilized prominently in the project. TCI’s initial asphalt bid priced asphalt at $54.10 per ton. However, the company had to pay $85.40 per ton for asphalt by the time the project got underway. This resulted in an overall cost increase of $324,933.

When TCI submitted its request for payment to the City of Kingman, the City refused to pay for the increased costs. As a result, TCI filed a lawsuit for breach of contract under the Arizona Prompt Payment Act. At trial, the court held that the City of Kingman was solely responsible for the construction delays and that the increased materials costs were in no way attributable to TCI.

On appeal, the Court of Appeals found conflicting provisions within the City’s construction contract which further established their liability under that contract. Although the contract contained a “no liability” provision, it also permitted delay damages in the event the owner requested changes or created project delays – both scenarios were supported by the facts in this case. The TCI Court further stated that there was no way TCI could have anticipated the increased cost of materials due to a natural event such as Hurricane Katrina.

Careful Drafting: Anticipating Delays

Any number of events can create both foreseeable and unforeseeable construction delays. The lessons to take away from TCI are twofold. First, courts always construe conflicting contractual provisions in favor of the non-drafting party. The City of Kingman’s contract included both a “no liability” clause and language providing for delay damages. In the presence of a delay damages clause, the Court invalidated the “no liability” clause. Secondly, the City failed to include a force majeure clause in its contract, which could have protected it from increased materials costs related to Hurricane Katrina. Without it, the City was stuck with a substantial increase in construction expenses. Careful contract preparation cannot completely absolve a party from all construction delay liability, but it is a good start.

©2015 Matthew W. Harrison and Harrison Law, PLLC All Rights Reserved

This website has been prepared by Harrison Law, PLLC for informational purposes only and does not, and is not intended to, constitute legal advice. The information is not provided in the course of an attorney-client relationship and is not intended to substitute for legal advice from an attorney licensed in your jurisdiction.

Steps for a Business to Avoid The Culture of “Maybe”

 

As outlined in a prior article, a culture of maybe develops in a business when a decision that impacts a business needs to be made and the company’s leadership or owner avoids a “yes” or “no” determination.   Instead, business leadership finds themselves getting trapped in “analysis paralysis” where either no decision is made or a decision is made too late for the business to take the best advantage of a situation.   This article will discuss steps a business can utilize to avoid analysis paralysis and the culture of maybe.

Speed is Often not the Best Solution

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When a business encounters or there is a corporate habit of indecision, their leaders often first look for options to accelerate the decision-making process. It is regularly the situation that a faster decision-making process is usually not the solution to the underlying problem.

Unfortunately, leaders then often go too far in the other direction and seek shortcuts rather than developing a proven system for decision-making. While looking for shortcuts to streamline the decision-making process, business leaders mistakenly eliminate important procedural steps that would help them make a correct decision.   Oftentimes, these leaders then began to look for analogies more frequently and leave their business vulnerable to flawed analogical reasoning.   For example, they attempt to find correlation to disparate areas of their investigation where no correlation exists.   In addition, these leaders also often adopt the “conventional wisdom” approach in both their industry and organization to the point where they become a permanent carbon-copy of their competitors. Simply copying your business rivals would be unlikely to lead to any long-term competitive advantage.

When examining a business decision, it is best for leaders to avoid term “faster” as the answer to effective decision-making. Instead, the terms “smarter” and “efficient” are the better approaches.   A business needs a comprehensive decision-making process. This process should include certain deadlines and milestones in order to arrive at a decision in sufficient time to be effective—whether the decision is yes or no.

Develop a Clear Set of Expectations

When a business has developed a clear set of expectations for how a final decision will be made, it has often eliminated the opportunity for “analysis paralysis” to take hold.   These expectations must start from the top with a clear and concise set of procedures and goals that are implemented from the leadership downward.   Vagueness becomes subject to interpretation, which breeds delay due to a lack of definitive purpose or goals.

Establish a Deadline When the Decision-Making Process Changes

Often times, the language used by business leadership leads to a culture of maybe because personnel cannot determine exactly when all information is to be compiled and continued investigation completed.   A system in place that helps business leadership communicate to their personnel that the decision process will change at a critical juncture from information gathering to decision making helps achieve a timely decision.   A set deadline or the establishment of thresholds when certain portions of an investigation are complete allows the organization to move toward a known goal and final decision.

Imitation is the Highest Form of Flattery

            As outlined above, it is important that a business avoid an exact duplicate of what their competitors are doing because copying your business rivals is unlikely to lead to any long-term competitive advantage.   However, analyzing and adopting the procedure and behavior of a successful business can be utilized—especially when the business has no current procedure in place.

            Although copying the decision-making process of a successful business may not lead to a competitive advantage against that competitor, it does allow a business to initially stand out from your other competitors who have either not developed a successful procedure for decision-making or are in the throes of “analysis paralysis.”   Then, over time, a business should hone its own individual decision-making processes which capitalize on its unique situation and also the lessons learned from their successful competitor.

Develop a Third-Party Confidante

Every business should build a relationship with an independent confidante who will not only offer sound advice but can also bolster the leader’s confidence when he or she becomes indecisive and overly risk adverse.   An outside consultant, friend, business advisor, or legal counsel can be utilized in this position.   This individual’s primary purpose is to look after the best interest of the organization itself.   Since the individual is not totally beholden to leadership, he or she would be more likely to provide the blunt assessment that most decision-makers need to arrive at a final conclusion.

Once a Decision is Made Closure Should Occur

Once a decision is made, the organization must immediately move forward.   If the decision is “yes,” the plan must be implemented wholeheartedly.   If the decision is “no” then the organization should move on to new decisions and goals.   Constantly looking back and questioning the decision made, can lead to “analysis paralysis” on future decisions because there is no finality to any decision.

In addition, a business needs to develop a culture where there is no sense of recrimination within the organization.   If individuals or sub-entities were on the opposing side of the ultimate decision, they need to know that their input was needed and that there would be no negative effects because of the position taken.   This allows for a culture where new ideas and opposing viewpoints are allowed and welcomed—instead of the business developing a culture of “yes,” which has its own inherent dangers as well.

©2015 Matthew W. Harrison and Harrison Law, PLLC All Rights Reserved

This website has been prepared by Harrison Law, PLLC for informational purposes only and does not, and is not intended to, constitute legal advice. The information is not provided in the course of an attorney-client relationship and is not intended to substitute for legal advice from an attorney licensed in your jurisdiction.

The Culture of “Maybe” – Indecision Leading to Paralysis of a Business

In the popular children’s movie Kung Fu Panda, the primary character, Po, is faced with a dilemma. Should he follow a difficult path to an unknown future destiny or quit and return to something more predictable and comfortable. Po expresses his concerns to an old and wise Kung Fu master who advises him: “Quit, don’t quit . . . You are too concerned with what was and what will be. There is a saying: yesterday is history, tomorrow is a mystery, but today is a gift. That is why it is called the present.” Essentially, the Kung Fu master is counseling that the problem was not choosing between the two options. Instead, the problem was not taking advantage of the moment, making a choice, and moving ahead. In real-life business scenarios, similar indecisiveness has led to the failure of many a business.

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A Business Culture of Maybe

In a business setting, this dilemma of choice is observed when the business devolves into a “culture of maybe.” A culture of maybe develops when a decision that impacts the business needs to be made and the company’s leadership group or owner avoids a “yes” or “no” determination. Instead, they want to gather as much information as possible before a final decision is made, so much so that they find themselves trapped in what is often referred to in business and leadership texts as “analysis paralysis.”

What is Analysis Paralysis?

Analysis paralysis occurs when a business leader or owner constantly delays decisions and actions because he or she believes that just a little more information and analysis might illuminate the path that should be taken. After the acquisition of the desired information, additional questions arise thus prompting the business leadership team or owner to feel that these questions and concerns must now be addressed before the decision is made. Analysis paralysis is a vicious cyclical pattern where a final decision is never reached because with every piece of new information acquired, additional questions develop, thus creating a back and forth structure which, by nature, will never reach a final outcome.

This need, however, is within the mind of the owner or leadership team and not truly a necessity to reach an intelligent and informed decision. When analysis paralysis occurs, those responsible for making the decisions essentially abdicate their responsibilities as decision makers and assume of the tasks of information gatherers. While on the hunt for increasingly larger and more nuanced amounts of information, an ultimate decision is unable to be reached until it is too late to take advantage of the opportunity being analyzed. Ultimately, the accurate initial response to the opportunity is “no” because a timely decision was not reached.

What are the Root Causes of Analysis Paralysis?

Analysis paralysis partially has its foundations in the fear of failure. For example, a businessperson or leader may remember a past decision that led to a less than successful outcome than anticipated. Instead of seriously examining the details of why the decision led to the unsuccessful outcome (which sometimes may include the potential determination that outside forces beyond the decision-maker’s control were the root cause) and/or developing concrete steps to avoid the problem in the future, the decision-maker rationalizes that had he or she only gathered a little more information that the bad choice would have been prevented. Instead of realistically examining the decision itself, the decision-making process or procedure is blamed as the ultimate culprit. This rationalization and flawed focus leads to the ever increasing desire for additional information before any decision is made – analysis paralysis at its core.

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Surprisingly, analysis paralysis also occurs when a business has been very successful. In this circumstance, a leadership team or owner is always looking for the next big business opportunity or decision that will catch “lightning in a bottle” a second time. As such, over-analysis of every potential future business decision is compared to the template of the past triumph. If the new potential business opportunity or decision does not exactly align with the criteria of the prior success, the leadership team or owner looks for evidence or data to alleviate their concerns about moving forward, which can never fully occur. Ultimately, a decision is not made in a timely manner (if at all) and the opportunity is lost.

This state of affairs often leads to a business passing on multiple “good” or “very good” business opportunities because its leaders are myopically pursuing the “perfect” opportunity instead. In addition, this approach often leads to rigid thinking which cripples the business until it is unable to innovate or adapt to any new business opportunity because these new prospects cannot fit into their template of past success. An examination of the evolution of the personal computer and internet industry over the past 30 years is full of examples of successful companies who were unable to take advantage of innovations because these advances did not fit with the pattern of past success their company had enjoyed. These once successful companies were eventually eclipsed by new companies who would quickly adapt and innovate to the changing computer and internet landscape.

Companies like Blockbuster Video and Borders Books fall squarely into this category and provide examples of what happens to a company when it cannot escape analysis paralysis. Blockbuster and Borders Books saw how their customer base was evolving to an internet-based and download/streaming focus. They also both saw the initial success of their competitors (i.e., Amazon and Netflix) and were provided options to quickly expand into the same market. However, instead of taking advantage of their large financial capital and market presence, they would not and could not swiftly make a determination on the next steps forward because the decision was so foreign to their past successful formulas. As a result, their adaptation to the new market occurred too late and they had already been eclipsed by their competitors.

Steps a business can utilize to avoid analysis paralysis and the culture of maybe will be discussed in a subsequent post.

© 2015 Matthew W. Harrison and Harrison Law, PLLC All Rights Reserved

This website and article have been prepared by Harrison Law, PLLC for informational purposes only and does not, and is not intended to, constitute legal or financial advice. The information is not provided in the course of an attorney-client relationship and is not intended to substitute for legal advice from an attorney licensed in your jurisdiction.

Drafting Your Employee Handbook

The Provisions You Need to Include

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Employee handbooks can be a tremendous resource for both employers and their employees. Carefully written employee manuals get everyone on the same page – literally – by clearly outlining company policy, laying ground rules, identifying important objectives, and establishing an overall culture. In general, people thrive when they know what to expect and what is expected of them.

Furthermore, for business owners looking to guard against employment-related lawsuits, employee handbooks provide businesses with an opportunity to set forth clear, concise policies regarding sick leave, personal days, discipline, benefits, work-life balance, inappropriate behavior, compensation, and other important issues.

 

Getting Started: The Basic Disclaimers

So where to start? In Arizona, and in nearly every other state, your employee handbook should include a disclaimer stating that the handbook is not an employment contract. A business attorney can help you prepare precise language to protect your rights. You should also expressly state that you reserve the right to modify the handbook. Finally, your handbook should include a page, preferably the final page, where the employee will sign, to acknowledge that he or she has read the handbook, understands its contents, and agrees to abide by the guidelines it sets forth.

Employee Rights under State and Federal Law

There are a number of state and federal laws that require employers to inform employees of their legal rights. Many businesses include employee handbook provisions that outline the following state and federal employment laws:

Family Medical Leave Act

The FMLA applies to certain types of employers with 50 or more employees. Businesses that fall under the FMLA must give their workers up to 12 weeks of unpaid leave in a 12-month time period to bond with a new child, care for a sick family member, or deal with the worker’s own health condition. Arizona also provides state family medical leave benefits for state employees; there are no such state-specific laws for private employers.

Equal Opportunity Employer

Many employers include a section indicating that their policies are fully compliant with Title VII and Equal Employment Opportunity Commission (EEOC) regulations.

Workers’ Compensation

Arizona law requires employers to post notices regarding workers’ compensation policies and benefits in conspicuous places. Many employers go one step further by placing this information in their employee handbooks.

Common Employer Policies

Each business is different, but many employers include the following information types of information in their employee handbooks. These items allow both management and the workforce to efficiently handle conflicts, raise questions, and identify solutions that really work.

Appropriate Behavior

This can be a comprehensive section to disclose everything from the company dress code and smoking standards to personal relationships between employees and foul language. Harassment guidelines are often included in this section of the employee handbook as well. Whether harassment takes the form of workplace bullying or inappropriate sexual advances, both forms are distracting and unsettling. Harassment also exposes the employer to significant liability. It is especially important for employees to know to whom in the organization they should report if they are experiencing harassing behavior.

Compensation

Compensation, vacation time, personal days, sick days, health insurance, and other benefits should be very clearly spelled out. Because compensation is something that often varies from employee to employee, consult with an attorney as to whether compensation details should be included within your employee handbook or delivered in separate correspondence.

Computer/Technology Use

In today’s fast-paced business world, many employees use several different forms of technology on an everyday basis. These devices include computers, smartphones, fax machines, tablets, and more. Employers should never assume that employees understand that this equipment is the employer’s property. The employee handbook should make it clear that all communication transmitted on company-owned devices is owned and controlled by the employer.

 Conclusion

In conclusion, a well-crafted employee handbook supports employers and employees as they begin and continue their business relationship. Continuous review and revision of your employee handbook coupled with highlighting the company policies contained within will help create a positive and successful corporate culture for your business.

You are reading the final installment of our series on Employee Theft.
For part one of our series on Employee Theft click here.
To find part two of our series on Employee Theft click here.
Part three of our series on Employee Theft can be found here.

© 2015 Matthew W. Harrison and Harrison Law, PLLC All Rights Reserved

This website has been prepared by Harrison Law, PLLC for informational purposes only and does not, and is not intended to, constitute legal advice. The information is not provided in the course of an attorney-client relationship and is not intended to substitute for legal advice from an attorney licensed in your jurisdiction.