That means that if your partnership, LLC or corporation is owned money from a customer, you as an owner of that company cannot file a lawsuit in Court.  That means if your company is sued, you as an owner of the company, cannot file an answer on the company’s behalf.  If you do file a complaint or answer on behalf of the company, and for some reason the Court allows it, you could spend months if not years in litigation just to have the judgment voided by the other side because your company was not represented by an attorney.

As I noted above there are a few limited exceptions to the general rule.  One of the exceptions apply in cases under worth $3,000 or less and which could have been filed in small claims.  There are two exceptions that apply to municipal court.  In all of these exceptions the company could be represented by an authorized officer or employee.  Lastly, a partner of a general partner, not a limited partnership, can represent the business in summary actions for possessions of property.

Recently, New Jersey has amended the time frames controlling the use of approval by written consent.   P.L. 2010 c. 105 amends NJSA 14A:5-6’s time frames.  The new law   requires the corporation to notify any who did not consent that the proposed action was approved and will take place no sooner than 20 days from the notice.  This notice must also provide that the shareholder has a right to dissent and to be paid the fair value of the shareholder’s shares.  Under the original statute, shareholders only received 10 days notice.

The new law also provides that the corporation can eliminate the post approval notice by providing in its original request for the written consent of its shareholders, the date that all of the written consents will be counted.  This request for written consent must be at least 20 days and not longer than 60 days before the counting of the “votes”.  This solicitation of consent must follow other requirements as well but they have not been changed from the original statute.

In short, P.L. 2010 c. 105 doubles the existing notice period for certain actions.

The Court reasoned that the Consumer Fraud Act required liberal application to protect consumers.  The CFA defines person as “any natural person or his legal representative, partnership, corporation, company, trust, business entity or association, and any agent, employee, salesman, partner, officer, director, member, stockholder, associate, ….”  NJSA 56:8-1d.

Prior case law has found, based upon the definition of Person under the Act, a principle of a company liable for the affirmative actions the principle took to violate the act. The Court in Allen reasoned that there was no reason to treat affirmative acts and regulatory violations different under the CFA.   An owner of a company can be liable for their violations of the CFA’s regulatory requirements.

Other posts on the Consumer Fraud Act:

NJ Consumer Fraud Act – What is Merchandise

With Consumer Fraud a person really means a person

Consumer Fraud Act and Any Person

Consumer Fraud Act – The Basics

There are many reasons why this classification is often hard to get right.  Realize that just because you, the employer, think of the person you hired as an independent contractor,  the contract itself might state that he or she is  an independent contractor and even the person thinks of themselves as an independent contractor but that doesn’t necessarily mean that they really are  an independent contractor. Furthermore, a person may be an independent contractor under one set of laws but will be considered as an employee under another set of laws. The tests to determine whether a person is an employee or an independent contractor may be different depending on whether it is for taxes, compliance with discrimination laws or the operation of respondeat superior or some other law.  At least for the purposes of determining whether the right taxes have been withheld it is up to the company to prove that the person was properly classified as an independent contractors and should not have been considered an employee.

New Jersey uses the “ABC” test for unemployment responsibility and hour and wage requirements.  NJSA 43:21-19.  Under this test it is up to you, as the employer, to prove that the relationship is that of an independent contract and not that of an employee.  Specifically the state would look at the following:

A.  Is the person now and continues to be free from the control and direction over the performance of the job?  This condition not only has to be in a contract but must be what occurs in fact.  If the actual practice is different than what is set forth in the contract, the contract will have little weight.

B.  Are the services either outside the usual course of the business or performed outside your physical location?  Does the independent contractor work in your office space or do they work from their own location?

C.  Is the individual customarily engaged in an independent established profession or business?  Are you the independent contractor’s only job or does the indepenent contractor perform work for several other companies?

The business must be able to prove that independent contractor meets all three prongs of the ABC test and it is important that a business gets the decision right. Failure to meet all requirements could result in the payment of all back taxes, penalties and interest.  Such ramifications could transform a company from a success to barley surviving or worse.  It may even open the business owner to personal liability for the back taxes.

As a business owner, it is crucial that you fully understand the differences between a true independent contractor and an employee.  You must fully understand what need you are trying to fill by the proposed relationship and then structure it to adequately meet your proposed business need so in order to avoid possible issues in the future.

I would suspect that most credit card machines do this automatically so hopefully this bill will have little impact on the daily runnings of your business.

But first, a little background is in order. In this case, Ms. Stengart made use of her company laptop to send emails, discussing her planned suit against her employer, to her attorney.  Those emails were sent not using the company’s email system but her personal, password protected Yahoo account.  After Ms. Stengart filed suit, her former employer had an image made of the laptop’s hard drive and examined the contents.  Unknown to Ms. Stengart the company had installed software that logged her activity on the laptop and that software had saved copies of her emails to and from her lawyer.

Yesterday, the NJ Supreme Court found that “under the circumstances” Ms. Stengart had a ”reasonable expectation of privacy” in her emails.  As the emails were sent to her lawyer, the Court further found that the employee had not waived the attorney-client privilege by using the company’s laptop to send the emails.  The Court went even further by writing that, even if the company banned all personal use of their computers,  an employee’s use of a personal password protected email account to send email to their attorney would not allow the employer to break the attorney client privilege.

Outside of the attorney-client area, the Supreme Court has given guidance to both employees and employers as to what to expect.  The Supreme Court based its decision on whether the employee has a “reasonable expectation of privacy”.  That expectation is determined by  the company’s policy on the issue. The Court looked at Loving Care’s policy, assumed that it was in effect at the time, and applied to Ms. Stengart both assumptions were in contention. Loving Care’s written policy was found in its employee handbook and provided:

The company reserves and will exercise the right to review, audit, intercept, access, and disclose all matters on the company’s media systems and services at any time, with or without notice. . . .

Email and voice mail message, internet use and communication and computer files are considered part of the company’s business and client records.  Such communications are not to be considered private or personal to any individual employee.

The principal purposes of electronic mail (e-mail) is for company business communications.  Occasional personal use is permitted; however, the system should not be used to solicit for outside business ventures, charitable organizations, or for any political or religious purpose, unless authorized by the Director of Human Resources.

The Court noted that there was no mention in the policy that the company was making images or copies of its employee’s activities on the computer.  The policy also did not define some of the terms it used, such as , like “media systems and services” and did not discuss at all the ramifications of using a personal, web-based email account.  The policy was also silent as to whether the company considered the personal email account message as part of its email system and its property or whether such accounts were considered outside the company’s property interests.  Given the many ambiguities created by the policy, the Court found Loving Care’s Employee Handbook was  ambiguous and unclear.

As lawyers learned in “Contracts 101” is that, in a contract, ambiguities will be construed against the drafter.  In this case, because the employee handbook was  ambiguous and unclear, the Court gave the benefit of the doubt to the employee.  As the policy did not clearly apply to password protected web-based emails, the Court was not going to apply to the company’s policy that emails were part of the company’s business records to Ms. Stengart’s yahoo emails.

From an employers’ prospective it is clear that if you want to “own” all the activity that occurs on a company computer, you must make that position very clear in your handbooks and policies.  If a company is going to use logging or imaging software to track usage, that fact needs to be disclosed as part of the company’s written polices.  Even with very clear policies in place, I am not sure that a Court would enforce a handbook policy that results in the company owning, and being able to use, personal emails from an employee to their physician or accountant, etc.   An employer probably could ban all personal use of the computer and also  could install filters and software to prevent employees from going to certain websites, such as Yahoo mail, AOL or gmail.  However, while these options may be legal and technically possible, I do not believe that such tactics acknowledges modern reality:  Employees need access to computers and the internet on a daily basis for personal use.

From an employee’s perspective, it is reassuring to know that, if you do not send personal emails using the company’s email program and email accounts, your information may be protected as confidential and your personal information.  What you may not know is whether the company is recording and monitoring your activities on the computer.  If they are and if they review your activity it is little solace that they cannot actually own your emails.  Your discussions with your doctor, accountant or lawyer or your personal spat with your signification other will have already been made public to at least one person.   The lesson to be learned from this case is that if you must use your company’s computer to send emails make sure you to use a web-based service, such as Yahoo, gmail, AOL,  or even your ISP’s own web-based email system.  Do not save your web-based email passwords on your work computer.  Better yet do not use your company’s computer for any activity that you would rather keep private.  If you must send emails of a personal nature during the work day, it is far better to use your personal cell phone’s email capabilities than it is to use your work computer.

Prior Posts:

Are your electronic communications at work private or employer property?

Appellate Division Restricts Company’s Computer Usage Policy

Why it’s important to establish a computer usage/electronic communication policy ?

THIS IS A LEGALLY BINDING LEASE THAT WILL BECOME FINAL AFTER THREE BUSINESS DAYS OR ON THE DATE THAT THE TENANT FIRST OCCUPIES THE DWELLING, WHICHEVER IS EARLIER. PRIOR TO THAT TIME YOU MAY CHOOSE TO CONSULT AN ATTORNEY WHO CAN REVIEW AND CANCEL THE LEASE. SEE SECTION ON ATTORNEY REVIEW FOR DETAILS.

The attorney review provisions of the law would not apply to units that are already rented but are up for renewal.  It would also not apply to leases drawn up by realtors because they already contained the required language.

The bill would also require a clause that sets forth the three day attorney review provision.  Given all of the protections that NJ’s landlord tenant laws provide to a tenant I am not sure what more can be negotiated for.  From a landlord’s prospective, it can create havoc.  For example, if a landlord as has 10 unit apartment building, the negotiations under the attorney review provisions, could lead to 10 very different leases.  It would be very difficult to maintain track of all of the differences in the leases and to enforce them.  If the landlord is not careful the negotiated changes in one lease could conflict with the negotiated terms in a neighbor’s lease.  It will be far simpler for a landlord to not negotiate different terms for a lease.  And that is probably what is going to happen.

We will see if this bill moves along in the legislative process.

Normally, lawsuits over $15,000 are filed in the Law Division of the Superior Court of NJ.  In the Law Division a plaintiff can file suit where they live, where a defendant lives, or where the action occurred.  That would mean a contractor could file suit in Law Division in the county where their business is located.  S1032 does not change this.  S1032 is meant for cases under $15,000.  For cases under $15,000 a lawsuit can be filed in the Special Civil Part.  In the Special Civil Part a lawsuit can only be venued where at least one of the defendants residences.  S1032 is meant to cover these kinds of cases.  The bill statement provides that its intent is for:

Home improvement contractors who are located in the State’s beach communities have found it difficult to pursue lawsuits against homeowners who have defaulted on payments for services rendered because these homeowners do not live in the same counties as their vacation homes.

So under the bill when a contractor does work on a shore house where the owner does not live, they can do not have to go to the county where the owner lives, but can file suit in the county where they did work.  The contractor could have always filed in law division no matter what the amount of damages, but the down side would be that a lawsuit in the law division can take several years before there is trial.  In Special Civil Part the cases move much faster.

Since the bill only applies to non-commercial property, hopefully the courts will not consider purely rental properties as commercial.  If so the bill would not apply and the contractor would be back to either filing in Law Division or filing the lawsuit in the county where the property owner lives.  Another work around would be for the contractor’s contract to provide where a lawsuit may be filed.