Articles Posted in News

New Jersey CapitolThe overall economic outlook for New Jersey is cautiously optimistic, at least according to some sources. The New Jersey Business & Industry Association (NJBIA) describes a gradual increase in “business confidence” in its annual Business Outlook Survey, but it also notes several downward trends. People are apparently leaving the state in substantial numbers, as are many businesses, resulting in fewer jobs and less income statewide. The NJBIA offers possible explanations for why this is happening and what might be done about it. The state is also taking steps to evaluate the situation. A bill that recently passed the New Jersey Senate, which is now awaiting action in the Assembly, would direct the New Jersey Department of Labor and Workforce Development (LWD) to conduct detailed surveys of businesses that are leaving the state.

In 2007, the New Jersey Legislature enacted the Millville Dallas Airmotive Plant Job Loss Notification Act, also known as the NJ WARN Act. P.L.2007, c.212; N.J. Rev. Stat. § 34:21-1 et seq. The law applies to employers that have done business in the state for over three years and that have at least 100 full-time employees. Covered employers are required to provide a notice, in a specified form, to any employee who is terminated as part of a “mass layoff” or to all employees who lose their jobs as a result of a “transfer of operations” or “termination of operations.” Id. at § 34:21-2. The law also directs the LWD’s response team, whose purpose is to assist laid off employees, to offer to consult with the business’ management and workers.

While the NJBIA’s 2017 Business Outlook survey shows optimism among business owners, another study published in early 2016 shows significant rates of “outmigration” by both residents and businesses. From 2005 to 2014, the NJBIA estimates that more than two million people moved away from New Jersey, and this cost the state about $18 billion in net revenue. It further estimates that the state has lost about 75,000 jobs and $11.4 billion in “lost economic activity.” Despite these grim statistics, other measurements seem much more hopeful. Another organization, for example, reported that home sales in New Jersey have increased by more than 30 percent since early 2015.

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geralt [Public domain, CC0 1.0 (], via PixabayThe attorney-client privilege, which safeguards communications between an attorney and a client, is a cornerstone of our legal system. Attorneys must maintain a high standard of confidentiality, and the attorney-client privilege builds on this by stating that a lawyer may not be compelled to testify about communications with a client, or to disclose such information in response to a subpoena or other demand. The privilege can apply to almost any sort of legal matter, not just communications related to litigation. Business clients face complicating factors that may not be present for individuals. For example, an employee of a business must be authorized to speak on behalf of the business in a conversation with the business’ attorney for the conversation to be privileged. A New York federal court issued a ruling earlier this year addressing whether documents transmitted by a business to its attorney constituted a privileged attorney-client communication. It held that the documents, which were not prepared by legal counsel for the business, were not privileged. Wultz v. Bank of China Ltd., No. 1:11-cv-01266, opinion and order (S.D.N.Y., Jan. 21, 2015).

The lawsuit’s claims arise from a suicide bombing in Tel Aviv, Israel in 2006. The plaintiffs, whose son died in the bombing, allege that the person responsible was a Bank of China (BOC) customer, and that BOC facilitated the attack by executing millions of dollars in wire transfers for the person. The documents at issue in the court’s recent order reportedly describe an internal investigation by BOC into the lawsuit’s allegations. The plaintiffs’ counsel sent a letter to BOC’s New York branch (BOC-NY) in January 2008, stating an intention to file suit in connection with the bombing and inviting BOC to enter into settlement negotiations. BOC-NY sent the letter to BOC’s head office (BOC-HO) in Beijing. The General Manager of the bank’s Legal Compliance Department in Beijing instructed the Chief Compliance Officer to investigate the plaintiffs’ allegations. According to the court, neither of these individuals were attorneys.

While BOC-HO was conducting an investigation, the Chief Compliance Officer at BOC-NY, who was also not an attorney, was conducting a parallel investigation. The two offices exchanged information and preliminary findings, and the executive at BOC-HO directed the New York office to continue investigating. The bank branch in Guangdong, China (BOC-GD) also conducted an investigation. At some point between January and March 2008, BOC executives discussed retaining outside counsel, but they did not formally do so until the end of March. No one involved in the investigation up to that point was an attorney, nor was any inside counsel for BOC involved in the investigation.

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S&P500_(1950-12).jpgA superior court in New Jersey denied a motion by the credit rating agency Standard & Poor’s Financial Services (“S&P”) to dismiss a lawsuit brought under the New Jersey Consumer Fraud Act (CFA), N.J. Rev. Stat. § 56:8-1 et. seq. Hoffman, et al v. McGraw Hill Financial, Inc., et al, No. ESX-C-216-13, opinion (PDF file) (N.J. Super. Ct., Essex Co., Dec. 31, 2014). The New Jersey Attorney General is alleging financial and advertising fraud involving mortgage-backed securities, which were a major factor in the 2008 financial crisis. The case, which should be of interest to New Jersey small businesses and consumers alike, has traveled to federal court, to a multidistrict litigation (MDL) matter, and back to state court.

S&P publishes research and analysis of stocks and bonds, maintains indices like the S&P 500, and issues credit ratings for private companies and government entities. The New Jersey Attorney General alleges that, from at least 2001 to 2008, S&P based its ratings of various mortgage-backed securities on its own financial interests, and gave favorable ratings to companies that were paying clients, even if they did not merit such a rating. Numerous other states and the federal government have sued S&P over the same general allegations.

The New Jersey lawsuit (PDF file), originally filed on October 9, 2013, asserts three causes of action against S&P and its parent company: (1) Misrepresentations and knowing omissions of material fact under the CFA, N.J. Rev. Stat. § 56:8-2; (2) unconscionable commercial practices under the CFA, id.; and (3) misrepresentation and knowing omissions of material fact in violation of the Advertising Regulations, N.J. Admin. Code § 13:45A-9.2(a)(9).
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Tesla_Roadster_Japanese_display.jpgNew Jersey officials are invoking a state law regulating the purchase and sale of automobiles to prevent Tesla Motors, a California-based electric car company, from operating stores in the state that effectively sell cars directly to the public. Laws in New Jersey and at least forty-seven other states prohibit auto manufacturers from selling cars themselves, instead requiring them to sell through franchised dealers. New Jersey adopted amendments to an administrative rule to make it clear that Tesla does not qualify as a dealer under state law. The rule change could be construed as good for New Jersey businesses, since it arguably benefits locally-owned or -managed car dealerships. It has also, however, incurred the anger of Tesla and other major companies.

Tesla Motors, based in Palo Alto, California, currently offers the Model S, a fully-electric luxury sedan, for sale through its website. It previously sold an electric sports car model called the Roadster. A Model S sells for around $69,000, so its retail appeal is selective. Rather than sell the cars through dealerships, Tesla operates stores around the country that reportedly act as showrooms. Consumers can learn about the cars there, but all actual purchases take place via the internet. Many states have successfully argued that the showrooms effectively serve as retail stores owned and operated by Tesla, which violate state law.

New Jersey law requires a dealer’s license in order to sell motor vehicles to the public. NJ Rev. Stat. § 39:10-19. All motor vehicle sales must take place through dealerships that have a franchise agreement with a manufacturer, NJ Rev. Stat. § 56:10-27, and manufacturers are expressly barred from owning or operating their own dealerships. NJ Rev. Stat. § 56:10-28. The state has argued that Tesla cannot, under state law, operate retail stores or dealerships directly, nor may the company operate them through a subsidiary.
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Civilrightsact1964.jpgUnder a 2012 amendment to the New Jersey Equal Pay Act, businesses employing fifty or more people within the state must provide an official notice to their employees of their rights under federal and state law regarding gender equity. The New Jersey Department of Labor and Workforce (NJDOL) published the final forms for these notices on January 6, 2014. The 2012 legislation required employers to provide the notice to their employees within thirty days of publication, making the deadline February 5. The NJDOL has not specified any penalty for failing to comply with the deadline, nor did the legislation itself provide for penalties. While the notice requirement does not apply to businesses with a small number of employees, the guidance it offers to federal and state employment law is nevertheless useful.

The New Jersey Assembly passed A2647 in June 2012, and it became law on September 19 of that year. The law amends the New Jersey Equal Pay Act, NJ Rev. Stat. §§ 34:11-56.1 et seq., to require notices to employees in a form prescribed by the NJDOL regarding their rights against gender inequity and discrimination under state and federal law. It does not expand workers’ rights in any substantive way, but simply mandates specific forms of notice regarding workers’ existing legal rights.

The law sets a deadline of thirty days after publication of final forms by the NJDOL. NJ Rev. Stat. § 34:11-56.12. This publication occurred on January 6, 2014. For employees hired after the February 5, 2014 deadline, covered employers must provide the notice by the next December 31. Employers must provide a written copy of the form to each employee, and obtain a signed acknowledgment of receipt and understanding. They may distribute the notice form via email; via printed materials delivered to employees with their paychecks, new hire packets, or employee manuals; via flyers delivered to individuals employees; or via a website or company intranet, provided employees receive adequate notice of how to access the site. The notice form is currently available in English and Spanish, and the NJDOL may make it available in other languages as needed.
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UNITED_STATES_GOVERNMENT_CONTRACT_NOTICE_TO_EMPLOYEES_-_NARA_-_515923.jpgThe U.S. Small Business Administration (SBA) recently issued a final rule relating to large government contractors’ use of small businesses as subcontractors. 78 Fed. Reg. 42391 (Jul. 16, 2013). Part of the SBA’s mission is to ensure that small businesses have a reasonable opportunity to participate in government contracts alongside larger companies. The SBA’s recent revisions protect small businesses from larger companies that include them in a bid for a government contract, in order to improve their chances of winning the contract, but then do not use them, or use them in a different manner, once the contract is awarded and the company begins work. Small businesses have had little recourse against this “bait and switch” practice, although Congress included protections for small businesses in this sort of situation in the Small Business Jobs Act (SBJA) of 2010.

Government agencies routinely enter into contracts with private companies for provision of goods or services to the agency, or for provision of services to others on the agency’s behalf. Companies that regularly enter into large government contracts are known as “prime contractors.” The SBJA requires prime contractors to include a “small business subcontracting plan” in bids for construction contracts valued at more than $1.5 million and non-construction contracts worth over $650,000. The bid must show that the prime contractor intends to use qualifying small businesses as subcontractors.

Various federal agencies maintain offices, such as the SBA’s Office of Government Contracting and the Department of Homeland Security’s Office of Small and Disadvantaged Business Utilization, to assist small businesses looking for prime contractors. The General Services Administration publishes the GSA Subcontracting Directory, which identifies prime contractors eligible for contracts requiring a small business subcontracting plan. Private-sector publications like Washington Technology also provide information on prime contractors.
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file5061263252299.jpgThe federal government offers a variety of programs for women-owned small businesses (WOSBs), generally defined as businesses with at least fifty-one percent of the equity owned and controlled by women. Such businesses have historically suffered disadvantages and discrimination, and part of the official policy of the U.S. Small Business Administration (SBA) and other agencies is to offer them support, including loans and government contracts. The SBA has a program, known simply as the Women-Owned Small Business Program, that assists WOSBs and economically-disadvantaged women-owned small businesses (EDWOSBs) in procuring government contracts. The program has had upper limits on the size of available contracts imposed by statute until recently. Congress removed the cap at the end of 2012, and the SBA published an Interim Final Rule in early May 2013, thus opening up a much wider field of government contracts potentially set aside for WOSBs and EDWOSBs.

Federal Support for Women-Owned Small Businesses

Congress has declared that it is in the nation’s interest to support WOSBs by “vigorously promoting the[ir] legitimate interests” and removing “discriminatory barriers [to] capital and other factors of production.” 15 U.S.C. § 631(h). Congress defined a “small business concern” as one that is “not dominant in its field of operation,” id. at § 632(a)(1), and that meets other criteria established by the SBA. It defined a WOSB officially as a small business concern “owned by one or more women,” with at least fifty-one percent of the stock (if a public corporation), and in which “one or more women” handle the day-to-day business operations. Id. at § 632(n). The SBA established standards to determine if a small business is “economically disadvantaged,” generally based on the circumstances of the individual owners.
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800px-Hurricane_Sandy_New_Jersey_Pier.jpgHurricane Sandy caused massive devastation across the eastern United States, destroying property, displacing people, and disrupting communications and transportation from Pennsylvania up to New England. New Jersey and New York were particularly hard-hit. Dozens of people lost their lives because of the storm in New Jersey, with even more fatalities in New York. Millions more lost electrical power and other services. Businesses that are trying to rebuild after the storm may face difficulties with insurers, who may contest claims for damages, and suppliers, who may have suffered their own losses. An often overlooked feature in many contracts is the force majeure clause, which businesses may be able to invoke to delay or excuse obligations they cannot fulfill. They should also be on guard, however, for attempts by others Behring Intern. v. Imperial Iranian Air Force, 475 F.Supp. 396, 401 (D.N.J. 1979). It typically refers to a “natural cause without the intervention of man.” Id. The Behring case involved a breach of contract claim between an American company and the Iranian government, with the Iranian government claiming that the unrest of the 1979 Iranian Revolution constituted force majeure excusing it from performance. The court found that this was clearly “within the control of human agencies” and therefore could not justify non-performance.
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800px-Hurricane_Sandy_damage_Long_Beach_Island.jpgHurricane Sandy, also known as Superstorm Sandy, hit the east coast of the U.S. on October 29, 2012, causing catastrophic damage across the eastern seaboard, particularly in New Jersey and New York. After touring damaged areas several days after the storm made landfall, Governor Chris Christie called the damage “unthinkable.” The state’s death toll in early November stood at twenty-three, and power outages affected up to 2.7 million people. Estimates of total damages went above $20 billion, making Sandy one of the most brutal and damaging storms in U.S. history.

New York and northern New Jersey suffered significant damage to buildings and infrastructure. The storm had a drastic impact on New Jersey small businesses, with power, transportation, and communications disrupted throughout the state. Local, state, and federal government assistance has become available to help businesses regain their feet as the state rebuilds. Businesses should also review their insurance coverage and business contracts to see how the storm has affected their rights and obligations.

New Jersey has made a “Business Recovery Check List” available on its website to assist businesses in assessing damages, making repairs, and getting business operations started again. It includes tasks like contacting the business’ insurance representative, filing claims, and assessing structural damage and infrastructure losses. New Jersey’s Business Action Center has a hotline and website to assist businesses with disaster loans, disaster unemployment benefits, building inspections, and other disaster relief. The New Jersey Governor’s Office has announced multiple programs to provide micro-loans and additional insurance coverage to businesses affected by Sandy. REBUILD New Jersey, for example, is a program operated by New Jersey Community Capital that can provide loans between $10,000 and $30,000 to assist businesses with repairs and replacement of inventory or equipment.
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493668_69476274_12272011.jpgAs the economy makes what we are told is a slow recovery, unemployment remains at uncomfortably high levels in many parts of the country, New Jersey included. With a 9.1 percent unemployment rate, some New Jersey workers have sought out alternative solutions. As the Asbury Park Press reports, entrepreneurship may soon become an appealing option for many as jobs remain scarce.

The Press tells the story of Charles Schlapfer of Lavallette, New Jersey, who worked as general manager of a building supply company when the 2008 financial crisis hit. He survived a massive round of layoffs but suffered a fifty percent pay cut. Although he looked around for other jobs, he could not find anything that met his family’s financial needs. Rather than continue with his reduced salary and no clear job security, he rolled the dice, quit his job, and started his own company. He now runs a “manufacturers’ sales representation firm” that helps businesses in the construction industry take advantage of public-sector opportunities, which he sees as a huge and relatively untapped market for local companies. The business draws on his work experience and contacts and, he hopes, has great growth potential.

New Jersey offers resources and support for entrepreneurs looking to start their own venture. The state’s Department of Labor and Workforce Development (LWD) operates several Small Business Development Centers (SBDC’s), which have begun hosting training courses and counseling for unemployed individuals who want to pursue an entrepreneurial path. A six-week training program, the “Entrepreneurial Training Program for the Unemployed” (ETPU), instructs aspiring business owners in how to develop a business idea and handle the many aspects of the business start-up process. It also includes one-on-one counseling and assistance with applications for start-up financing. The program is free, financed by grants from the LWD), and requires applicants to meet certain criteria related to employment and receipt of unemployment benefits.

Starting a business requires careful planning and attention. Every business is unique, but all have common questions at the outset. The question of initial capital is perhaps the most important. Some businesses can be run from a laptop computer and cell phone in a corner of your home or the neighborhood cafe, while others require significant equipment purchases and office space. This also affects the questions of how to structure a business. An entrepreneur must consider whether to operate a business as a sole proprietor, to form a corporation, or to create some other business organization. That leads to questions of whether to hire staff, and so on.
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