Iowa Law Blog

Benjamin Clark Joins Sullivan & Ward, P.C.

Skain@sullivan-ward.com (Samantha Kain) — Sun, 28 Sep 2008 13:52:15 -0600

Benjamin joined the firm as an associate in September of 2008. He is a recent graduate from Drake University Law School where he served on the Drake Journal of Agricultural Law. Benjamin's knowledge in the areas of environmental, agricultural, real estate, corporate, and public utility law are an asset to the Firm.

Corporate Liability Protection? Maybe.

MGardner@sullivan-ward.com (Matt Gardner) — Wed, 17 Sep 2008 20:25:04 -0600

Many people understand that a corporation or limited liability company can provide its individual owners with protection from the debts of the company. For example, if a company is unable to pay its vendors, those vendors are typically unable to go after the owners of the company for those debts. Or if the company borrows money, the lender can only recover the debt from the company and not the owners/shareholders/members, generally.

However, if the owner of the company has provided a personal guarantee to that vendor or any other entity that has provided money or services to the company, the corporate liability protection is meaningless at that point. Most guarantees don't require that the creditor look to the company first, but could look first to the individual providing the personal guarantee.

If at all possible, an owner should avoid giving a personal guarantee when entering into any agreements. Conversely, as a creditor, whenever dealing with a small business with limited operating history, you should demand a personal guarantee from the owner(s) of the company.

Breaking a Trust in Iowa

MGardner@sullivan-ward.com (Matt Gardner) — Mon, 01 Sep 2008 23:09:21 -0600

A common question that I get asked is about "breaking a trust". By breaking a trust, someone typically means doing away with a trust for some reason or changing its terms. Is it hard to do? Can it be done? Yes, it certainly can be done. The difficulty of doing so depends on the circumstances.

Terminating or Modifying a Trust in Iowa

The general background is that a trust will run its course until its objectives are reached. However, there are situations which may be applicable that affect the trust. Under the Iowa Trust Code, which is still relatively new and untested in Iowa, there are several statutory options that are available for consideration.

Terminating a Small Trust in Iowa

If the amount of the trust is relatively low and incurring costs in its administration, it is possible to terminate the trust and distribute the assets to the beneficiaries, even if the trust terms provide for the trust to continue into the future. A court would need to approve such a termination after either the trustee or a beneficiary request the court to terminate the trust. Iowa Code sec. 633A.2205 (2007). Whatever "low" value means depends on the costs involved, the argument presented to the court and the court's opinion as to what is "low enough".

Modifying a Trust in Iowa

it is possible to change an irrevocable trust. If the settlor (the person who created the trust) is still alive, so long as they consent and all the beneficiaries consent, a trust could be modified or even terminated. Court involvement is not necessary. Iowa Code 633A.2202. If the settlor is dead, there is a different procedure involved. If ALL the beneficiaries are in agreement and it isn't necessary for the trust to carry on with the same terms, a court can permit the trust to be modified or even terminated. The difficult component is getting the consent of each beneficiary. The Iowa Trust Code does provide some relief when dealing with minor beneficiaries. Iowa Code 633A.2203.

Replacing the Trustee of an Iowa Trust

This provision has some unresolved questions that may need to be clarified in the future through some legislative changes. Historically, it was difficult to remove a trustee from a trust. However, the relatively new (& untested) Iowa Trust code does provide some "gray area" that may be used to change the trustee. There is also the possibility that a trust could be amended by insertion of a provision in a trust permitting a procedure to remove a trustee. At least one court in Iowa has permitted this change.

Celebrate Labor Day!

eoverton@sullivan-ward.com (Liz Overton) — Tue, 26 Aug 2008 10:41:46 -0600

Labor Day, summer's last hurrah, is just around the corner (It's Monday, for those of you who don't highlight every holiday on your calendar). The original purpose of Labor Day was to celebrate the working (wo)man (154.5 million people now) and also to discuss working conditions and improvements that could be made. Most celebrations included rallies, demonstrations, and speeches from labor representatives. Today, Labor Day has become more of a family celebration with little thought about our working conditions. Is it because we have it so good? You decide--below are some facts and statistics about current working conditions taken from the U.S. Census Bureau regarding labor:

· 82% of full-time workers are covered by health insurance

· 77% of workers receive paid holidays

· 15% of workers have access to employer assistance for child care

· 12% of workers have access to long-term care insurance

· 46% of workers have access to dental care

· 29% of workers have access to vision care

· 64% of workers have access to outpatient prescription drug care

· The median earnings of male full-time, year-round workers is $42,261.00

· The median earnings of female full-time, year-round workers is $32,515.00

· 28% of workers work more than 40 hours per week

· 8% of workers work more than 60 hours per week

This year, enjoy your Labor Day celebration, but take some time to think about your working conditions and to pat yourself on the back for another good year.

Laughter May Still be the Best Medicine

eoverton@sullivan-ward.com (Liz Overton) — Wed, 13 Aug 2008 11:17:39 -0600

The other day I had the opportunity to hear Gavin Jerome, the Morale Mechanic speak. The invitation stated Gavin's mission is "to change the workplace one laugh at a time, not just by getting laughs, but by teaching people how to create and share humor with others." I like a good joke so I thought I would attend. His presentation was humorous, but also enlightening. He championed taking the difficult, stressful situations which you have to deal with and finding some humor in it. Gavin gave nine thoughts which won't eliminate the stress in our lives or jobs, but may make it more bearable:

1. You always have a choice: you can be positive or negative.

2. Find humor in places people miss it

3. Go with the flow

4. Look for the laughs in your life

5. Laugh at yourself

6. Humor helps manage conflict

7. Humor helps manage change

8. Customer service isn't magic

9. People like doing business with people who like doing business

Today's environment--work obligations, family obligations, financial obligations--creates stress which causes disruptions in the work place, including strained co-worker relationships and customer relationships. Since stress cannot be eliminated from our lives, laughter may be the best medicine.

Photo on flickr by Darren Hester

Be Careful What You Say

eoverton@sullivan-ward.com (Liz Overton) — Mon, 11 Aug 2008 14:37:17 -0600

Beside the fact that discriminating against prospective employees could land your company in litigation hot water, it may come back to bite you later on. Most people have heard of Roe v. Wade but haven't heard of Sarah Weddington, the attorney representing the woman seeking an abortion in Roe v. Wade. According to an ABA article, Weddington may not have had that opportunity had she been given a fair chance at a Dallas law firm. During the interview process, the law firm questioned her ability to work the long hours and still make it home to cook dinner. They were also concerned that they couldn't cuss her out as much as male associates. She didn't get the position, but she didn't file a lawsuit. Years later, when she was advising President Jimmy Carter on women's issues and judicial appointments, a senior partner in that same Dallas law firm wanted to be a federal judge. He didn't get the position.

Project LIGHT

Skain@sullivan-ward.com (Samantha Kain) — Sun, 10 Aug 2008 18:51:35 -0600

I was fortunate enough to have been part of the 2007-2008 Leadership Iowa class. Throughout the year I traveled the state learning about different communities and important issues facing Iowa such as healthcare, economic development and agriculture entrepreneurship. During one session, my class and I decided we were going to partner with Habitat for Humanity and build Iowa's first "green" Habitat House.

Our goals were to build a model green home that would:
* Reduce the impact on human health and the environment;
* Minimize the family's sustained utility costs;
* Serve as a model for Habitat for Humanity nationwide to encourage the organization to build more green homes, reduce the carbon footprint, and help make sustaining a home more affordable for partner families;
* Raise awareness of Iowa's leadership in renewable energy; and
* Demonstrate that the life cycle cost of green building is less expensive than traditional construction.

These goals are becoming a reality this week when construction on Iowa's first "green" Habitat House gets undeway. "Raise the Roof" on Project LIGHT (Leadership Iowa Green Home Team) is scheduled for Tuesday, August 12, 2008. Thank you to everyone involved who has contributed to make this project a reality!

So you want to start your own business . . .

eoverton@sullivan-ward.com (Liz Overton) — Thu, 31 Jul 2008 10:39:13 -0600

You've been working at ABC Co. for some time now. You have gained experience and knowledge during your employment, but you've caught the entrepreneurial bug. You want to start your own business. During your employment you have developed solid relationships with ABC Co. clients. You're positive these clients would follow you if you left ABC Co. Before you do anything ask yourself the following questions:

1. Did you sign a non-compete with ABC Co.? Reasonable non-compete agreements are enforceable in Iowa. If you signed a non-compete agreement before or during your employment with ABC Co., it may be enforceable and you will want to abide by the terms of the agreement. If you have questions about the agreement, contact your attorney.

2. Do you still work for ABC Co.? If you are currently employed with ABC Co. fight the urge to solicit ABC Co. clients and/or employees. According to Iowa law employees have a duty of loyalty to their employers. Soliciting clients and/or other employees while employed violates that duty. Even an innocent conversation with a client: "Hey, I'm thinking about starting my own business, what do you think?" may be considered solicitation. It may be difficult to not ask because clients are important to the success of your new venture. But don't do it.

3. Are you cleaning out your old office/workspace? If you have terminated your employment (or are just about to) and are in the process of cleaning out your workspace, including your computer refrain from taking with you ABC Co. information or materials that may be unique to ABC Co.. This information or material might be considered confidential or a trade secret. Leave it there.

4. Have you terminated your employment with ABC Co.? Once your employment relationship with ABC Co. has been terminated you are free to compete with ABC Co.(as long as there is no agreement otherwise). You are entitled to use general information concerning the business, including the names of clients retained in your memory. Good luck.

photo on flickr by bludgeone86

Think from the End when Starting a New Business

kkrudenier@sullivan-ward.com (Kyle Kruidenier) — Fri, 25 Jul 2008 14:35:42 -0600

The best time to make decisions regarding how to exit a business venture is at the beginning, especially if the business is to have more than one owner. Why? Because, although this my seem a little cynical, it is in all likelihood precisely the time when the soon-to-be business partners will be most closely aligned and focused on a common goal. It is at this time, when leaving the business is the furthest thing from the partners minds, that objectivity can be achieved and a fair buy-sell agreement can be created that allows a partner out, without placing an undue burden on the remaining partner(s) and business. At a bare minimum a carefully crafted buy-sell agreement will cover, (1) How the value of an owners interest in a business will be determined; (2) What, if any, internal or external events will trigger a buy-out; and (3) Is the sale of a departing owners interest restricted in anyway.

For information on different types of buy-sell agreements and their tax implications see Structuring Corporate Buy-Sell Agreements by David Joy, Jo Koehn

Targeted Small Business (TSB) Program

eoverton@sullivan-ward.com (Liz Overton) — Thu, 24 Jul 2008 13:27:56 -0600

My husband and I are in the early process of purchasing a business. After some searching, a couple hints from a friend and a newspaper article in the Des Moines Register we stumbled on the Targeted Small Business program offered through the Iowa Department of Inspection and Appeals and the Iowa Department of Economic Development. The TSB program is for Iowa businesses that are at least 51% owned and managed by minorities and/or women or persons with disabilities. One purpose of the program is to provide financial assistance in the form of low interest loans and/or grants to new or existing businesses.

The process (as I am currently discovering) does take a little work. First, you must become a certified TSB through the Iowa Department of Inspection and Appeals. The application requires information concerning you and the current and/or future business. Because our business is not yet established my husband and I will apply to be conditionally certified. Once we are up and running we can become fully certified.

Once certified (conditionally or fully), you are eligible to apply for the TSB Financial Assistance Program. The financial assistance application is a bit more involved than the certification application. A complete business plan, including projected financials is required. Those who have little or no experience in developing a business plan or projecting profits and losses can contact the Department of Economic Development and be assigned an assistant who will guide you through the process.

If you are a minority, woman or person with disability thinking about starting your own business or expanding a current business, you should consider the Targeted Small Business Program.

New Child Support Guidelines?

Skain@sullivan-ward.com (Samantha Kain) — Tue, 22 Jul 2008 14:34:53 -0600

The Federal Family Support Act of 1988 requires each state to maintain uniform child support guidelines and criteria, and review the guidelines and criteria at least once every four years. In Iowa, the Iowa Supreme Court holds this responsibility. To facilitate this year's scheduled review, the Iowa Supreme Court established a committee to (1) analyze information about the number of deviations from the Iowa Guidelines, (2) study current data concerning child-raising costs and other economic measures, and compare Iowa's guidelines with child-rearing measures and the guidelines of other states, (3) review and consider the findings and recommendations of the Iowa Child Support Advisory Committee, and (4) consider other information deemed necessary or useful for a thorough review of the current Iowa guidelines. Upon completion of its investigation the committee recommended the adoption of new child support guidelines. The proposed guidelines place a greater emphasis on apportioning the cost of child rearing between both parents according to their respective incomes. The proposed guidelines also provide for lower support orders for low-income, non-custodial parents, are more closely aligned with current economic data on child-rearing costs, and provide a better way for parents to share the cost of health insurance.

For more information regarding the current child support guidelines see Iowa Code Sections 598.1(9) and 598.21B (www.legis.state.ia.us/Code.html) or contact the Child Support Specialized Customer Service Unit at: 1-888-229-9223 (toll free) or 1-515-242-5530.

The Innocence Project of Iowa

Skain@sullivan-ward.com (Samantha Kain) — Mon, 14 Jul 2008 18:11:30 -0600

In 2007, a group of Iowa attorneys, professors and students founded the Innocence Project of Iowa. The Project is designed to prevent and remedy wrongful convictions in the state through education, advocacy and litigation. With the creation of the Project, Iowa joins many other state and regional innocence projects that make up the national Innocence Network. There are currently at least 38 university based innocence projects in the United States. The first Innocence Project was founded at the Cardozo School of Law in 1992. Since that time, more than 200 people have been exonerated in the United States, including 15 individuals on death row.

The Innocence Project of Iowa has no paid staff and relies completely on volunteers. Case intakes and initial screenings are completed by the paralegal program at Iowa Lakes Community College, and additional support is provided by students at Drake Law School and the University of Iowa College of Law. Utilizing the services of volunteer attorneys, the Project then provides pro bono representation to inmates with viable claims of actual innocence. An emphasis is placed on cases where DNA evidence is available. To date, the Project has identified two cases to pursue. Hopefully, the efforts of the Innocence Project of Iowa will increase the chances that more Iowa inmates will be exonerated for crimes they did not commit.

For more information about the Innocence Project of Iowa, go to www.iowainnocence.org

Divorce & the Economy

jjaskolka@sullivan-ward.com (Jennifer Jaskolka-Brown) — Fri, 11 Jul 2008 14:43:50 -0600

I was home Tuesday morning waiting for a repairman when I caught the "Today" show on NBC. One of the speakers was a prominent divorce attorney discussing the state of divorce these days, especially given the economy. The other issue was use of electronic evidence during a divorce especially when child custody is an issue.

The conclusion was that the economy has a temporary affect on the divorce rate. Tough economic times tend to make people stick together. Isn't it always easier to support one household on two incomes rather than two households on two incomes? The divorce rate is likely to emerge from stagnation once the market begins doing better.

As for electronic evidence, the program focused on the Christie Brinkley divorce trial. As you may know, Brinkley's attorneys are using her husband's past behavior, which includes visits to pornographic websites, to argue he is an unfit custodian.

While using such evidence is not new, it still often goes unnoticed . . . . or unrecognized by those engaging in such behavior.

Iowa Law on Smoking in Vehicles Under Smoke Free Air Act

mlanda@sullivan-ward.com (Mark Landa) — Wed, 02 Jul 2008 15:40:33 -0600

Iowa Department of Health recently clarified the regulations affecting smoking in vehicles. Under Iowa’s Smoke free Air Act, smoking is allowed in vehicles that are for the sole use of the driver and are not used by more than one person in the course of employment either as a driver or passenger. Last week I asked the Iowa Department of Health three questions regarding the law:

1.) Can an employer allow nonsmoking employees to be passengers in these vehicles as long as no one is allowed to smoke?

2.) Can an employer allow nonsmoking drivers to drive these vehicles with or without passengers?

3.) Can an employer allow a driver and passengers to smoke in these vehicles as long as all present in the vehicle are smokers?”

The Department answered:

“As you mention in your question, the law stipulates that smoking is not regulated in a vehicle if that vehicle is for "the sole use of the driver" to which it is assigned and is not used by any other "driver or passenger." This means that any work vehicle in which passengers are allowed at any time must be smokefree at all times and must have a "no-smoking" sign posted. If the vehicle is driven at any time by anyone other than the driver to which it is assigned, the vehicle must be smoke free at all times.”

So, under Iowa’s law, a vehicle that is assigned to a driver who smokes must be designated as “No Smoking” for its remaining life as a company vehicle if the driver ever allows a passenger to ride with him/her. If the vehicle is driven by any person other than the designated smoking driver it must be smokefree “at all times”. It’s no wonder that the employers I’ve dealt with have decided to ban smoking in their company-owned vehicles altogether.

Wal-Mart Takes Another Hit

eoverton@sullivan-ward.com (Liz Overton) — Wed, 02 Jul 2008 09:45:34 -0600

It's been said before: Wage and hour claims are the newest trend in the employment law area. Recently Wal-Mart got hit with a $6.5 million judgment for violating Minnesota wage and hour laws. The judgment could increase to $2 billion depending on the penalties imposed. Apparently Wal-Mart required employees to work off the clock and denied rest and meal breaks to employees. The 151 page opinion can be found here.

What can you do to prevent a wage and hour claim? Start by classifying your employees correctly. Employees are either exempt or non-exempt. The most common types of exempt employees are executive, administrative and professional. Non-exempt employees must be paid overtime.

Keep accurate records of the hours worked by non-exempt employees. Using punch-in and punch-out clocks may be the most accurate, but at the very least have employees write their hours on a time sheet for each pay period. Iowa law requires employers to keep these records for three years.

Make policies clear to employees and managers. If breaks are given to employees, make it clear to employees that they should or must take the breaks. Make sure managers understand this as well. It seems Wal-Mart's policy was to give workers meal and rest breaks, however, managers either directly or indirectly required employees to work during meal and rest breaks with no pay.

For more information on the wage and hour law check out the DOL website

Debt Collectors Save Us All Money in 2007?

kkrudenier@sullivan-ward.com (Kyle Kruidenier) — Fri, 27 Jun 2008 09:42:35 -0600

In a national study entitled "Value of Third-Party Debt Collection to the U.S. Economy in 2007: Survey and Analysis" , which was conducted by PricewaterhouseCoopers and commissioned by ACA International, it was determined that in 2007 the collection industry was able to return $40 billion in bad debt back to large and small businesses that had previously extended consumer credit. That $40 billion return represented a greater than twenty (20) percent reduction in private-sector bad debt. The study suggested that this return of $40 billion translated to an average savings of $354 per American household, as the reduction in bad debt helped companies keep their margins low and in turn sell there products at a lower price. So there you have it...through the diligence and hard work of its employees the collection industry benefits us all.

Liability for Non-Employee Sexual Harassment?

eoverton@sullivan-ward.com (Liz Overton) — Wed, 11 Jun 2008 09:00:00 -0600

It should be obvious to all employers that sexual harassment in the workplace is prohibited. Most employers also understand their obligation to discipline employees who engage in harassing behavior in the workplace. But what about the non-employee harasser? Many companies are not self-sustaining—they rely on customers, vendors, outside sales persons and other non-employees to drive their business. You, as the employer, cannot control their actions. Even so, do you have the responsibility to protect your employees?

Possibly. The federal regulations suggest that in some limited circumstances employers may be liable for sexual harassment by a customer. If the employer knows or should have known of the conduct and fails to take immediate and appropriate corrective action an employer may be liable for the non-employee’s actions. Once an employer knows or should have known of the harassment, it has an obligation to take all reasonable steps to protect its employee.

As always, have a policy in place which prohibits discrimination by non-employees. Make supervisors aware that the company has a responsibility to protect its employees from harassment by non-employees. Take prompt action to investigate an employee’s complaints. Discuss with the employee the findings of the investigation and steps to prevent the harassment from continuing.

Photo on flickr by DOS82

Time To File Civil Rights Complaint Lengthened

mlanda@sullivan-ward.com (Mark Landa) — Mon, 09 Jun 2008 10:23:15 -0600

Starting July 1, 2008 a person who wants to file a civil rights complaint under Iowa law will have 300 Days. The previous filing deadline was 180 days. This change conforms to the federal deferral time-line of 300 days. There is an exception for persons covered by Section 614.8 of the Iowa Code, the mentally ill and minors. This change will result in a change the Iowa poster which may, but is not required to, be hung in the workplace. The revised recommended poster can be accessed on the Iowa Civil Rights Commission website.

Employers are required to hang the federal EEOC poster.

Retaliation

eoverton@sullivan-ward.com (Liz Overton) — Sat, 07 Jun 2008 09:00:00 -0600

I recently attended an employment law seminar in St. Paul, Minnesota. One key topic that kept resurfacing in the sessions I attended was RETALIATION. Title VII retaliation claims have increased 19% from 2006.

An employer retaliates when it makes an adverse employment decision which tends to discourage an employee from engaging in protected conduct. What is an adverse employment decision? Although not clearly defined, the Supreme Court has made it clear that it is not necessarily have to be a tangible employment decision, such as termination. What is protected conduct? Whistleblowing, filing a complaint, taking FMLA leave or making a worker’s compensation claim are all examples of protected conduct.

What should employers do to minimize retaliation claims?

Have a clear policy prohibiting retaliation;
Educate managers and supervisors about retaliation;
Enforce policies consistently for all;
Refrain from making hasty decisions when employees have engaged in protected activity in the recent past even if you believe the decision is warranted;
Investigate all retaliation claims and discipline those who have engaged in retaliation. Inform the employee alleging retaliation of your findings and whether any disciplinary action will take place;

Some Mechanics of Iowa Mechanic's Lien Law

kkrudenier@sullivan-ward.com (Kyle Kruidenier) — Fri, 06 Jun 2008 05:46:46 -0600

Mechanic's Liens are a valuable tool used by contractors to help insure that they are fully compensated for the materials they supply and the improvements that they make to buildings or land. However, if you are a contractor providing materials or making improvements to an "owner-occupied" dwelling, essentially a residential remodeling contractor, then the mechanic's lien that you file may not be worth much more than the paper that it is printed if you neglect one crucial step.

Under Iowa's Mechanic's Lien law, Chapter 572, a contractor who enters into a contract with a home owner to provide labor or furnish materials for a owner-occupied dwelling and who has or will hire sub-contractors for the job must provide in the written contract with the home owner the following notice:

"Persons or companies furnishing labor of materials for the improvement of real property may enforce a lien upon the improved property if they are not paid for their contributions, even if the parties have no direct contractual relationship with the owner."

In the alternative a contractor who does not enter into a written contract with the home owner must, within ten (10) days of beginning work on the property, provide the owner with written notice stating the name and address of all subcontractors that the contractor intends to use for the construction and, that the subcontractors or suppliers may have lien rights if they are not compensated for the labor or material that they provided in completion of the project.

If written notice required under Chapter 572 is not provided to the owner in a timely manner then the contractor is only entitled to a lien for the work or materials that it actually performed or the materials that it actually provided and would not be entitled to a lien as it pertained to any labor performed or materials furnished by a subcontractor.