Minimum Wage Increases on July 24
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Remember that the most recent federal minimum wage increase (from $5.85 to $6.55 per hour) takes effect on
Getting to Know Tim Anderson
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“The Greatest Object of the Law is to Encourage Commerce”
I am the managing attorney of the St. George, Utah office of Jones Waldo. Since first opening the St. George branch office of the firm in 1980, much of my practice has been focused on the quality growth and development of Southern Utah in diverse areas such as large-tract recreational property development including golf courses, ski resorts, planned development communities as well as mining and natural resources-related matters. I have handled the principal legal aspects of shopping center acquisition and development, including construction, mezzanine and permanent financing on shopping center and commercial retail projects in St. George and at other sites across the United States. Practice in these areas has, as a matter of course, required involvement in municipal law, real estate law, and public land policy matters in the Southwestern United States. My practice also extends to business development from start-ups to representation of rapid-growth private companies with a focus on introduction and expansion of new and existing companies into Southern Utah.
I view the various communities of Southwestern Utah as a virtual panoply of opportunity for small technology firms looking to carve out their own place in one of the most attractive parts of the American sunbelt. It is also ideal for many mid-size companies looking for an expansion site. The area is well-suited geographically for freight and other transportation-centered companies that serve the American Southwest. The quality of life is ideal for family-oriented people, as well as the outdoorsman and the adventurer. It is a truly a hub of commercial and industrial activity on the edge of one of the few remnants of the American frontier. Yet, you can catch some of the best rodeo in the world at the Dixie Round-Up (September, St. George), Broadway-quality theater on a stunning outdoor stage at Tuacahn (Summer and Fall), the finest of Shakespeare in the authentic Stratford on Avon replica stage in Cedar City (Summer and Fall), skiing at a 10,000 ft. + ski resort at Brian Head, or Lake Powell two hours to the east, Las Vegas two hours to the west and Grand Canyon two hours to the south. There are now five large high schools in the St. George area and two in Cedar City. Additionally, Dixie State College in St. George and Southern Utah University in Cedar City both serve the area well with their own programs and well-designed collaborations and partnerships with Utah State University and the state’s flagship institution – the University of Utah.
I am a senior shareholder at Jones Waldo Holbrook & McDonough, PC, one of Utah’s largest and oldest law firms. In addition to serving as the managing attorney for the seven-lawyer St. George office, I currently serve as chair of the firm’s General Counsel Services Group. In this role, I serve as general counsel for several major technology and international sales transaction-oriented clients, handling all aspects of corporate organization and operations as well as management of litigation. This work involves, among other things, emphasis on technology commercialization in higher education and other governmental environs, as well as licensing, publishing, and exploitation of intellectual properties and commercial transactions, both nationally and internationally. I am a member of the International Council of Shopping Centers (ICSC), American Intellectual Property Law Association, the Direct Selling Association Regulatory and Legal Counsel Committee and the association’s International Council. I am a member of the Intellectual Property and Corporate Practice Sections of the Utah Bar and in connection with public lands and endangered species issues (with emphasis on protection of landowner’s rights) worked as a registered lobbyist for clients in matters with the State of Utah and the Federal Government. I am fluent in the German language. Since 1992 I have held and “AV-rating,” the highest peer-based rating an attorney can receive according to the Martindale-Hubbell Law Directory.
Consistent with the philosophy of the firm, I am active in business and civic affairs, having been appointed in 2005 by Governor Jon Huntsman to the Board of Trustees of the University of Utah. I also currently serve as a member of the Washington County Economic Development Council and on the National Advisory Counsel of Dixie State College. I served as a member of the Board of Directors of the University of Utah Hospital Foundation from 2000-2005. I was a trustee of Virgin River Santa Clara Flood Relief, Inc. (community response to the flood tragedy of January 2005). I was President of the Dixie State College Foundation from 1993 to 2004. I was appointed by Governor Michael O. Leavitt to the Board of Business and Economic Development for the State of Utah, 1992-2002 (vice-chairman); served as member of the Industrial Assistance Fund Committee; member of the Centers of Excellence Review Committee from 1993-2002 (chairman); and as Chairman of the Fifth District Judicial Nominating Commission, 1993-1998. I also had the honor of serving as “Logstar” (Honorary Wing Commander) of the 388 Fighter Wing at Hill Air Force Base, Ogden, Utah, 2001-2002 (back-seated in an F-16, earned my 9-G certificate and did not throw up!). Earlier in my practice, I was a weekly columnist on matters concerning the law in my “From the Law Library” column in the Spectrum newspaper from 1986 to 1993. I have served on the Board of Directors of the St. George area Chamber of Commerce and was a founding member of the Washington County United Way.
My wife Kathryn and I enjoy a blended family of seven children, ages 11 to 26 and three grandchildren and are involved in many aspects of coaching, outdoor activities, supporting athletics, music and other family and children’s educational pursuits and activities. I have run twelve marathons. We reside in St. George, Utah, with a second residence in South Jordan, Utah. I was born in Seattle, Washington on March 12, 1951. I was educated in schools at various locations across the United States and in Germany, graduating with high honors in Political Science from Southern Utah University in 1975 and received my J.D. degree in 1978 from J. Reuben Clark Law School at Brigham Young University. I am a member of the Utah Bar and am admitted to practice before the Federal District Court for Utah and the Tenth Circuit Court of Appeals.
Don't Take a Chance with Promotional Sweepstakes
Utah’s ban on gambling is strict. The state constitution makes illegal “… any game of chance, lottery or gift enterprise under any pretense or for any purpose.” (Utah and Hawaii remain the only states in which a state-sponsored lottery is illegal.) Consequently, sweepstakes and games of chance must be crafted carefully to avoid potential criminal liability for conducting an illegal lottery. Note that, contrary to popular belief, Utah law affords no exception permitting lotteries (or raffles) sponsored by charitable organizations.
The three requisite components which constitute a lottery are: consideration, chance, and a prize. It is obvious that any sweepstakes is going to involve the elements of chance and prize; consequently, the element to dispense with in order to avoid legal complications is consideration. By making sure that the chance to win a prize is not tied to any requirement that could be viewed as consideration, it is possible to avoid the lottery issue and conduct a legally compliant sweepstakes. Thus, the words “No Purchase Necessary” are often the first words you will see in the Official Rules of any sweepstakes. In addition to making sure that no purchase or other monetary expenditure is required, a sweepstakes promoter must guard against imposing obligations of time and/or effort sufficiently onerous to be deemed consideration.
Sweepstakes laws and regulations vary from state to state and from country to country, so a great deal of care and preparation are required to comply with the requirements of each jurisdiction in which the promotion is run.
A promotion which runs afoul of anti-lottery laws has the potential of seriously damaging the reputation of a business. Always seek legal counsel early in the planning stages to insure that promotional activities are legally compliant.
Practical Trademark Basics
What is a trademark? A trademark is a word or symbol used to indicate the source of goods. A “service mark” performs the same function for services – for the sake of simplicity I will refer to trademarks and service marks collectively as trademarks. A trademark is how a satisfied consumer remembers you so he or she can purchase your products again.
Why are trademark rights important? Success attracts copycats. Once you own a trademark, you can prevent your competitors from naming their products in a way that is likely to confuse consumers into believing that their products are associated with you. Trademark rights enable you to stop competitors who deceptively attempt to associate their products with your hard-earned success.
How do I acquire a trademark? Trademark rights are based on use. As soon as you use a trademark in the sale of your product, you have acquired rights in that trademark and have the right to exclude others from using it (or confusingly similar variations) in the sale of similar products. Registration is not necessary to acquire trademark rights.
There is one exception to the foregoing: if you are not ready to make sales of your product quite yet, but have a bona fide intention to do so in the future, and you want to lock in your right to a particular trademark, you can file an “intent-to-use” application with the United States Patent and Trademark Office (USPTO). This effectively reserves your right to the trademark until you are ready to make sales.
Should I register my trademark? While trademark rights are not dependent on registration as explained above, trademark registration is generally a good idea in most circumstances. Among the benefits it affords are:
- The exclusive nationwide right to use of the trademark for the goods or services identified in the registration.
- The right to use the familiar ® symbol with your trademark.
- Since most people search the USPTO’s database of registered trademarks before selecting a trademark, registering your trademark can help prevent infringement by third parties by placing them on notice that you have superior rights in the trademark.
What is the scope of my trademark rights? If you have registered your trademark, your trademark rights are nationwide. If you have not registered your trademark, your trademark rights are restricted to the geographic area in which you operate.
As the owner of a trademark you have the right to prevent others from using any trademark that is confusingly similar to yours. A significant part of the “confusingly similar” analysis is the similarity of the goods or services at issue. For example, if you are using the trademark OASIS in connection with a restaurant, and someone across town opens up an OASIS car wash, the newcomer is probably beyond the scope of your trademark rights because restaurant and car wash services are quite different, and OASIS is a commonly used word. If, on the other hand, someone opened an OASIS bakery across town, the newcomer probably is within the scope of your trademark rights, since restaurants and bakeries are very similar services.
What factors should I consider when selecting a trademark for my new product? There are frequently two competing factors in the trademark selection process. On the one hand, you want to select a trademark that is highly distinctive and will clearly set your product apart from the competition in the minds of consumers. On the other hand, however, you may want to select a trademark that tells consumers something about the qualities or characteristics of your product and is easy to remember—this is especially so in the case of small businesses with limited advertising budgets. The best trademarks are frequently those that achieve both objectives—distinctive enough to set your product apart from the competition, yet descriptive enough to suggest something about the product.
Once you select a trademark, it is of course essential to investigate whether anyone is already using it.
Noncompete Agreements: When They Work and When They Don't
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Knowing when to use a noncompetition agreement can be a very helpful tool and a smart business move if done in the right way and at the right time. It is important to understand at the outset that the law (meaning the judge), usually does not favor agreements that create restraints on a person’s right to work. Thus, if you determine that it is appropriate to create a noncompetition agreement, it needs to be done properly. If it is done improperly, the courts in Utah generally declare the whole noncompetition agreement unenforceable rather than try to order fair or more appropriate terms that would still allow for some restraint.
There are generally two circumstances in which a noncompetition agreement would be used;
- in connection with the sale of a business and
- in the case of employment or similar agreements.
Sale of Business
Normally, a noncompetition agreement entered into between the buyer and seller of a business in which the seller agrees not to engage in the same or similar area of business or otherwise compete with the business that he sold is enforceable. The duration of such noncompetition covenants may vary but it is not uncommon in the case of an installment purchase (purchase of the business over time) for it to run for the entire period that payments are due. If the installment period is short, the covenant can run for a period of time thereafter. The reason this type of noncompetition agreement is easy to enforce is because the seller is held to a duty not to interfere with the business that he sold. The buyer needs to have a reasonable chance to make it work and to obtain a return on his investment in purchasing the business. Obviously, it would make no sense to lay out funds to buy a business only to have the seller set up across the street and continue what he was doing, attract the same customers and trade on the same good will and reputation. To assure that his does not happen, the terms of noncompetition must be in writing and follow a reasonably specific framework as will be explained below.
Employees
The use of a noncompetition agreement with employees is somewhat trickier than in the case of the sale of a business. Again, there is a general disfavor of agreements that restrict a person’s right to earn a living and unlike the sale of a business where the seller received money, which if the agreement is properly done, was payment for the noncompetition covenant; the employee may not get any additional money for the noncompetition. Courts are reluctant to enforce an agreement that creates an undue hardship i.e. requiring a person to move to another town or state merely to continue his or her regular occupation. For example, you could not require all teachers and staff in a private school to sign such an agreement and then enforce it against them if they left. A noncompetition covenant is not a routine agreement signed by everyone in the business. It does, however, become more applicable to certain (usually highly paid and highly entrusted) employees where the move to a competitor would have serious consequences for the employer and where the restriction would not create an undue hardship on the employee who is leaving. The foregoing having been said, Utah courts still balance such agreements against a person’s right to contract – even if it is a bad contract. Your own stupidity is not a defense. Utah courts are more likely to enforce such agreements than states like California or Oregon. The laws do vary from state to state.
The terms and conditions of such agreements must be artfully drafted and fully acknowledged in the agreement – normally at such time as the employee is hired. If the employer chooses to pay, in addition to salary, a separate amount for the noncompetition covenant, that is a good practice even though in Utah it is not required. Remember, as important as being consistent with the current law, you want to make sure you have contract terms that a judge would think are fair.
Employee noncompetition agreements are sometimes more difficult when there are numerous persons in a small business who are in key positions. There are many other more complicated terms that you may want to avoid unless they fit your situation perfectly, for example, the classic “coaches contract” which you often read about when a college or NFL coach moves to another school or team. In these types of agreements there is a buyout-right which the existing employee or the employer can pay to get a release of the noncompetition covenant. Again, this is a tricky area. Sometimes the mere existence of a buyout clause makes the noncompetition covenant unenforceable. A competent lawyer in this area can help you navigate through the complications.
Basic Elements
Fundamental to all noncompetition agreements are several basic elements that must always be unambiguous and reasonable; namely;
- Time (duration) and location (geography) of the restriction. The time frame can be interpreted to be open ended or unreasonably long. If the area of restriction is too broad the entire agreement will fail.
- There should be no bad-faith in the negotiation of the contract
- The covenant must be necessary to protect the good-will of the business (not to punish the restricted person)
Most effective noncompetition agreements are narrowly tailored in terms of time and location to the circumstances. For example, if a person sells a dry cleaning business, the restriction should be within the number of miles from the business that customers routinely travel to come to the dry cleaners. If there are definite plans to expand the business, the geographic restriction can be larger. It can’t just be based on a pie-in-the-sky “someday I’m going to start a nationwide franchise”. Obviously, restrictions as to internet-intense business or national or international sales oriented businesses become quite complicated. Again, the well-trained lawyer can help.
Restriction as to time for a key employee in Utah is usually not more than a year, again, this is assuming no buyout or extremely highly compensated employee status, but some covenants may go longer. Likewise, the type of work restriction cannot go beyond what the buyer, or the employer, as the case may be, actually does. For example, as a company that sells vitamins, you may be able to restrict your CEO from being hired away to another direct vitamin competitor but if he chooses to move to a lumber company, you could not restrict that move.
There are many other reasonably complex issues that must be considered in the use of a noncompetition covenant. Do not get noncompetition covenants mixed up with nondisclosure or confidentiality agreements. They are in the same area but entirely different animals. There are also other sister-clauses such as nonsolicitation of employees and nondisparagement that are often considered when doing a noncompetition agreement as well. Again, these require expertise in order to draft appropriately.
Great care should be taken when considering noncompetition agreements. Knowing when such an agreement will work and when it will not, can be critical to the success of your business.
Who's Calling?
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Transmitting false or no caller ID information violates the FTC’s Telemarketing Sales Rule and its Do Not Call provisions, which require that telemarketers transmit accurate caller ID information so that consumers can contact them to stop unwanted calls. Substantial fines can be imposed for transmitting incorrect caller ID numbers.
Tips for consumers:
- Don’t rely on the accuracy of caller ID.
- Never give out personal or financial information over the phone.
- Visit the FTC’s web site at www.onguardonline.gov to educate yourself about identify theft, phishing and other scams.
Tips for businesses:
- Inform your customers that you will never solicit personal or private information via email or telephone.
- Warn customers on your web site and in your newsletter of phishing and other scams to watch for.
- For telemarketers: Make sure you are transmitting accurate and valid telephone numbers. A consumer should be able to call back the number recorded by caller ID to ask questions and/or to request not to receive future calls.
For The Small Business/Medical Office
When you have software installed and engage a company with an outside server or retain a consultant for any purpose, to run a collections, accounting, warehousing or customer/patient tracking system in your office, more often than not you are presented with a form document (maybe even a commercially printed document with multi-colored logos, graphics or photos on it that make you feel like it is unchangeable). You quickly look over and then sign this form. You were perhaps even told it was the “standard” agreement that is either signed by everyone or maybe even “required”.
You might have been somewhat concerned about what a consultant or system/service provider who has access to your important information might do with your data or you might have wondered if the software used by the company is really theirs or if maybe it includes software illegally borrowed or copied from someone else but you were satisfied that you have reasonable protection due to the fact that you saw a fairly lengthy paragraph entitled CONFIDENTIALITY and another entitled WARRANTY OF TITLE or WARRANTY OF NON-INFRINGEMENT.
The one clause that you may have also seen was a string of all capital words under a heading, DISCLAIMER, or LIMITATION OF LIABILITY, the last phrase of which reads similar to the following: COMPANY’S (licensor’s or consultants’) LIABILITY UNDER THIS AGREEMENT FOR DAMAGES WILL NOT, IN ANY EVENT, EXCEED THE LICENSE PAID BY CUSTOMER TO COMPANY UNDER THIS AGREEMENT.
This sounds reasonable. At least if your system/service provider or consultant breaches its contract you may get some money back, but is it really reasonable? If you paid $25,000.00 for a system/service provider or to a consultant but that same system/service provider or your consultant, took your customer list, or your warehouse order data or your business expansion plans and shared them with your principal competitor, a mere repayment of the $25,000.00 may be a drop in the bucket! In fact, your system/service provider or consultant may be happy to pay it because he has just used you to position himself with your competitor who may be very willing to engage the services of the provider or consultant to gain access to the information. Before you know it, all of your customers are being solicited by your competitor and you are in jeopardy of losing them. If it is patient information, it may have been released in violation of HIPAA or State confidentiality statutes. An equally bad or even worse scenario may arise if you are using software that has the software of Microsoft or a similar company imbedded in it without Microsoft’s permission. Microsoft in that circumstance may choose to sue your company right along with the company that is providing the software or service to you. Remember, damages under the Copyright Act may be as much as $150,000.00 for each infringement. This damage is huge! However, by signing the “standard” agreement, you agreed to this on the front end to a limited remedy. You agreed to only take back the $25,000.00 even if the damages were $2,500,000.00.
It is my view that no reasonable business person should put his/her business in jeopardy in this manner. Further, the lenders and investors in such a business should make sure the small business they are lending to or investing in does not have agreements with clauses in them that have the potential to place the company in deep jeopardy. A competent business lawyer will recognize this clause and know that such contracts are usually subject to negotiation if tactfully and timely handled. He or she knows that by amending the agreement, sometimes by mere interlineations in handwriting and in properly initialing in the correct places, the license (consulting agreement) can be rewritten to make an exception to the disclaimer as to claims that arise by way of breach of the confidentiality section or that may arise due to infringement of a third party software or other rights. With this small change a significant portion of the extremely expensive problems that the small business might otherwise need to deal with are addressed in the agreement. It is a fair modification and can be done quickly so as not to hold up the deal. Further, it does not impact the area which is the more common area of dispute and for which the system/service provider or consultant legitimately needs protection by way of a disclaimer; namely, the delivery of product or services.
So, don’t be afraid to suggest changes to such form “standard” agreements and further, seek competent legal help going into the deal.
