Replacing Our National Pride with a Victim Mentality

Posted on October 6, 2010 by Rick Massey

From the movie "Cider House Rules"

In the 1999 movie “Cider House Rules” based on John Irving’s 1985 novel of the same title, one of the leading characters, Homer, is asked to read a set of typewritten rules that are tacked to a post where the cider house workers sleep. The workers begin to laugh and ridicule the rules such as “no smoking in bed” or “no operating the cider press” after drinking alcohol. Finally, one of them tells him to stop reading. “They aren’t our rules. We didn’t write them. I don’t see no reason to read them,” he says.

I still marvel at the effectiveness of open aviaries. They have a remarkable ability to keep birds captive with no glass or cage of any kind except the walls that exist in the imaginations of the birds themselves. Whether it is fear of the unknown or just the natural tendency of birds to avoid venturing beyond their comfort zone, something within the birds’ inner being keeps them predictably in line. Yes, I know aviaries are pretty and cool and all of that. But they are also monuments to mankind’s propensity to figure out how to capture, manage and control other creatures for its own advantage.

That is where government comes in. Unlike other animals, people have concepts such as ideals, morals, and ethics that can also be utilized to draw boundaries around their movement. A common pattern of those we often see on the domestic violence docket is the “blame it on the victim” excuse. Batterers of their spouses or children often explain that it was the actions of the victim that “drove” them to be such dirt bags. For those seeking to control other people, fear and shame can be very powerful tools.

Don’t think for one second that this toolbox has been overlooked by politicians, clergy, bankers and others whose mission in life is to make sure you don’t wander far from the aviary. It doesn’t take a rocket scientist to understand how the country got into the hole we find ourselves trying to claw out of today.

Our country cannot seem to distinguish between the virtual world and the tangible one. We let our politicians get away with treating rhetoric the same as flesh and blood. Why wait for an actual attack? We can declare war on “poverty” (a human condition), or “drugs” (plants and chemical substances the government does not tax), or “terrorism” (a criminal tactic) and point to this “war” as an excuse to undermine basic freedoms. Never mind the absurdity of failing to make these obvious distinctions. These phony wars are by definition impossible to “win”. And if winning is not the goal, the only other possible function they can serve is to take away our civil liberties.

The national poverty rate may not have gone back to nineteen percent where some say it was when President Johnson declared a “war on poverty”. But one in seven Americans are now at or below the poverty rate; and that number has been climbing steadily since 2000. The idea that we are making progress in the “war on drugs” is not taken seriously by any law enforcement agency. And who really believes we will ever capture, kill, or otherwise dominate “terrorism”?

This tendency of ours to blindly swallow the substitution of fictitious concepts for the real world has made us the perfect victim. We have legally defined imaginary entities (corporations) as “persons” with all of the rights and virtually none of the responsibilities that are incumbent upon you and me. This places them at a remarkable advantage when they compete against us in the halls of congress and on the street. Legislators, our law makers, are openly bought by an unlimited quantity of these virtual persons that decide what the rules of our “democracy” will be. While deluding ourselves into thinking we are guided by morality and ethics, we have delegated rule-making to a small band of robots that were hand-picked, paid for, and placed in office by investors that don’t even pretend to have any objective other than to increase the bottom line for their shareholders.

More people are hurting. And foreclosures are at an all-time high. So we are told that this generation lacks the moral character of earlier generations. Look how many are walking away from their house rather than selling their fist-born to pay the mortgage. How could they do that to the poor defenseless bank (you know, the one that has been guaranteed protection from our government)? What is the difference? Well, for one thing, when your grandfather would have died before he stuck the banker with the debt for his house, it was another human being – the banker that he did not want to leave holding the bag. He got the loan by going in and talking to the banker who decided (sometimes largely on your grandfather’s character) to take a chance on him and write the mortgage. He did not write the loan for more than the house was worth. And because the banker was not a crook, no one could have sold the house to your grandfather for substantially more than it was worth. Your grandfather could not have qualified for such a loan. In an honest world trust is mutual.

If the government (you can’t blame either political party because Bush started the bail-outs and Obama carried the program forward without missing a beat), had not come rushing to the banks’ rescue, what would have happened? Some banks would have walked away from the debt they owed to their depositors. Most of those depositors would have been okay because the government had insured their accounts. Did that make them “too big to fail” for our sakes? Not hardly. If that had happened the FDIC would have had to bail human beings out. But until Mr. Geithner came along with the Bush-Obama Troubled Asset Relief Program (TARP), no one was there to bail out their rich colleagues. Those not covered by FDIC (mostly corporations) that had more than $250,000 in deposits would have lost big and declared bankruptcy. When was the last time you saw someone criticize a corporation for filing for bankruptcy? No one really blames them. It’s business. They are not expected to follow our rules. We are not the aristocracy. We are the surfs, in this case the victims. Is it rational to blame the victims for not following a different set of rules than the batterers?

I fear that we are becoming a society that no longer understands the distinctions humans used to make. It’s every man for himself; and it’s all about the money. After all, there are rules involved here. That is how (as this video shows) a human being in a fire fighter’s uniform can stand there with a fire hose in his hand and watch another human being’s house burn down – with his pets inside because he did not come up with $75 for the corporation when he was “supposed” to. Do you think it would have made any difference if children were inside? It sure doesn’t look like it.

Copyright © 2010, Rick D. Massey, JD

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Are You Trapped by a Non-Compete Agreement With Your Last Employer?

Posted on October 4, 2010 by Rick Massey

Most employment contracts and many consulting services agreements from larger companies include non-compete provisions. These are intended to one degree or another, to keep the employee or contractor from competing against the company in its own marketing space after he or she parts ways with the employer.

The legal enforceability of these provisions varies from state to state. If you want to avoid the restrictions of a non-compete and your employment contract is governed by Florida law (and you are not trying to avoid the non-compete limitations in one of a handful of states that will protect you in spite of the other state’s governing law) you have a very uphill battle indeed. On the other hand, if you intend to work in California you probably don’t have to worry much about anyone’s non-complete (with one clear exception to be dealt with later).

In Missouri where I practice, the law is reluctant to go too far in its enforcement of these provisions, but it will generally enforce them if the Court finds them to be necessary to protect the employer’s legitimate interests and that the agreement is reasonable as to geography, time and space. Because the Missouri model is fairly in the middle between the two extremes of Florida and California, a closer look at its approach is a good way to understand what to look for when evaluating these issues.

Like most states that enforce non-compete provisions, Missouri courts have taken the position that non-compete provisions are NOT enforceable when their aim is to protect an employer from mere competition by a former employee. They are only enforceable to the extent that the restrictions protect the employer’s trade secrets or customer contacts. Even in middle of the road states, non-competes are only enforceable to the extent that they are reasonable in duration, geography and scope. If the non-compete is found to be reasonable in duration, geography and scope, it will still only be enforced to the extent that it prevents you from unfairly using the company’s trade secrets or actual customers (that means customers that do business with the company on an ongoing basis – not “potential” customers from some list). If it doesn’t protect against one of those two things, it probably goes too far.

Sometimes, people scan an employment agreement for something labeled “non-competition” or something similar to that description and think they have fully addressed that issue. But you must also search the document for sections relating to confidentiality and trade secret obligations. If your next position threatens the exposure of your former company’s trade secrets or confidential information to its competitors you may be in serious trouble – even in states that otherwise refuse to enforce non-compete provisions.

Also be aware that while your knowledge of some of the company’s confidential or trade secret information does not legally prevent you from working for a competitor, using this information for the benefit of yourself or the competitor can get you in a lot of trouble. Because states generally have statutes specifically addressing these issues, you should be particularly careful about this, regardless of what the contract says. Just make sure the contract does not contain unfair presumptions that everything is confidential whether or not it is identified as such, or that it does not characterize too many things as “trade secrets.”

Many of these contracts also include binding arbitration agreements. Your best course of action is always to ask them to strike any statement that says you must settle disputes by arbitration. If the company is bigger than you are, binding arbitration is not good for you. Fortunately, contracts that include both binding arbitration agreements and non-compete provisions have a built in problem. The arbitrators do not have the legal authority to enforce injunctions against you. Therefore, these contracts usually include an exception that says the judgment of the arbitrator may be filed in any Court of competent jurisdiction. Tell the potential employer that you are not comfortable signing a contract that may be enforced against you by the courts, when you have no right to appeal the decision. Explain that you would therefore like to keep the whole thing under the jurisdiction of the courts. That way you are not coming across as unreasonable. But if they can’t register and enforce the arbitration decision in court it will be useless to them. So why not remove the arbitration provision altogether?

In the real world, the longer you work for a new employer, the less likely it becomes that a Court is going to enforce an injunction ordering you to quit your new job. So while the deck is stacked against you if the employer insists on including binding arbitration, you may want to push back with your own special additions that will tend to drag things out. Insist on non-binding mediation before it goes to an arbitrator and try to include rules that require mutual agreement as to whom the arbitrator will be. Anything that makes enforcement of the non-compete take more time will help you resist its enforcement.

Employers are sometimes selfish, but seldom vicious. Most employers are not trying to throw up road blocks to your ability to make a living. They just want to protect themselves against unfair competition. If their contract goes far beyond what it takes to do that, there is a good chance they will work with you to lighten it up a little. Also keep in mind that they will be working with a lawyer either in-house or outside counsel on their end. So you will be much better off if you do the same. 

Rick D. Massey, JD, Copyright © 2010

Posted in Contract Review & Drafting | Tagged | 7 Comments

Are Small Businesses Going the Way of the Drive-In Movie?

Posted on September 8, 2010 by Rick Massey

Small Businesses may soon be as hard to find as Drive-In MoviesSome of you probably remember the Drive-In Movie experience.  Those of you that are too young to have shared this experience didn’t just miss a special form of family entertainment – you missed out on something very human that has been lost in one generation.  Families, even poor families such as mine could load up the car and go out for a double feature on Friday night for very little money.  If you couldn’t afford refreshments, you could bring your own.  There were swing sets and slides in front of the screen so parents could have some alone time while knowing their kids were safe before the movie started.  There were always cartoons before the movie.  But they were written more for the parents than for the kids.  Most of the jokes were targeted toward an adult audience.  But they were cleverly crafted so the kids could watch them too.  That seems like a thousand years ago.  It recalls a time when families shared their time and did not isolate themselves with headphones, video games, or separate screens in a corporate multiplex. 

Today, a trip to the movies like virtually everything else, is a corporate experience.  In essence, the Movies have always been a business.  But somewhere along the way things have really changed.  We human beings have become so commoditized, that the goal is no longer to sell us an evening of entertainment.  The entire aim is openly, blatantly, and almost exclusively to sell us more stuff.  Theater owners admit that their profits are based on sales from the concession stand.  The opening cartoons have been replaced with television commercials.  Drive-ins are gone because you can sell more tickets by packing people like sardines into the same area and ensure that they don’t bring in their own stuff.  Public corporations are operated and managed by experts in wringing out the most possible profits per square foot of the stockholders’ investment. 

Some argue that this is perfectly okay because when venture capitalists create businesses such as huge multiplexes they merely increase the number of choices available to consumers in the market place.  That may sound good in theory.  But as anyone who has had their mom and pop convenience store pulverized by Walmart or QT can tell you, the theory is a lie.  The little guy has to buy from the suppliers the big guys patronize.  And in the real world, the little guy cannot compete.  The choices available to the consumer actually decrease because sooner or later the corporate behemoth will have no serious competition.  Once that has occurred, there will be no pretense of a “free market” economy. 

Why are small businesses hurting?  Small businesses are failing because no one is on their side.  All of the government’s recent efforts to “stimulate” the economy were designed to ensure that the “too big to fail” banks and insurance companies continued to enjoy massive profits at the expense of you and me.  The evidence of what this is doing to small business is beginning to emerge. 

Some experts are noticing a troubling difference between this and prior recessions.  Typically, the number of payroll jobs and the number of self-employed do not decline at the same time.  According to the Department of Labor, the U.S. lost 125,000 jobs from May to June of this year.  Interestingly, at the same time there were 176,000 fewer self-employed.  Apparently, the sluggish economy, lack of available credit to small businesses, and fear of the way things are headed are working together against small business. 

More than ever before, it is imperative that we don’t allow the misdirection and BS to distract us from what is really happening.  The problem is not that the taxes are so high for millionaires that they are not investing their money.  Constantly repeating that ridiculous fairytale will convince some.  But the rest of us realize that millionaires aren’t just letting their money sit around now.  They are using it to build their factories oversees – not because of the U.S. tax rates.  The biggest corporations have a hundred ways to avoid taxes regardless of what the official rate is.  It’s just cheaper all the way around to exploit people in other countries.  The greatest threat to small business is the same demon that threatens our very humanity. 

We as a society have made a god of capitalism.  We placed the capitalistic ideal ahead of people when we granted full legal rights of persons to corporations even though they can never be held accountable in the same way people are.  We sold our collective soul as human beings when we allowed investors to operate hospitals, nursing homes, orphanages, military operations, and even prisons where life and death decisions about human beings are made in an environment where human life has no “fair market” value. 

Small businesses are managed by people.  They cannot survive without people.  But people have been transformed from slaves to cogs in the corporate machine, and finally to nothing more than another commodity to be traded by investors on the open market.  If small business or the human race is to survive, we must find a way to stop the runaway train toward greed that seems to be driving every aspect of our policies in this country. 

Copyright © 2010, Rick D. Massey, JD

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Homeless in a Land of Milk and Honey

Posted on August 22, 2010 by Rick Massey

My goal for this post has always been to provide something useful that may help ordinary people in their struggle to get ahead in a world dominated and controlled by wealthy corporations.  But sometimes you just have to rant.  I hope you will forgive the lack of positive feel-good ideas in this post because this is one of those times.  Near the top of the list of most destructive forces that come to bear on human beings looms despair.  If you have never experienced complete and hopeless despair you are very fortunate indeed.  But many of us have.  Contrary to what you may have heard, you don’t have to go to a third-world country to find it.  This video provides one glimps of a situation that is repeated countless times each day here in our country and within a few miles of our homes. 

One of the greatest challenges of being homeless is the inherent futility in all of your available options.  I have been there a couple of times in my earlier years – once as a single parent with two small children to feed.  When you get to a certain point in life, there is no longer room to negotiate.  When the cost of your motel room and enough food for your children is just barely covered by the most you can make at the minimum wage job you finally landed, it is impossible to survive.  Sooner or later you will lose the job, get too sick to work, have to buy medicine for one of the kids or the room rate will increase.  People who are struggling know this.  And knowing this fact destroys what is left of their health and robs them of their dignity, their self-respect, and their will to go on with life.  I have no doubt that stress kills more people than hunger, illness, and lack of shelter from the elements combined. 

Our country is in pretty bad shape right now.  Millions of people are homeless or one small step away from that condition, millions have no healthcare, and millions more are quitely suffering as they choose between medicine and groceries.  I hope the American people are bright enough to realize how those in power are exploiting this desperation to turn us against one another and to further weaken our ability to fight back. 

Our greatest threat as we go forward is not the Mexicans that come across the border to work so they can feed their families; it is not the gays who would be quietly forming their own families and getting on with life but for the meddling of others that cannot rest as long as they are not telling someone else what he or she can and cannot do; it is not the Muslims that want to build a community center in New York; and it is not that vast crime-wave of people chemically altering their mood by smoking a plant that is infinitely less dangerous than its legal alternatives: alcohol, tobacco, and the abuse of prescription drugs. 

The greatest threat we face is that we forget that we are human beings; we will all die someday, and that in the meantime we are all pretty much in the same boat.  If we don’t care for one another there will ultimately be no one to care for us. 

What happened to our internal system of red flags?  What happened to our natural tendency to instantly question the messenger when the message is one of hate, intolerance, and blaming others for problems we can’t seem to resolve ourselves? 

I propose a simple test for whether or not an idea is worthy of human support.  Does it help other human beings without hurting innocent people in the process?  Does it put the value and dignity of human beings ahead of the stability of some philosophy or system someone wants to protect?  If that is the case, can it really be so wrong? On the other hand, what if the idea protects greed, or someone’s own religious or political philosophy at the expense of the right of other human beings to life, liberty and the pursuit of happiness?  What if it blames victims of poverty or those disadvantaged by the coincidence of where or into which family they happened to have been born for the hardships they now face?  What if it devalues human life and elevates profits above everything else?  That decision for a rational person should be obvious.

Copyright © 2010, Rick D. Massey, JD

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Of the Persons, By the Persons, For the Persons

Posted on August 4, 2010 by Rick Massey

Once in a great while, mankind makes an amazing discovery that does as much for the peasants as for those in power. Until our generation, the last really big such innovation in the West was the invention of moveable type. I say “in the West” because moveable type was not so much a Western invention as is generally believed. It was based on similar innovations that were made in China 400 years before. Nevertheless, its application in the West put mass communication into the hands of ordinary people and beginning with the Protestant Reformation has toppled countless thrones and empires.

The last century gave birth to other leaps in communication technology with the development and spread of the telegraph, the radio, and finally television. These innovations are impressive and were instrumental in magnifying the power of ordinary people in a very short time. Fortunately for regular people, the government created and maintained safeguards to guarantee equal access to the limited airways that were available for these new technologies.

Since that time, and arguably since the development of the printing press, no single breakthrough has so directly put so much power into the hands of the people as free and open access to the Internet. Unfortunately, there doesn’t seem to be much left of the government elected by the people. The old Watergate adage “follow the money” is the best predictor of what our legislators and governmental agencies are likely to do.

Regardless of their political persuasion, I think most people would agree that it is no longer surprising when we are lied to by the Government. Nor would we be amazed to find that some things are hid from us (the people as opposed to the “persons” otherwise known as corporations). I was disgusted when the previous administration met in secret with the top oil companies to decide our energy policies. I am equally sickened that the current administration is doing the same thing with what may have even more impact on us all.

After closed door meetings with Verizon, Google, AT&T and other top communications giants, the FCC will soon decide whether enough money has passed under the table to remove the pesky government from the oversight business where the Internet is concerned – just as has already been done with the banks, the securities industry, the insurance industry, and the oil companies.

The corporate giants are pushing for a system known as “paid prioritization.” In other words they will charge those that can afford it top dollar, while leaving the rest of us with slow, crappy, inefficient access they don’t use anyway. This arrangement actually creates an incentive for service providers to resist upgrading their systems because they make more money when the big guys have to pay to cut in line. As Timothy Karr points out:

It’s because of Net neutrality that great ideas like YouTube (which began in an office above a pizzeria in San Mateo) and Twitter (which grew out of a daylong brainstorming session among podcasters) blossomed to revolutionize how we connect and communicate with one another.

The paid prioritization deal under consideration wouldn’t allow for the next YouTube. And the next Twitter would likely never make it off the drawing board. It’s because of Net neutrality that great ideas like YouTube (which began in an office above a pizzeria in San Mateo) and Twitter (which grew out of a daylong brainstorming session among podcasters) blossomed to revolutionize how we connect and communicate with one another.

Wave bye-bye to the best opportunity to come along in years for little guys to start their own businesses. It has always been the case that new technology allows everything to be done faster, cheaper, and more efficiently. This country became great specifically because the free press gave little guys the power to have their voices heard somewhere in the sea of government propaganda and corporate control. But the future will not be decided by printed communication. The digital revolution is the new printing press. We must not let the corporate moguls monopolize one of the only tools still available to the people.

Copyright © 2010, Rick D. Massey, JD

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Jury Duty: 3 Things You Are Not Supposed to Know

Posted on July 25, 2010 by Rick Massey

jury dutyThe medical community has a special name for situations where an incompetent doctor rips out the patient’s only good lung, leaving her with the cancerous one.  They call it “wrong-site surgery.”  Of course it may not be entirely their fault.  According to an “Information Statement” by the American Academy of Orthopedic Surgeons, these mistakes may result from ”poor preoperative planning, lack of institutional controls, failure of the surgeon to exercise due care, or a simple mistake in communication between the patient and the surgeon.” (Emphasis mine). 

Let us suppose for the sake of argument that this was an honest mistake.  Let us go even further and suppose that it was not a fatal one.  Instead of removing the wrong lung, the doctor hacked off the only remaining good leg.  It was an honest mistake.  They both looked pretty much the same.  And the usually good and hard-working surgeon made room for one more after a long day in which he really did save another patient’s life. 

Now it’s your turn to serve on the jury in the inevitable lawsuit.  You will not be told many things.  Some of the things you will be told will be misleading.  You will be asked to weigh the “evidence”, follow the law, and decide the outcome of the case.  But you will never be told who will actually be affected by your decision. 

1. You will not be told who is really being held responsible.

That’s the first big secret the lawyers and the judge are not allowed to tell you.  You will be aware of the name of the case.  It will be something like Susie Victim vs. Dr. James Hackenchop.  Assuming the Defense admits the wrong leg was removed, you will hear all manner of nice things about Dr. Hackenchop.  You may even hear about some of the hardships he has recently gone through while dedicating himself to provide free services for orphans, etc.  Dr. Hackenchop will be the only defendant you see sitting in the court room.  He will have been instructed to appear humble and contrite.  What you will not be told is that all of that is a smokescreen.  If you find against Dr. Hackenchop, the entire amount will be paid by his insurance company.  His defense including the legal fees will be paid for by his insurance company.  In fact, Dr. Hackenchop will not pay a nickel out of his own pocket for any of this.  Why will you never be told that the sympathetic doctor they have paraded in front of you for the last three to five days has no skin in this game?  Because the lobbyists for the insurance industry have successfully written the law to ensure that no one tells you about them.  The judge and Susie’s lawyer are not allowed to mention them at all. 

Okay.  So the entity that Susie Victim is really looking to for compensation is not really Dr. Hackenchop.  Her compensation if she gets any at all, will come from a multi-billion dollar insurance company.  The only representative of that insurance company you will see in the court room every day is the defense attorney that you will be led to believe is defending Dr. Hackenchop.  That attorney is paid for by and is there to defend the insurance company.  That is not the only part of the story you will not be allowed to hear. 

2. Before the first witness speaks some of the truth will be hidden from you.

While you and the other jurors were sitting around in uncomfortable chairs waiting for things to get started, things have already gotten started behind closed doors.  Before the actual trial, the attorneys have gone before the judge to argue motions in limine.  This is a procedure wherein the judge will decide what about the case you will be allowed to hear – and what you will never be allowed to hear.  The judge will rule on things not considered relevant to the trial: things like how many times Dr. Hackenchop has been found negligent before or how much the “expert” that will testify that any good surgeon could have cut off the wrong leg is being paid for his testimony. 

To make matters worse, you will not only not be told that some of this information will be withheld from you, but you will be led to believe the opposite.   After the opening statements, Susie’s lawyer will call her first witness.  You will hear every witness as they are told to raise their right hands and swear to “tell the truth, the whole truth, and nothing but the truth.”  You will not be told that the witness has been cautioned NOT to tell the whole truth if it includes information the court ruled out in the earlier motions in limine.  If you thought you were going to hear the “whole truth” you were wrong.  You must make your decisions based on the pieces of truth you were allowed to hear. 

3. Some of your power as a juror will be hidden from you. 

After the testimony is finished, you will be given jury instructions that are intended to tell you about the law that you should follow in reaching your decision.  You will be told for example that to find that the good doctor was negligent you must believe that he failed to use the degree of skill and learning ordinarily used under the same or similar circumstances by other surgeons.  Because you have taken an oath to follow the law, you are legally bound to make your decision within those boundaries.  But what if the law is not that clear cut?  What if you place more weight on what your conscience tells you than on the letter of the law as defined in the jury intructions?  Sometimes, juries do that.  But you will never be told of that possibility.  A federal judge once told me that he will not let someone serve on the jury if he thinks they have even heard of the concept of jury nullification. 

Nothing here is intended to minimize the importance of jury trials.  The proliferation of articles and lobbying efforts demanding “tort reform” and the rapidly expanding practice of denying citizens this basic constitutional right through binding arbitration show how big of a threat the corporate world and the insurance industry perceive this fundamental right to be.  But in a democracy, jurors should have a right to know the secrets of how the sausage making process works.

Rick D. Massey, JD, Copyright © 2010

Posted in Politics | Tagged | 13 Comments

Should Small Businesses Fear the Healthcare Reform Act? Some Pros and a Possible Con

Posted on July 12, 2010 by Rick Massey

afraid of healthcare reform

Since the passing of the Patient Protection and Affordable Care Act (PPACA) there has been a lot of noise about how all of this will impact small business.  For the most part, the noise consists of warnings that it will hurt small business with very little specific information about exactly how.  For the reasons explained below, the potential negative impact on small business is probably greatly exaggerated. 

By addressing some of the problems currently faced by individuals and by small business, the benefits could outweigh the relatively few short-comings that have been identified so far.  We know that the lack of reasonably priced healthcare to individuals and the exorbitant cost of providing decent healthcare plans to their employees has hurt small businesses for years.  Many would-be entrepreneurs have been tied to their existing job with a large company because they could not afford to lose the insurance benefits for themselves or their family members with expensive medical conditions.  This has prevented some people from taking the leap and starting their own business.  And it has prevented highly skilled and potentially valuable employees from coming to work for small businesses that could not afford to offer good healthcare plans. 

By 2014, individuals with pre-existing conditions and who do not otherwise have insurance available to them through an employer will have access to insurance at the same rates as healthy individuals in the same market.  Small businesses and start-ups that cannot afford healthcare coverage for their workers may not face this obstacle as the deal breaker that has prevented them from getting the best talent in the past. 

Small businesses should also be in a better position to provide insurance to their workers because under the community rating rules, insurance companies will no longer be allowed to discriminate against small businesses with less healthy workers by charging them more than larger companies or by raising their rates when one of their workers gets sick. 

Today, small businesses pay on average eighteen percent more for the same healthcare coverage large businesses provide for their employees.  The new law will give a tax credit of up to 35% of the premiums small businesses pay to cover their workers in the first year.  By 2014 these credits increase to up to 50%. 

The new law does not place additional insurance “requirements” on small businesses with fewer than fifty workers.  But businesses with more than fifty employees will face a penalty if they do not provide insurance for their workers. 

What About the New Tax Provisions?

There are some concerns about one of the tax provisions that, if literally enforced, will increase the bookkeeping burden for small businesses.  The tax provision is one of those things that you just have to step back from and ask yourself, what in the !@*% were they thinking?  In what many of us perceive to be a misguided effort to recover some of the estimated $300 billion in unreported income tax each year, the new law will require that every expenditure of or to a small business of $600 or more must be documented with the issuance of a 1099 form.  This expands the requirements of existing law in that corporations are now defined as “persons” to whom forms 1099 must be issued; and sales of tangible items must now be reported in addition to the existing requirements to report expenditures for services, rents and financial transactions. 

Okay, that’s the bad news.  The good news is that as with everything else involving the Tax Code, the IRS gets to pretty much interpret the rules – and the rules if strictly interpreted will greatly increase the record keeping burden of the IRS.  That’s why some observers believe the IRS will ultimately take advantage of a loophole in the law that says:

The Secretary may prescribe such regulations and other guidance as may be appropriate or necessary to carry out the purposes of this section, including rules to prevent duplicative reporting of transactions.  (emphasis mine)

In spite of all of the “sky is falling” handwringing that you may have seen on the internet, we will not really know how this will impact businesses until the IRS publishes its regulations on the new law for the requirements that take effect January 1, 2012.  One possibility considered likely by some observers is that because the banks and credit card companies will be required to report all of these transactions, the requirement that businesses report the same credit card payments would be duplicative and therefore, not required for business purchases by credit card.  For most small businesses, that could eliminate most of the additional reporting requirements.  But no one knows for sure until the new rules are published. 

Of one thing you can be sure: as long as the new tax law makes things tougher for the big guys (as a strict interpretation of it currently would), they will be in your corner fighting to change it.  And they already are.  The IRS wants to collect more unpaid taxes.  But the IRS doesn’t want to increase its internal administrative costs in a way that doesn’t accomplish that goal.  The odds are very good that a less paper intensive means of tracking small expenditures will be adopted.

Copyright © 2010, Rick D. Massey, JD

Posted in Protecting Small Business | Tagged | 3 Comments

How Entrepreneurs Can Make Money Without Making Big Mistakes

Posted on July 2, 2010 by Rick Massey

entrpreneur, small business walk a tight ropeSo you’ve done all of the right things to get your new business up and running.  You have chosen a good business name that promotes your branding in a memorable and unique way.  You have googled the name and ran its variations through the WhoIs databases to verify that no one is using it, or something so similar that customers may be accidentally driven to someone else’s website when they are trying to find yours.  You have gone to the United States Patent and Trademark website to verify that no one else has trademarked your new name, and you have gotten your new limited liability company (LLC) registered with the Missouri Secretary of State’s office. 

Is it possible to get this far and still leave your house and your life’s savings at risk?  You bet it is.  As a small business attorney, I see it happen every day.  Until they have actually done it, no one really understands how many hats you have to wear to get a new business off the ground.  Somewhere in the process of forming your company, marketing your company, building the framework for your company, and managing a thousand day to day tasks that must be done to keep your business going, you also need to protect your investment.  Setting up an LLC is a good start.  But that is only the beginning.  If you don’t follow through with some fundamental precautions, your LLC could turn out to be a safety net with holes big enough to drop your house through. 

Three Ways to Keep Your Family Out of the Line of Fire

Here are some basic, for the most part, easy to avoid mistakes that could cost you your nest egg.  Missouri is one of the few states that still recognizes the form of ownership known as a “tenancy by the entireties.”  This is a law that protects property that is owned by you and your spouse from creditors that only have a claim against one of you.  What that means to you as a small business owner is that if you venture out and start that flower shop you always wanted, you would be wise to make sure your husband does not have an ownership interest in the LLC.  That way, if someone slips and falls in your flower shop and sues your LLC – or even you personally by getting around the LLC protections, the house you own in Missouri as husband and wife is off limits.  So don’t share business ownership or management with your spouse if you can do the business without it.   

Another common mistake is to fail to follow through with the legal requirements that were designed to protect you in the first place.  Your LLC will not protect you from liability if someone manages to pierce the corporate veil and go after you personally.  There are several ways this could happen.  But one of the most common mistakes is to not fully establish the LLC properly in the first place.  Sometimes, people either forget or don’t realize the importance of connecting all of the dots.  They go online and complete the Articles of Organization.  They submit the application and receive their Certificate of Organization, and never complete the process.  The LLC is not completely established until a valid and binding Operating Agreement is in place.  The Operating Agreement must be signed by all members before conducting business and especially BEFORE an event occurs that would trigger the protections of the LLC.   

And finally, it is very important that you treat the LLC as a separate entity in everything you do.  After all, the legal argument that shields you from personal liability is that the LLC is a separate “person” under the law, and therefore carries its own separate liability.  You must avoid the argument that the LLC is indistinguishable from your personal identity.  Keep separate bank accounts and don’t co-mingle your personal funds with those in the business account. 

They say the buck stops with you.  But taking some sensible precautions can add a layer of protection so the buck stops with the LLC first.

Rick D. Massey, JD, Copyright © 2010

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What is the Least I Have to do Before I Hang Out My Shingle?

Posted on June 27, 2010 by Rick Massey

business riskIf you are starting your own business, you are a gambler.  You know that most small businesses fail.  But you also know many of them do very well.  You understand that there are no guarantees in life.  And you have decided to take your chances.  On the other hand, you probably realize you cannot survive if you are a reckless gambler.  Professional gamblers know the odds and avoid unnecessary risks. 

If you just want to begin advertising and see what happens, you can legally do that the same way you would conduct a garage sale.  Gather your inventory, run an ad, and accept payments by cash or checks made out to you.  There may be local licensing and zoning requirements.  But as long as your business is legal, and unless your type of business is subject to state licensing requirements (such as professional certifications, or those governing the sale of liquor, tobacco, fire arms, tires, etc.) you are good to go.  If you want to use a creative business name, you will need to register for a fictitious name with the Secretary of State.  You can fill out the (extremely easy to complete) form at the Secretary of State’s website, pay the $7 filing fee, and be on your way.  Whether you choose a unique business name, or operate under your own name, the State and the IRS will categorize your business as a “sole proprietorship.” 

This is the fastest and least expensive way to go.  Whether or not you should do more depends on your risk/benefit analysis at this stage of the game.  You may be thinking that incorporating as an S-Corp or LLC may not give you that much additional protection in the first year or two anyway.  It is true that the risk is generally less now than it will be as you become more profitable and/or venture out into other markets.  After all, as a new business with no credit history you will still have to personally guarantee your loans and leasing commitments. 

However, you should also realize that going that extra step in the beginning is not that big of a deal.  Establishing an LLC (Limited Liability Company) is not very expensive (the Missouri filing fee is $105) and it doesn’t take more than a few days.  This is the entity most small businesses choose because it provides the most protection with the least hassle most of the time.  Just make sure you get the supporting legal documents (Articles of Organization and Operating Agreement) right.  Otherwise, the LLC will provide nothing more than a false sense of security.  If you are in business for the long haul, you might as well build it right from the ground up.

Rick D. Massey, JD, Copyright © 2010

Posted in Protecting Small Business | Tagged | 12 Comments

After September 11, 2001 the President Knew What We Must Do: Go Shopping

Posted on May 24, 2010 by Rick Massey

I am more saddened than disgusted every time I pull up to an intersection, look up and see the Orwellian camera staring back at me. More troubling than the hypocrisy of the claims that these “telescreens” are there to save our lives, is the nagging fear that this lie will be accepted. 

That’s what happens when corporations, whose only aim is to make money for their shareholders are allowed to make decisions and write laws to govern human beings.  Some may think it strange that a lawyer with a corporate background and a track record of encouraging small businesses to incorporate would have such a negative attitude toward corporate participation in government. But these two positions are not mutually exclusive.  Corporations should be tools of the people.  Unfortunately, the wealthiest people have used them to drive the rest of us into submission and to place us, the flesh and blood people, at the mercy (a bad choice of words because corporations by definition are incapable of mercy) of corporations. 

Corporations are legal fictions created by business people to protect business people. When corporations serve living, breathing human beings, they serve a valid and useful purpose. When they usurp the rights of human beings and take control of the levers of what should be a democratic government something has gone terribly wrong. And that unfortunately, is where we find ourselves today.

Not only has the corporation become a “person” with all of the rights of human beings (but much fewer of the obligations imposed on human beings), it is now entitled to exercise the right of “free speech” – which it communicates in the form of money.  Corporations have been buying politicians for years.  But the Supreme Court has now given this disgusting practice the legal seal of approval.  When will we finally realize the inescapable fact that power and money are inseparable twins; that those with more money have more power; and that power (whether euphemistically tagged as democracy or something else) will never be shared by those already in power with those who don’t have money?

Through the ages, our wisest leaders have instinctively known this.  Commenting on the third attempt to create a central bank in the United States, Abraham Lincoln foretold what has since proven to be completely true: 

I have two great enemies, the Southern Army in front of me, and the bankers in the rear. Of the two, the one at my rear is my greatest foe. As a most undesirable consequence of the war, corporations have been enthroned, and an era of corruption in high places will follow. The money power will endeavor to prolong its reign by working upon the prejudices of the people until the wealth is aggregated in the hands of a few, and the Republic is destroyed. 

Lincoln’s fears have been realized.  Sen. Dick Durbin did not exaggerate when he said the banks are the most powerful lobby on Capitol Hill. Nor was he overstating the case when he added “. . . they frankly own the place.”

People are beginning to notice.  But they don’t seem all that upset.  For a tyrannical system to last, the peasants must acquiesce in it. They won’t all be foolish enough to believe it, or to buy into it. But they do need to accept it. The system requires a lack of will on the part of the masses to revolt – an aversion to risk losing what they do have for a fair and just arrangement.

That lack of will to resist is the greatest threat we now face. The expansion of power and simultaneous breaking down of the will of the people was implemented in graduated stages. No master plan was needed. It was, as always the result of human greed. The greediest individuals do whatever it takes to get to the levers of power. Once there, they see what needs to be done to maintain and increase that power. So they proceed with the next logical step to build on what has gone before.

Who would have thought even twenty years ago that Americans would soon become so complacent that the State would have a camera trained on them at virtually every intersection in almost every town; or that the presumption of innocence would be so completely forgotten that once accused by one of those cameras they would receive a letter in the mail telling them that they have the option of ratting out their friend or family member to prove their innocence and escape punishment? 

I don’t mean to trivialize the greater transgressions to our freedom, dignity and self-respect that have crept in while we were “out shopping” in response to the 9/11 attacks.  But the nonchalant manner in which the government can so blatantly intrude on our personal lives really underscores how far we have fallen in such a short time.  So much ground has been lost that our politicians can boldly take the most cold, inhumane, and despicable positions without fear of losing the popular vote.

  • Laws have been proposed (and largely supported by public opinion) making it a “crime” to provide food and water to another human being who will otherwise die in the desert because he or she did not ask permission to cross an imaginary line and come onto our turf.  
  • The public has supported laws that allow the government to seize the property of and to jail human beings that are dying of cancer for the “crime” of using a common plant to relieve their own pain and suffering.  
  • The government no longer needs permission from the courts to spy on its own citizens. And American citizens can be (disappeared) arrested, tortured, and convicted with no right to a lawyer or to even let their own family know what happened to them by the mere declaration of the President that they are “Enemy Combatants.”  

The great state of Arizona recently passed a “show us your papers” law while our politicians freely and openly discuss how our newly created department of “Homeland Security” should operate.  And our congress can, with a straight face and in all seriousness, debate whether or not holding a person we think knows something about someone who may do something wrong upside down and forcing water down his throat until he loses consciousness is really “torture.” 

We have seen how this works and where it inevitably leads.  It is about time we kick the corporations out and put human beings back in charge of governing people’s lives.

Rick D. Massey, JD, Copyright © 2010

Posted in Politics | 2 Comments