November 19, 2014
•
Expected legal issues:
• corporate form/entity selection
• tax implications for entity
• Non-Profit Formation
• commercial lease
• employment
2
presented by Simpson Thacher & Bartlett LLP
3
1) Do you plan on forming your business alone?
2) If you do not plan on forming your business alone:
a) How many partners will you have?
b) Will any of those parties be legal entities?
c) Will all of the partners be U.S. citizens or permanent
residents?
d) How will management responsibilities be shared? Equally or
not?
e) Will each partner’s voting power be based on his/her
percentage ownership of the business?
3) Do you plan on hiring employees?
4) What are your plans for expansion, including any plans to seek
additional funding?
5) Will the business operate outside of NYS?
4

Liability
◦ to clients and customers
◦ to employees
◦ to the government

Taxes

Governance
◦ entity-level tax or “pass-through” treatment
◦ need to check tax at federal, state and local levels
◦ decision making
◦ representing the business to the outside world
◦ internal controls and compliance
5

Ownership

Ongoing Administrative Requirements

Initial Formation
◦ voting and economic control
◦ raising capital
◦ Transferability
◦ minutes and meetings
◦ reporting
◦ Recordkeeping
◦ cost
◦ efficiency
6

Sole Proprietorship

Partnership

C-Corporation

S-Corporation

Limited Liability Company
7
➤
➤
➤
Liability
◦ Weakest liability protections
Ownership
◦ Single owner
◦ Can do business under
owner’s given name or a
trade name (“dba”)
◦ Ability to raise capital
limited
Governance
◦ Single owner
◦ not appropriate for bringing
in additional parties
➤
➤
➤
➤
Business Taxes
o
Pass through taxation
o
Single owner reports business
income on individual return (1040
Schedule C)
o
Self-employment tax on all profit
o
NYC “Unincorporated Business Tax
Initial Formation
◦ Inexpensive
◦ Additional fees for registering “dba”
Ongoing Administrative Requirements
◦ Minimal
“Life”
◦ limited to owner’s life (no separate
entity existence)
8
➤
➤
➤
Liability
◦ Weaker liability protections
➤
Governance
◦ Flexible, set forth in partnership
agreement
Ownership
◦ Two or more partners
◦ Can do business under partners’
names or a trade name (“dba”)
◦ Less flexible than an LLC or
corporation
◦ Limited partnerships permit
investment without control of the
business
➤
➤
➤
Business Taxes
o
Pass through taxation
o
Report business income on
individual return (IRS 1040 Schedule
1065)
o
Self-employment tax on all profit
o
NYC “Unincorporated Business Tax”
Initial Formation
◦ Cheap, although limited partnerships
also have a publication requirement
Ongoing Administrative Requirements
◦ Minimal
“Life”
◦ Limited independent existence ―
when any partner exits, partnership
dissolves (creates difficulties with
buying/selling interest)
9
➤
➤
➤
➤
Liability
◦ Strong liability protections
Initial Formation
◦ Fairly inexpensive
◦ Certificate of Incorporation
($135)
◦ Bylaws
◦ Hold organizational meeting to
approve bylaws and elect initial
directors
◦ Issue stock

Ownership
◦ Shareholders
◦ Multiple classes of stock allowed
◦ Transferable, subject to
securities laws
Governance
◦ Board of directors and officers
◦ Appropriate for complex
organizations
Business Taxes
o
Corporate level tax (i.e., double
taxation)
o
Shareholders report and pay tax
on dividends they receive
o
NYS Corporation franchise tax
➤
➤
Ongoing Administrative
Requirements
◦ More onerous
◦ Important to avoid “piercing the
corporate veil”
“Life”
◦ Entity exists until it is formally
dissolved.
10
➤
➤
➤
Liability
◦ Same as C-Corp
Ownership
◦ Shareholders
◦ Limitation on number and type of
shareholders
◦ One class of stock allowed
◦ Transferable, subject to securities
laws
Governance
◦ Same as C-Corp
◦ BUT - Managers (owner/employees)
must be paid a reasonable wage.
Otherwise, could be subject to selfemployment tax
➤
Business Taxes
o
Pass through taxation for IRS and
NYS
o
Pro-rata allocation of income or loss
o
NYC general corporation tax
Initial Formation
◦ Fairly inexpensive
◦ Certificate of Incorporation ($135)
◦ Bylaws
◦ Hold organizational meeting to
approve bylaws and elect initial
directors
◦ Issue stock
◦ Make “S” election

➤
➤
Ongoing Administrative Requirements
◦ More onerous
◦ Important to avoid “piercing the
corporate veil”
“Life”
◦ Entity exists until it is formally
dissolved
◦ BUT – may loose special tax status
11
➤
➤
➤
➤
Liability
◦ Strong liability protections
Ownership
◦ Highly flexible, multiple
classes of interests allowed
◦ Transferable, subject to
securities laws
Governance
◦ Highly flexible, set forth in the
LLC operating agreement
◦ Can be member-managed or
manager-managed
Business Taxes
◦ Pass through taxation
◦ Flexible allocation of income,
loss and other tax items
➤
➤
➤
Initial Formation
◦ More expensive ($200)
◦ Publication Requirement
Ongoing Administrative
Requirements
◦ Less onerous than corporation,
but recordkeeping requirements
important
“Life”
◦ Less onerous than corporation,
but recordkeeping requirements
important
12



Hire an accountant
Do not commingle personal and business
funds
Sign documents in the name of the entity
rather than in personal capacity
◦ for example: “XYZ Corp., by John Smith, CEO”
rather than “John Smith”
13
Choice of Entity
➤
•
➤
election for eligible entity
Two economic possibilities
•
Entity tax (corporation)
•
Flow-through tax (partnerships, LLCs, S-corps)
➤
Other
•
State
•
Local
•
Payroll Taxes
•
Sales and Use Taxes
14
Other Considerations
➤
Employer Identification Number (“EIN”): Must have one to open a
bank account and if wages paid to any employee; Use IRS Form SS4
➤
Self-Employment Tax Considerations
➤
Taxes on Payments to Employees:
•
Withholding of Employee’s Income Tax (Federal and NYS)
•
Payroll Taxes

Consider payments to ordinary employees (Social Security
and Medicare Taxes, Federal Unemployment Taxes),
payments to family members (“reasonable compensation”)

Payments to independent contractors: No tax needs to be
withheld, but have information reporting requirements.
Business generally must report to the fed gov’t payments of
$600 or more it makes to independent contractors
15
Other Considerations (cont’d)
➤
Tax
•
•
•
•
•
➤
Returns:
C-corps file income tax returns, other entities generally file info returns
Sole proprietors must report business income on NYS tax return
Single-shareholder S-corp must still file entity-level returns
Employers file NYS returns quarterly, even if no wages paid (Form NYS45)
Business files NYC returns (Form NYS-202 or NYS-204) if it has gross
income (before deduction for services performed or cost of goods sold)
of more than $95k, and files a Form NYC-5 UBTI each quarter
Estimated Taxes:
•
C-corp that anticipates federal tax bill of $500 or more must estimate its
income tax liability for the tax year and pay quarterly installments
•
Sole proprietorships, partners in partnerships: pay estimated taxes if
prior year’s NYS & NYC tax owed was at least $300 and this year’s
income tax withholding on wages and credits won’t cover most (90%) of
anticipated tax owed
16
Other Considerations (cont’d)
➤
Capital gains
•
➤
Individuals get reduced rates, corporations don’t
Sales taxes: NYS and NYC
•
Retail sales of most tangible property are taxed, and sales of some services
(e.g., film developing, printing, sales of food and beverages by restaurants,
and repair and maintenance)
•
Seller personally liable for the tax (but consumer usually pays)
•
Sellers of taxable goods and services must register with state & city BEFORE
they do business
•
File sales tax returns (even if had no taxable sales or purchases)
17
“Where Do I File/Pay Taxes?”
➤
➤
NY business generally needs to register, file returns and pay tax in another
state if it
•
“Does business” in the state (i.e., has employees or regular sales in the
state)
•
Has an office in the state
•
Owns or leases property in the state

Internet, telephone or mail-order sales only are likely not enough
State & Local Taxes
•
Varies, but similar to NYS in most respects
•
Some states don’t impose corporate tax on S-corps
•
Most cities don’t impose municipal corporate and unincorporated
business taxes
•
Each state has a formula to divide revenues among states where
business operates to avoid paying tax on same income in more than
one state
18
presented by Linda S. Manley, Legal Director
Lawyers Alliance for New York
19


Groups intending to engage in charitable or
educational activity tend to do so either as a not
for profit corporation (NFPC) or unincorporated
association.
Advantages:
1. Limited liability for directors, officers, and members.
2.
3.
4.
Facilitates the process of applying for tax exemption
Perpetual existence
May help generate revenues
20

Depending on the scope of services it can be
somewhat difficult to qualify as a not-forprofit corporation in NYS.

Can be time consuming and expensive.

Will not automatically generate revenues.

Difficult to dissolve.
21

Nonprofit corporations are governed by the
Not-for-Profit Corporation Law, which is
based on the Business Corporation Law but
with significant differences.
1. Must be formed for non-pecuniary purposes.
2. There are no shareholders.
3. Processes of formation, certain amendments
and dissolution for NFPC are much more
involved and time consuming.
22



Nonprofit Revitalization Act creates two types of
nonprofit corporations: charitable and noncharitable.
Corporation formed for both charitable and noncharitable purposes will be a charitable
corporation.
Existing corporations are automatically reclassified:
◦ Type A corporations will be non-charitable.
◦ Type B or C will be charitable.
◦ Type D will be charitable if they were formed for
charitable purposes and non-charitable if they
were not.
23


Membership vs Non-membership
◦
Role of members
◦
Members serve similar function as shareholders
◦
Membership add a layer of bureaucracy; small
organizations may not be adept at keeping
membership list current
Board of Directors
◦
Responsible for oversight of organization

Officers

Staff
24


B Corp is a business corporation whose directors and
officers can be required to consider non-financial values
when rendering decisions on behalf of the corporation.
Three key points:
1. Benefit corporation has a corporate purpose to
create general public benefit;
2. Directors and officers have expanded fiduciary
duties that require them to consider non-financial
values; and
3. Benefit corporation has to publish an annual report
measuring its social and environmental
performance against an independent standard.
25

Reserve Name

Prepare Certificate of Incorporation
◦ 1. Purposes clause either “charitable” or “noncharitable” or specific activities
◦ 2. Obtain necessary governmental approvals

File with Department of State
26

Document governing the operation of Board

NPCL establishes the baseline for operations

Need to have flexibility

Best practices for governance
27

Corporation or foundation organized and operated
exclusively for religious, educational, charitable
etc. purposes – cultural purposes will not qualify.

Major advantage is that donations are tax
deductible.

Significant restrictions on 501(c)(3) organizations

Corporations which anticipate engaging in some
lobbying activity should make 501(h) election.
◦ limited lobbying (influencing legislation) permitted
◦ no partisan political activity permitted
28

Applications filed within 27 months of
incorporation receive tax-exempt status retroactive
to the date of incorporation.

Applications filed after 27 months of incorporation
retroactive to the date of filing 1023.

Decide when the organization’s Fiscal Year will
end.

Key Components:
◦ Narrative description of the past, present, and
future activities of the organization
◦ Compensation and financial affiliates
29



Streamlines the tax exemption application process
for small nonprofits seeking 501(c)(3) status
Generally, only nonprofits that have had less than
$50,000 in revenue for the past 3 years, project
less than $50,000 of revenue for the next 3 years,
and do not have assets whose value exceeds
$250,000 may use the 1023-EZ form.
Other exceptions apply, so please consult the
worksheet in the Form 1023-EZ instructions for
more information.
30


Classification depends on source of organization’s
financial support.
Important because:
1.
2.
Private foundations are prohibited from any
lobbying;
Are subject to 2% tax on investment income;
3.
No compensation to any directors or officers; and
4.
Must make a certain percentage of
distributions each year.
31


A contractual relationship between an exempt
sponsoring organization and an organization that
intends to carry out a charitable purpose.
Why find a fiscal sponsor?
◦ Allows an organization that does not have tax-exempt
status to receive grants, charitable contributions and other
tax-deductible donations
◦ Short-term projects may not need independent status

Other Considerations
◦ Fees, depending on services offered (back office, payroll,
etc.)
◦ Two organization’s missions must match – risk to
sponsoring organization
32


Annual Reporting Obligation to the IRS is Form
990, due 5.5 months after end of fiscal year
◦ public (including funders) relies on information
contained in Form 990
CHAR 500 due to NYS Attorney General Charities
Bureau
◦ audit required if gross revenue above $250,000
◦ accountant’s review report required if gross
revenue about $150,000
◦ must be up-to-date to obtain AG consents
33
Presented by Peter Batten
Bingham McCutchen LLP
34
➤ Commercial lease is a contract.
➤ Commercial tenants generally have few rights outside of the
contract.
➤ There is no “warranty of habitability.” Unless required in the
lease, the Landlord doe not have an obligation to maintain or
repair. Commercial tenants take “as is.”
➤ No “duty to mitigate.” If a commercial tenant vacates before the
end of the lease term, the landlord does not need to try to lease
the space and may pursue the business for the rest of the lease
term.
➤ There is no rent regulation: the landlord has no obligation to
offer a lease renewal and once the lease expires, there is no
limit on the rent the landlord can charge.
35

Determine the type of business entity that will be named as the tenant
on the lease.
◦ Sole Proprietorship, Partnership, Corp., LLC
◦ Type of entity can insulate the principals from personal liability

Is the space suitable for the business?
◦ Check the Certificate of Occupancy and property profile.
◦ Go to NYC Department of Buildings and fill in the address and borough
http://www.nyc.gov/html/dob/html/home/home.shtml
◦ Determine whether the space may be used for a variety of purposes, in case
the business needs to change
◦ Use a broker
➤
Who owns the building?
◦
➤
To find out ownership history go to the on-line City Register at
http://www.nyc.gov/html/dof/html/property/acris.shtml
What is the Property Tax?
◦
Commercial tenants are generally required to pay a share of property tax.
Go to NYC Dept. of Finance and click on “search by address” to find out tax.
36
Rent: Totally negotiable – know the going rate
in your area.
Security Deposit: 2-3 months is very common,
may be more.
Lease term: Standard length 3-10 years.
 commencement and expiration dates
“Free Rent” Period: 2-6 months for build-out.
37
➤ The “standard” lease often limits use of the space to a
very specific purpose—this can be fatal to an exit
strategy. Best language: “Tenant may use and occupy
the premises for all lawful purposes.”
➤ You have no legal right to sell or do anything that is
not permitted by the lease.
➤ Keeping the permitted use general permits sublet or
assignment to a wide variety of businesses.
➤ It is unlikely that the party who takes over the tenant’s
lease will have the same type of business.
38
➤ The lease will require casualty (property damage)
and liability (damage to persons or property of
others) coverage, at a minimum.
➤ Lease terms should be reviewed by an insurance
agent.
➤ You may also want to consider insurance that
covers the replacement value of items in your
store and business interruption.
39
➤ Construction
Who will pay for it?
Who will own the fixtures after the lease is over?
Who has to remove furniture or other items at the end?
Limit the fees that Landlord can charge to review plans
or supervise work.
o Any planned alterations should be pre-approved by the
Landlord before lease execution
o
o
o
o
➤ Signs
o Obtain pre-approval of signs
o Permit “closing” and “going out of business” signs
40
➤ Landlord should maintain and repair the structure
of the building, building systems & common areas.
➤ Landlord should be obligated to minimize
interference with the tenant’s business.
➤ If critical repair item is within the space, negotiate
the right to do work and have credit against rent.
41
➤
A tenant’s most powerful strategy to get out of the lease is
to get someone else to take it over.
 Assignment = you move out before the end of the lease term and another
person or company takes over the lease.
 Sublease= you permit another person/business to use all or a portion of
your leased space but you retain control over the space.
➤
Certain events should not require Landlord’s consent:
 Mergers, acquisitions and sales of businesses
 In an office lease, occupancy by affiliates
➤
Landlord should be reasonable in considering requests for
consent to sublease or assign, and should be obligated to
respond to such requests within a specified period of time.
42
➤ Default is a violation of the lease.
➤ Events that may trigger a default include:
 Failure to pay rent
 Failure to perform obligations
 Vacating or abandoning the space
➤ Must have notice and chance to cure the default
➤ A default that is not corrected may lead to termination
of tenancy and eviction.
43
➤ Cancellation right permits a tenant to terminate the
lease before the end of the lease term.
➤ Tenants like them because it gives them a seat at the
table to negotiate as part of an exit strategy.
➤ Even an “expensive” cancellation right is valuable to a
tenant because it is probably will probably be less
than the remaining rental obligation.
➤ Landlords will resist including a cancellation right, but
it is worth asking for.
44
➤ Landlord should be required to return the
security deposit quickly.
➤ Avoid agreeing to restore the space to its
original condition or to remove fixtures or other
improvements.
➤ Avoid high “holdover” rent penalties and
consequential damages.
45
Landlord may require a personal guaranty from
individual owners, which puts their personal assets
at risk.
➤ Not unusual for Landlord to require especially if tenant is
a limited liability company or corporation with limited
assets
➤ Director and Officers of not-for-profit entities should
strongly resist any personal liability
➤ Limit the extent of the guaranty
➤ Provide for substitute guarantors in the case of lease
assignment or retirement - or provide for increased
security deposit if substitute is not available.
46
➤ Not a full lease guaranty
➤ Personal guaranty for payment
➤ Only responsible for rent up to surrender of
lease by tenant (or certain period after
surrender)
47
48
Critical to determine whether individuals providing services
are employees or independent contractors


Independent contractors are in business for themselves and make their
services available to the public.
Consider degree of control and independence.
◦ Does employer have control over the means of doing job or just the
result?
◦ Does company control or have right to control what the worker does and
how and when the worker does his or her job?
◦ Are business aspects of the worker’s job controlled by the company?
(how worker is paid, who provides tools/supplies, etc.)
◦ Are there written contracts or employee type benefits (i.e. pension plan,
insurance, vacation pay, etc.)?
◦ Invoices? Tax ID No.? Website? Business cards? D/B/A?
49
Unpaid internships must meet all the following criteria or face
potential liability for federal and NY wage and tax law violations:










Internship must be similar to training provided in an educational program.
Training must be for the benefit of the intern.
Interns must not displace regular employees and must work under close
supervision.
Business must derive no immediate advantage from the intern’s activities.
Intern must not necessarily be entitled to a job at the end of the internship.
Interns must receive written notice that they are not entitled to wages and
not considered employees.
Any clinical training is performed under supervision and direction of people
who are knowledgeable and experienced in the activity.
Training is general and not designed specifically for a job with the
employer.
Screening process for interns is not the same as for employees and only
uses criteria relevant for admission to an independent educational
program.
Advertisements for the program clearly discuss education or training.
50
51
An Employer CANNOT refuse to hire, discharge, or
otherwise take any adverse action against an applicant or
employee with respect to compensation, terms, conditions
or privileges of employment based, in whole or in part, on
the applicant’s or employee’s protected characteristics
under federal, state or local law.

Laws governing employment discrimination include:
Title VII of the Civil Rights Act of 1964 (Title VII)
Age Discrimination in Employment Act (ADEA)
Equal Pay Act of 1963 (EPA)
Americans with Disabilities Act (ADA)
Genetic Information Nondiscrimination Act of 2008
(GINA)
New York State and New York City Human Rights Laws
52
Federal:
Race, color, sex (including pregnancy, childbirth, and
related medical conditions), religion, national origin,
age (40 or older), citizenship, disability, certain
veterans, genetic information
NY State:
All of the above, plus: age (18 or older), marital status,
NY City:
sexual orientation, AIDS/HIV status, military status or
service, observance of Sabbath, political activities, use
of service dog, domestic violence victim status,
conviction record (with exceptions), lawful use of any
product or lawful recreational activities outside work
All of the above, plus: transgendered status, actual or
perceived sex, gender identity, self-image, appearance,
behavior or expression, status as a victim of domestic
violence, stalking and/or sex offenses
53
Do:
Are you over the age of 18?
Don't: How old are you? When did you graduate from
college? What is your birthday? Other questions that
indirectly ask for the applicant’s age.
Do:
Are you authorized to work in the U.S.? What
languages do you read, speak or write fluently? (if
job related) What professional associations do
participate in? (if job related)
Don't: Are you a U.S. citizen? Where were you/your parents
born/grow up? What is your native language? What
clubs or social organizations do you belong to?
54
Do:
Would you be willing to relocate if necessary? Would you
be willing to travel as may be needed? Would you be able
and willing to work overtime as may be required?
Don't: Are you married? Who do you live with? Do you plan to
have a family? When? How many kids do you have?
What are your child care arrangements?
Do:
Can you work on evenings and weekends if necessary?
Don't: What is your religion? What religious holidays do you
observe? What are your plans for the upcoming holiday
(for ex., Christmas, Easter, Passover, etc.)?
55
Do:
Ask about: (a) applicant's ability to perform a specific
job function, (b) non-medical qualifications such as
education, work history, certificates and licenses, (c)
how the applicant would perform job tasks or ask to
demonstrate such tasks, (d) whether applicant can
meet attendance requirements. (e) current use of
illegal drugs.
Don’t: Ask about: (a) applicant's general or specific health,
medical condition or mental/physical disability, (b)
how many days applicant was absent last year due to
illness, (c) workers compensation claim history, (d)
legal drug use.
56
The Basics about Overtime:
 All time worked over 40 hours in a single
workweek must be compensated at a rate not less
than one and one-half times the employee’s
regular rate.
 Each workweek stands alone. No averaging.
 Some employees may be exempt from overtime:
• “White collar” (administrative, professional &
executive) employees and others, based on duties.
• Exemptions narrowly construed. Title, salary NOT
determinative. Burden on the employer to prove.
57

Currently $8.00/hour, but set to rise incrementally:
◦ $8.75/hour effective December 31, 2014
◦ $9.00/hour effective December 31, 2015

Minimum wage and overtime laws apply to all non-exempt
employees (but do not apply to independent contractors).

For-profit businesses do not have “volunteer” workers.

Tips, meals and lodging may be credited towards the
minimum wage in some cases. Specific rules apply.

Employers must post the provisions of the Minimum Wage
law in a the workplace.

Overtime rules generally same as under federal law.
58

If you hire employees, you MUST secure for your records the following forms:
◦ Eligibility to Work in the US (Form I-9)
◦ Employee’s Social Security Number
◦ Employee’s Federal Tax Withholding (Form W-4)

NY Wage Theft Prevention Act: Employers must notify employees in writing and
retain acknowledgement of notice: rate of pay and regular pay day 1) at the
time of hiring; 2) any time there is a wage change; AND 3) on or before February
1st of each subsequent year of employment.

Other records to maintain:
◦ Records of wages, hours, overtime and withholdings for each employee for
each workweek
◦ Job descriptions
◦ Performance reviews
◦ Disciplinary notices
◦ Employee health and safety logs

Records should be maintained for a minimum of 7 years (longer, if
possible).
59

Types of Benefits:
◦ Short Term Disability Insurance (required)
◦ Workers’ Compensation (required)
◦ Health Insurance (required by 2015 for
employers with >100 FTEs. Small business may
be eligible for SHOP exchange)
◦ Life Insurance (optional)
◦ Sick Leave (Paid sick leave required in NYC.
Unpaid FMLA leave required for employers with
>50 employees. )
◦ Vacation/Holidays (optional)
◦ Breaks (meal break required for full-time
employees)
60




Went into effect April 1, 2014.
Requires employers with 5 or more employees in
the City to provide paid sick leave, which may
include leave for either employee’s or a family
member’s illness.
Applies to any full-time, part-time or temporary
employee who works more than 80 hours in a
calendar year.
Employers with fewer than 5 employees are only
required to provide unpaid leave.
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One hour of is earned for every 30 hours an
employee works, up to a maximum of 40 hours’
accrued leave per year.
Employees can use accrued sick leave starting 120
calendar days after the start of employment.
 Accrual for those already employed began
April 1, 2014; accrual for new employees
begins on their date of hire.
 Unused sick leave may be carried over to
next year, but employee’s use is capped at
40 hours per year.
NOTICE REQUIREMENTS:
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Employers must give new employees a notice
of rights on their date of hire.
Existing employees should have been
provided the notice of rights as of May 1st.
Maintain records of compliance with the law.
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Obtain and keep in effect workers compensation
coverage for their employees without a lapse in coverage;
Post a notice of workers compensation coverage;
Keep accurate records of the number of employees,
classification, wages and accidents for 4 years;
Not discriminate against an employee or applicant
because of workers compensation claims;
Report most injuries to the Board and the insurance
company within 10 days after an accident; and
Report an injured worker's wages or other compensation
to the Board, as well as any wage or work status changes.
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
Family and Medical Leave Act (FMLA):
◦ Applies to employers with at least 50 employees
and entitles an eligible employee to twelve weeks
of unpaid leave in a 12-month period (but
employer must continue health insurance
coverage)
Americans with Disabilities Act (ADA):
◦ Prohibits discrimination on the basis of disability
against any “qualified person” with a “disability”
who can perform the “essential functions” of the
job, with or without a “reasonable
accommodation”
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Set clear expectations
Address problems promptly
Provide accurate, timely feedback, including
performance evaluations
Be clear about policies and work rules
◦ (e.g., employee handbook)


Apply policies and rules firmly, consistently
and fairly
Provide the necessary training and tools to
do the job properly and safely
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•
Consider consulting with a professional before termination
•
No final decisions when emotions are high
•
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Consider progressive discipline unless serious offense (e.g.,
violence, sexual harassment, theft, serious insubordination)
Consider prior discipline of others in similar cases
Consider if accommodation is indicated (performance
cases)
Consider any recent exercise of a protected right
Investigate employee’s complaints so no appearance of
retaliation for complaints
Check compliance with policies and practices
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•
If it isn't documented, it didn't happen!
•
“Just the facts”
•
•
•
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Include prior supervisory actions
Include effects on company
Document third-party statements
Document employee responses
Progressive discipline, as appropriate
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
Determine whether progressive discipline followed
Obtain appropriate review and approval (e.g., human
resources, senior management, legal counsel)
Document basis for termination for internal use (e.g.,
performance, discipline, reduction-in-force)

Assess possible claims against company

Avoid retaliation or appearance of retaliation

Written notice of termination, cancel of benefits date

Final pay and accrued vacation (if applicable)

COBRA?

Consider possible unemployment insurance claim, defenses
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•
Discrimination or harassment claims
• retaliation;
• aiding and abetting;
• coercing, threatening, intimidating,
interfering;
• failure to act; “deliberate indifference.”
Tort claims
• assault and battery;
• defamation;
• invasion of privacy;
• false imprisonment.
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