In construction cases, lien waivers are generally used as requests for payment are made. Caution is the word when dealing with lien waivers.

In a recent case decided by the North Carolina Business Court, (Wachovia Bank vs Superior Construction Corp.) the Court interpreted a lien wavier against the general contractor.

In this case, Wachovia was the lender and Superior Construction was the general contractor. The project was a condominium complex located in Brunswick County. The project was partially completed and lawsuits started flying.

North Carolina lien law provides that a lien “relates back” to the first date when the lien claimant began furnishing labor and/or materials. This is a great aspect of North Carolina lien law which is helpful to lien claimants. The lien will have priority of title as it relates to other lien claimants or encumbrances which arise after the date of furnishing of material and/or labor by the lien claimant.

In this case, Superior provided labor and materials to the condo project approximately one month before Wachovia obtained a promissory note and deed of trust on the construction project. (In most cases, these facts would have greatly benefited Superior Construction).

During the construction, as Superior made payment requests, Wachovia required Superior to sign lien waivers. Judge Jolly, the Judge who issued the opinion in this case determined that the pleadings “clearly establish that Defendant Superior executed the Waivers in exchange for consideration from Wachovia”.

The Attorneys for Superior argued that the lien waivers did not alter the effective date of the lien and the relation back of the lien but only served to reduce the amount of the lien claim. However, the Court did not agree. The Court determined that Superior lawfully chose to change its position in the hierarchy of liens on the project by way of the contractual lien waivers.

Thus, when requested to sign a lien waiver, caution is the word. Be sure to read the entire wording of the lien wavier and be certain that it is accurate as to the facts of your situation.

The North Carolina Secretary of State’s Office recently mailed out “Notices of Grounds of Administrative Dissolution” to businesses which lacked one or more filed annual reports.  As you are probably aware, business corporations and limited liability companies which are approved to conduct business in the State by the N.C. Secretary of State are required to file annual reports with the Secretary of State.  Being delinquent on filing the annual reports is grounds for administrative dissolution.  If a business is administratively dissolved, the business no longer has what is referred to as the “corporate shell” which could create personal liability for the owners, board of directors and officers of the business.

The Secretary of State’s Office is required by law to notify businesses of the grounds for administrative dissolution and provide the businesses sixty (60) days to correct each ground for dissolution or demonstrate to the reasonable satisfaction of the Secretary of State that each ground does not exist.

There is continuing confusion of what actually is required to be filed with the Secretary of State and when it is to be filed.  Unfortunately, the law which outlines the requirements creates some of the confusion.  The easiest tip to remember is that each business corporation is required to file an annual report by the 15th day of March of each year.  Many businesses may fail to file their initial filing or a later filing and think everything is fine until they receive a notice later.

If your business received a Notice recently from the N.C. Secretary of State’s Office or if you have questions regarding what and when to file, please feel free to contact us.  We will be happy to help answer your questions.

With the job market and employment rate being what it is, many potential employees are doing everything possible to clean up their records to improve their chances of employment. A recent article in the Wall Street Journal is a prime example of what is going on today. http://online.wsj.com/article/SB125789494126242343.html

Employers often inquire as to whether the employment candidate has a criminal conviction and more so today what the financial stability of the candidate is. These can be legitimate inquiries. The problem arises when the potential candidate thinks their record is cleared from the public record. As is often the case, even if the candidate has their criminal record cleared (expunged), many times the criminal conviction will have been picked up and stored on other databases. Thus, the problem arises when the candidate reports to the potential employer that the candidate has no criminal past record but the potential employer’s background check reports otherwise.

Trying to clear a past criminal conviction can be difficult because many times local news web sites may pick up the arrest or convictions. Increasingly more so today, search engines include old news articles and information and police reports which could include arrest and/or convictions.

Background checks are becoming more common place in the work force and understandably so. According to the Society for Human Resource Management, more than 80% of companies performed background checks on potential employees in 2006.

Employers could have an obligation to have potential employees thoroughly investigated with background checks in order to safeguard existing employees, customers and personal information obtained from customers or other sources to prevent identity theft.

Employers need to thoroughly interview and feel comfortable with the potential employee. The employment relationship is founded on trust. The employee should be honest and up front. There may be bad news from years past which the employee should share up front and not try to hide even though the record is legally cleared.

As an employer, if you have questions concerning background checks and employment questions, please feel free to contact us.

Suppose for a moment a business acquaintance of yours sends you an email proposing a specific transaction. And let’s suppose you respond that it sounds great, let’s do it. You might be thinking you haven’t really committed to anything since you haven’t signed any contracts or agreements.

And you might be wrong.

Digital signatures have finally been officially approved by the North Carolina Court of Appeals. In a recent decision by the North Carolina Court of Appeals in Powell vs. City of Newton, http://www.aoc.state.nc.us/www/public/coa/opinions/2009/pdf/081262-1.pdf the Court enforced a settlement agreement even though no settlement agreement had actually been physically signed. As far as we know, this is the first reference to this statute by the North Carolina Court of Appeals.

The Court reached its decision in part based upon emails which were sent between counsel for the parties which reflected the settlement terms and which circulated the necessary documents. The Court held that the emails and documents which were sent between attorneys for the parties actually satisfied the signature requirement of the statute and thereby bound the parties to the settlement agreement. The Court went on to say “The parties, by their conduct, impliedly agreed to conduct themselves via electronic means, subjecting themselves to the provisions of the Uniform Electronic Transactions Act”.

This brings us a new level of convenience, and perhaps some environmental advantages, but also poses some new dangers.

How Can This Impact Your Agreements With Others?

The Uniform Electronic Transactions Act (“UETA”) does not apply to all transactions but it does apply to most. It applies only to electronic records and signatures that relate to a “transaction”, which is defined as those interactions between people relating to business, commercial, or governmental affairs. UETA has the limited objective of ensuring that electronic records and electronic signatures are the equivalents of paper records and manual signatures. Thus, you now may enter into contracts with binding terms without ever actually physically signing a document as you have in the past. Simply agreeing to the terms and conditions of the agreement and responding via email to the other parties may be enough to create a binding agreement.

Agreement to use electronic means between the parties may be derived in several ways including express assent and from the context and surrounding circumstances, including the parties’ intent. In some circumstances, the use of a business card that includes your email address may be an indication of asset to contract and bind yourself electronically.

The Court’s recent decision to uphold the UETA law is a great start in enforcing the existing law. The primary aspect to remember now is that your electronic communications, including those with smart phones, etc. may create binding agreements with those you contract with.

If you have questions concerning this area of law, we hope you will contact us.

Most corporations want to protect their business interests and “trade secrets”; they often do this by having employees sign non-compete agreements and/or non-disclosure agreements. Corporations often think that this is enough to protect their interests. For non-compete agreements to be valid there are several requirements that must be met. The agreement must be designed to protect a legitimate business interest and it must not be overbroad. In short the agreement must be narrowly tailored so as to protect your legitimate business interest without unnecessarily restricting the employees from working elsewhere in similar fields.

The agreements must be reasonable in length of time, activities limited and the geographical area protected. The ultimate question for the Court to decide is whether the agreement is reasonable in nature. Generally, North Carolina law does not favor non-compete agreements. However, they are enforceable if drafted properly.

It seems as though the use of non-compete and non-disclosure agreements continues to rise as business owners try to protect their business interests. If you desire to use similar agreements with your business, please feel free to contact us.

Your Employee Signed A Non-Compete,
So You’re Safe, Right?

It’s every business owner’s nightmare. You have a bright young employee, in whom you have made a significant investment. For three years, you’ve nurtured him, encouraged him, taught him everything about the business, paid him — and now he wants to quit and open a competing business to take away your customers and your revenues!

In an effort to prevent this scenario, and protect their business interests and trade secrets, business owners will have employees sign non-compete agreements and/or non-disclosure agreements.

Owners of corporations think that this document is enough to protect their interests, but thee are several pitfalls to be avoided — or that agreement will prove to be unenforceable. For non-compete agreements to be valid there are several requirements that must be met. The agreement must be designed to protect a legitimate business interest and it must not be overbroad. In other words, the agreement must be narrowly tailored so as to protect your legitimate business interest without unnecessarily restricting the employees from working elsewhere in similar fields.

Common sense applies here. You can’t tell your ex-employee that he can never work in your industry, anywhere in the world, forever. The agreements must be reasonable in length of time, activities limited and the geographical area protected. The ultimate question for the Court to decide is whether the agreement is reasonable in nature.

Generally, North Carolina law does not favor non-compete agreements. However, they are enforceable if drafted properly.

In today’s information economy, where knowledge is priceless, the use of non-compete and non-disclosure agreements continues to rise as business owners try to protect their business interests. If your business could be at risk and you’d like to protect yourself with the use of non-compete agreements, please feel free to contact us.

Recent studies show that people who are reading or writing text messages while driving are 23 times more likely to crash. And most people agree that restricting the use of technology for sending and receiving text messages, emails, and other similar communications while driving makes sense. It is simply too dangerous.

Effective Dec. 1, 2009, it will be unlawful to drive a motor vehicle and use a mobile telephone or other similar digital technology for email, texting, access to the Internet or games in North Carolina.

This law is important, but employers need to go further.

As a business matter, we often need our employees to be accessible while out of the office. Email and/or texting are one easy way to stay in touch. However, safety requires more concentration to driving.

The concern for employers is potential liability. Let’s put that in plain English. If one of your employees should crash and cause damage while reading or sending a business-related text message, you could be in for a big law suit. And you could lose.

You can take preliminary steps toward protecting yourself with a comprehensive written policy which addresses the use of electronic communications while driving on behalf of your company. After the policy is adopted by you, the employer, the policy should be properly communicated to all of your employees and consistently enforced.

If you have questions or would like us to help you to create and enforce a policy to cover the new law, please contact us.

We’ve all seen the headlines: “Driver in fatal crash was text messaging.” Reading or sending text messages on cell phone while driving is a dangerous practice, and as of December 1, 2009, an illegal one in North Carolina.

Effective on that date, it will be unlawful to drive a motor vehicle and use a mobile telephone or other similar digital technology for email, texting, access to the Internet or games in North Carolina.

Driving while texting (DWT) is a topic drawing much debate. A recent article in the Wall Street Journal http://online.wsj.com/article/SB10001424052970203278404574415053448975972.html sets out many of the concerns and issues. It is not only a State issue — the Federal government wants to be in on the debate as well.

The North Carolina law sets forth limitations as to what type of electronic information is or is not allowed while driving. The law makes it unlawful to
• Manually enter multiple letters or text as a means of communicating with another person; or
• Read any electronic mail or text message sent or stored;
• However, this limitation does not apply to any name or number stored in the mobile telephone or other digital device nor to any caller identification information.

Thankfully, the prohibitions of this law do not apply if your motor vehicle is parked or stopped. This raises the question as to whether you can text and email while your vehicle is stopped at a traffic sign or traffic light. The law also is not applicable to emergency personnel. The law does allow the use of global positioning systems or wireless communication devices used to send or receive data as part of a digital dispatch system. The law also allows the use of voice operated technology which will grow in popularity.

If you have employees, and if they sometimes drive in the course of business, you’re going to need an employment policy on distracted driving. We’ll discuss that in our next blog post.

The Federal Trade Commission (FTC) has issued regulations which require financial institutions and creditor’s to develop and implement a written plan to prevent identity theft. Part of the goal of the FTC is to have businesses detect, prevent and mitigate identity theft. The new regulations become effective August 1, 2009.

As stated by the FTC, “a creditor is any entity that regularly extends, renews or continues credit;” (FTC web site http://www.ftc.gov/bcp/edu/pubs/business/alerts/alt050.shtm)

As required by the new FTC regulations, business must have a written plan to address the identity theft issues. The written plan must identify and detect warning signs for identity theft. As provided by the FTC, the warning signs may include but certainly are not limited to unusual account activity, attempted use of suspicious account application documents, notices from customers who are victims of identity theft, use of suspicious addresses, social security numbers, etc.

The primary goal for business owners is to determine whether your business is required to have a written policy. If you are required to have a written policy, now is a great time to develop and implement the policy. Please feel free to contact us if you have questions.