All posts tagged seattle startup lawyer

Five Reasons to Be Your Startup’s Own Lawyer

Five Reasons to Be Your Startup’s Own LawyerGuest blog post from Josh King. 

Of course you need a lawyer if you’re raising funds (and Joe is a brilliant choice for that).  And you need a lawyer if your business model revolves around something risky and untried – like publicly rating every lawyer in America.  But if you’re a startup founder, you owe it to yourself to get at least minimally educated on legal issues, so you can choose where to devote your carefully marshaled cash to legal fees, and get better value in the process.

  1. You Can Read Your Own Contracts.
    You need to read and understand your own contracts.  For the vast majority of contracts that newly-formed startups will enter into (with the notable exception of formation, investment, and loan docs), the business terms matter far more than the “legalese.”  As long as the financial terms are right and there aren’t any long-term commitments, exclusivities or other terms that could complicate a future strategic deal, there’s likely little to worry about legally.  Sure, a lot of lawyers will tell you that something could still come up and bite you.  And it could.  It absolutely could.  But that’s why you’re the entrepreneur; you’re taking that risk in exchange for not having to spend the time, legal fees and negotiating uncertainty in getting lawyers involved.
  2. You Know What’s At Stake.
    Here’s a shock: many lawyers aren’t well-trained to differentiate between those issues that matter and those that don’t.  For every lawyer who will scale his or her work to the size and complexity of the deal, some will happily spend hours arguing over and re-crafting minor provisions in small contracts.  I can’t emphasize enough that for most agreements your startup enters into, you don’t want “perfect” documents.  You want things that generally work for you, don’t unduly tie your hands, and let you get back to your business.  That’s all.
  3. It’s Easier to Be Friendly.
    Here’s a radical thought – don’t look for maximum contractual advantage in your business deals.  While many attorneys are trained to get “the best possible deal” in the form of contract terms most advantageous to their client, this is often NOT the best possible deal for your startup.  It’s highly unlikely that the legal terms in your agreement will ever matter.  But what’s 100% likely to matter is getting deals in place, having fair business terms, and establishing relationships that can help your business grow.  In the early days of your startup, that’s best accomplished using simple, fair contracts.  You’ll build trust and minimize friction – all at a minimal cost in added legal risk.
  4. Coaching is Available.
    If you’re engaged with the issues facing your business, you’ll know when you need a little legal guidance.  You’ll be far better-positioned to get that coaching – and have it laser-focused on the exact issue you’re addressing – if you’ve been the one dealing with the issues.  It’s a more cost-effective approach than tossing everything that’s vaguely “legal” over to your lawyers for review.
  5. You’ll Know What to Look for in a Lawyer.
    As your business grows, it will at some point make sense to hire a lawyer to help guide the business.  If you’ve been actively involved in the legal work for your startup, you’ll be able to tell if the lawyer you are hiring a) has the ability to differentiate between important and non-important and issues; and b) shares your attitude toward risk.

Oh, one final piece of advice – if you go this route, just don’t call yourself a lawyer.  The Bar frowns on that . . .

Josh King is Vice President – Business Development & General Counsel of Avvo in Seattle.

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New Internet Domains Are Coming … What You Should Do

By Bob Corn-Revere, Burt Braverman, and David M. Silverman

The Internet Corporation for Assigned Names and Numbers (ICANN), the entity responsible for management of the Internet domain name system (DNS), has approved major changes in the system of top-level domains (TLDs) that will lead to the approval of potentially thousands of new domains. (Please see our June 22, 2011, Advisory.) ICANN has also given final approval to a sponsored domain for the adult entertainment industry, .xxx.

Historically, only a limited number of general use TLDs have been used across the Web, the best known of which are .com, .net, and .org. Country code TLDs also exist, many of which also have been used generally without regard to the nationality of the registrant (e.g., .tv). As discussed in our June Advisory, ICANN’s action will permit new applicants to propose almost any name or brand to become a top-level domain (e.g., .google or .pizza), and it will begin taking applications in January 2012. The sponsored .xxx domain will open this fall, but use of the .xxx TLD is limited to members of the “Sponsored Community” who provide adult-oriented content and related services.1  Continue reading →

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Summertime Blues: Limits on Using Unpaid Student Interns and Volunteers

summertime bluesBy Gregory S. Fisher, John C. Post, and Mary E. Drobka

Summer is the time of year when businesses often use student interns. Many businesses erroneously assume that student interns are not employees, particularly if they “volunteer” or if they are earning college credit for work performed. While it is true that college students under certain circumstances may be classified correctly as non-employees, not all qualify.

This advisory highlights key issues and best practices related to using student interns and the limits on using volunteers. Child labor or other student-learner subjects are beyond the scope of this brief summary.

Be familiar with the six-factor test

The U.S. Department of Labor (USDOL) applies the following six-factor test regarding student interns. All six factors must be met, otherwise an employment relationship exists and the student intern is considered an employee who must be paid under the Fair Labor Standards Act (FLSA).

  1. The training, even though it includes actual operations of the facilities of the employer, is similar to that which would be given in a vocational school;
  2. The training is for the benefit of the trainees;
  3. The trainees do not displace regular employees, but work under close observation;
  4. The employer providing the training derives no immediate advantage from the activities of the trainees, and on occasion the employer’s operations may actually be impeded;
  5. The trainees are not necessarily entitled to a job at the completion of the training period; and
  6. The employer and the trainees understand that the trainees are not entitled to wages for the time spent in training.

This “trainee” test also applies to school-to-work learning programs under the School-to-Work Opportunities Act of 1994. Please see USDOL guidance on trainees and on school-to-work programs.

Volunteers – private sector vs. public sector

Individuals may volunteer their services for charitable, religious, or other nonprofit community or public services organizations without creating an employment relationship, so long as certain conditions are satisfied. Thus, private sector for-profit employers generally may not use unpaid volunteers to perform work for them. In contrast, public employers may use volunteers, including individuals who are already employed by the public entity, so long as such individuals are not volunteering to perform work that they are already performing as part of their regular job for the public employer, and other conditions are satisfied. Please see USDOL guidance on volunteers.

But the student “volunteered” to get experience so I am not liable, right?

Wrong. College students looking to get a leg up in the marketplace may try to “volunteer” to work. But, even if the student is getting course credit for work, that alone does not allow the employer to ignore the requirements of the FLSA. Unless the relationship meets the entire six-factor test, the student must be classified as an employee, and the employer must comply with the FLSA and any applicable state wage and hour laws regardless of the student’s motivation.

Pay requirements

If a student should be classified as an employee, the student must be compensated no differently than any other employee. Unless other statutory exceptions and exemptions apply, the student would usually be eligible to be paid at least the minimum wage and overtime. Federal law allows for payment of a sub-minimum wage for certified student-learners. See 29 C.F.R. §§ 519.1, et seq.; 29 C.F.R. §§ 520.500, et seq. However, unless your state law includes a comparable provision, you may not be able to use this federal sub-minimum wage.

Practical tips

An internship must have a significant educational or vocational component.

    The employer must prove that the nature of the intern’s activities is directly related to the educational and vocational objectives of the training and that the activities do not unreasonably displace the tasks performed by employees.
    An intern should earn college credit or have a learning experience by being able to observe the practical application of classroom instruction in the workplace. The experience must do more than merely enhance the student’s marketability by giving him or her a line on the resume.

The program must benefit the students more than the employer.

    The burden of administering the program and supervising the student interns should outweigh any incidental benefit provided to the employer.

The interns or trainees may not displace regular employees or do their work.

    The student intern should be shadowing regular employees, not stepping into the place of a worker, directly performing the main work of the business, or actually working along side regular employees while receiving little or no training.

The interns must be closely supervised.

    Supervisors of interns must commit significant amounts of time to mentoring, teaching, and critiquing the activities of the interns.

Where can I get more information?

Check out the USDOL’s Fact Sheet #71.

In 2006, the USDOL published a useful opinion letter addressing the six-factor test in the context of university externs.

Still thinking of utilizing an intern?

    • Begin with the assumption that any person performing any job or task for you should be classified as an employee.
    • Never assume that anyone may lawfully “volunteer” or perform any work for you without being covered by wage and hour laws, particularly if you are a for-profit business.
    • Do not assume that every college student earning credit can be classified as an intern or trainee.
    • Confer with employment counsel before classifying a student as an unpaid “intern” or “volunteer.”
    • Be clear with interns, both in written and verbal communications, that the internship will not be paid and will not necessarily lead to employment.
    • Forms don’t control, but they are helpful in a close case. Have counsel assist with drafting an internship agreement in which the student-intern acknowledges that the six factors are present, particularly the absence of a wage.
    • When in doubt, classify a worker as an employee entitled to minimum wage and overtime.
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