NNBW Business law magazine 2014 by Northern Nevada Business Weekly

BUSINESS

D E

LAW

Paul J. Georgeson

Commercial Litigation/ Construction Law/Litigation – Construction/Personal Injury Litigation – Defendants

Terry Care

William A.S. Magrath II

Commercial Litigation

Bet-the-Company Litigation/ Commercial Litigation/ Litigation – Construction

Matt Addison

Commercial Litigation/ Litigation – Construction

Jeff Silvestri

Commercial Litigation

Leigh Goddard

Commercial Litigation

Kathleen Drakulich

George F. Ogilvie III

Energy Law

Litigation – Construction

Robert E. Armstrong

Scott A. Swain

Corporate Law/Real Estate Law/ Tax Law/Trusts and Estates

Trusts and Estates

Sylvia L. Harrison Environmental Law

John J. Frankovich Leo P. Bergin III

Michael A. Pagni

Litigation – Real Estate/Real Estate Law

Corporate Law

Kaaran E. Thomas

Litigation – Real Estate/Real Estate Law

Bankruptcy and Creditor Debtor Rights- Insolvency and Reorganization/Litigation – Bankruptcy

A.J. “Bud” Hicks Gaming Law

Andrew S. Gabriel

Timothy E. Rowe

Corporate Law/Real Estate Law

Workers’ Compensation Law – Employers

James Bradshaw

Commercial Litigation

Pat Lundvall

Commercial Litigation/Litigation – Labor and Employment

Thomas R.C. “Spike” Wilson Administrative – Regulatory Law/ Bet-the-Company Litigation/ Commercial Litigation

SELECTED AS THE BEST IN AMERICA BY A JURY OF THEIR PEERS. We are honored to have twenty-one McDonald Carano Wilson LLP attorneys selected for inclusion in Best Lawyers in America®. They were included in this prestigious directory after an exhaustive nationwide peer-review survey in which leading U.S. attorneys scrutinized and rated their legal abilities. We congratulate each of these attorneys for their accomplishments. Founded in 1949, McDonald Carano Wilson LLP is a full-service law firm with offices in Las Vegas and Reno. To learn more, visit www.mcdonaldcarano.com.

| Business Law Guide 2014

Table of Contents FennemoreCraig.Com

Strategies for Success at the 2015 Legislative Session

LAW THAT LEADS ®

What a Nevada Court

COV ERS MORE GROUND

of Appeals Means for Business

Protect Your Bottm Line by Avoiding Data Theft

A Year of Change in Wage and Hour Law

The Value of a Written Contract

Publisher Editor Business Development Administrative Assistant Circulation Director

Rick Carpenter John Seelmeyer C. Eli Zeiter Kayla Mullins Keith Sampson

REAL ESTATE AND REAL ESTATE LITIGATION. FAR REACHING EXPERIENCE. POWERFUL

Reporters

Rob Sabo Duane Johnson Anne Knowles

Graphic Design

Rob Fair

For more than 125 years, our expansive real estate practice has covered every aspect of land use and development in the Mountain West region. Our attorneys stand tough and stay focused. We protect and enhance our clients’ interests. And we keep them on solid ground. For more information call Ann Morgan, Office Managing Partner, Reno, at 775.788.2200 or visit FennemoreCraig.com. REPRESENTATION.

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Strategies for Success at the 2015 Legislative Session — How Your Business can get Its Voice Heard By Catherine O’Mara

he 78th Session of the Nevada Legislature will convene on February 2, 2015, for 120 days. As a true biennial state, the Nevada Legislature convenes every other year. In 1998 the voters approved a constitutional amendment limiting the session to 120 days. Despite the short period of time, what happens at the session is likely to have a significant impact on Nevada businesses, big and small. The Legislature is expected to consider matters of taxation, infrastructure, education and a variety of other issues related to employment and economic development. Whether you wish to promote a specific agenda or you simply want to keep abreast of the legislative developments and their impact on the local business climate, early involvement is the best way to protect your business’s interests. There are three key things businesses can do now and during the session to help navigate the legislative process. Evaluate your own interests The most persuasive individuals are those who know themselves and can clearly articulate their needs. Spend some time considering your own business and its requirements. Then, consider how your business is impacted by current and proposed policy. Have recent changes in the business climate affected (or not affected) you in the way you had hoped? Where does your company stand on current voter initiatives such as Question No. 3 on the ballot, which seeks to impose a 2 percent margin tax on certain businesses in Nevada? What policy changes, if enacted, would help or hinder your business? One great way for business leaders to begin educating themselves on current issues and their likely impact, is to reach out to leaders of other like-minded businesses. Many industry-specific associations and local chambers of commerce publish informative statements on policy measures that are likely to impact the business climate. Once you have a handle on those issues that are important to you, prioritize those matters and consider what resources you wish to devote to achieving your legislative goals.

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Get to know your legislators There are currently 63 members of the Nevada Legislature. These Nevadans are elected to represent their constituencies from the 21 Senate and 42 Assembly districts throughout the state. Start by connecting with the senators and assemblymen and women who represent the districts where you vote, where your businesses are located, and where you employees reside. (You can find out who your representatives are at http://mapserve1.leg.state. nv.us/whoRU/.) Keep in mind that in addition to being public servants, these men and women are Nevadans who have a personal interest in the success of our state. Don’t be shy; in Nevada, one is as likely to run into an elected official out in the community as he or she is to attend a town hall or committee hearing. A civic-minded citizen is wise to take advantage of the accessibility of Nevada’s elected officials and to forge personal relationships with these local leaders. Although not currently “in session,” your legislators represent you year-round, and most welcome the opportunity to learn about you and your business. Stay connected before and during the Legislative Session Before the session begins, familiarize yourself with bill draft requests (“BDR”). A BDR is a request for the Legislative Counsel Bureau to draft a bill for consideration by the legislature. The list can be accessed on the Nevada Legislature’s website at http://www.leg.state.nv.us/

S t “ 1 t L a i f s

Session/78th2015/BDRList/. You can also sign up for the Nevada Electronic Legislative Information System “NELIS” which will allow you to electronically track up to 10 BDRs, bills and budgets for free. In general, every bill that is introduced during the session begins as a BDR. Legislators, state agencies and other authorized entities are allotted a certain number of requests. This allotment is provided by statute or joint rule and also sets a deadline for submissions. As of Sept. 1, 479 BDRs have been submitted for the 2015 session. That number is likely to triple by the end of the session. In 2011, there were a total of 1,321 BDRs submitted and in 2013, 1,252 BDRs were submitted. The list of requests is accessible online and can provide insight into the topics likely to be considered during the session and the identity of the bill sponsor. Once the session begins, you can track the progress of a bill online from introduction of the measure through passage and execution into law by the Governor. After a bill is introduced on the floor of either the Assembly or Senate, it is generally referred to a committee, where much of the substantive work on the bill will take place. Although there can be nuances to the process, typically a committee chair will schedule a hearing on the bill where the committee will listen to public comment and testimony.

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continued on page 6

LRRLaw.com Catherine O’Mara is an attorney practicing in the Reno and Las Vegas offices of Snell & Wilmer. Contact her at 775-785-5428 or comara@swlaw.com.

Contact: David McElhinney DMcElhinney@LRRLaw.com | 775.823.2900 50 West Liberty Street, Suite 410 Reno, NV 89501

LEGISLATIVE continued from page 5 The committee is the best place for you to engage in the legislative process on a bill which affects you and your business. You can submit reports or letters to the committee expressing your views on the proposed legislation. You can also request to be heard at a hearing by contacting the committee chair, a member of the committee or the sponsor of the bill. A committee hearing is another place where membership in an association can have a definite advantage. Testimony by an association’s representative can demonstrate to a committee either broad support for, or opposition to, any measure. A committee can then choose to take any of a number of actions on the bill, including accepting it as introduced, amending it, or taking no action on it and thus “killing” the bill. Once the bill passes out of the committee, it is sent back to the originating house where, if it passes, the bill is sent to the second house for consideration, and the process starts anew. Just as there are deadlines to submit a BDR, there are also deadlines for a bill to be passed out of committee and out of each house. Failure

to meet the deadline or to be passed in final form by the time the Legislature adjourns kills the bill. The 78th Legislature will adjourn sine die (without a day being set for reconvening) on June 1, 2015. If a bill makes it out of the Legislature, it may still be vetoed by the Governor, or it will become law. With some preparation and personal engagement, one can stay involved in the Legislative Session by attending the proceedings in person, or by utilizing the Legislature’s website to track bills, review the calendar of important dates and deadlines, and monitor hearings and floor proceedings. However, if tackling the legislative process on your own seems daunting, consider retaining an experienced government relations professional or forming an association to combine forces in tracking legislation in an efficient manner. In addition to being familiar with the legislative process, a government relations professional can offer guidance and strategy to help you accomplish your legislative goals. ●

Because differences matter.

Understanding what makes you unique.

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| Business Law Guide 2014

The Court and the Bottom Line: What a Nevada Court of Appeals Means for Business By Marla Hudgens

ccording to a study undertaken by the U.S. Chamber of Commerce in 2012, more than 70 percent of legal counsel and senior executives surveyed said that the quality of a state’s judicial system is an important factor in the ultimate decision of where to locate and do business. Similar considerations were also reported by Laif Meidell — the president of Renobased American Wealth Management—in his article recently published in the Reno Gazette Journal entitled “Businesses in Italy to benefit from faster judicial process.” In that article, Meidell compares the “average” time that it takes to enforce a contract in the U.S. (370 days) with the average time in Italy (1,185 days). He noted that Italy’s “snail’s-paced judicial system” has dissuaded companies from relocating to Italy, and has impacted existing business’ operations there. Meidell ends on a positive note, explaining that Italians have made judicial reform a top priority, and are already seeing an upswing in business as a result. In November, Nevadans will have an opportunity to make judicial reform a priority in our state, and business owners in northern Nevada should step up to this challenge. Indeed, Nevada’s judicial system struggles to maintain the level of consistency and efficiency that Nevada businesses need and deserve. While it may take an average of 370 days in the U.S. to enforce a contract — which Meidell describes as seemingly “an eternity to you and me” — the numbers in Nevada often do not even reflect the national average, and more accurately reflect figures in Italy. Members of the Nevada judiciary and legal community generally agree that a primary source of delay is the backlog of cases pending in the Nevada Supreme Court, and similarly, the lack of published opinions in Nevada that establish controlling law and guide citizens

Marla Hudgens is an associate with Lewis Roca Rothgerber who focuses on civil, commercial and appellate litigation at the federal and state levels. She is chair-elect for the Appellate Section of the Nevada State Bar. Contact her at 775-321-5576 or MHudgens@LRRLaw.com.

In November, Nevadans will have an opportunity to make judicial reform a priority in our state, and business owners in northern Nevada should step up to this challenge. in understanding what the law is. In fact, in 2012, there were 2,500 new appeals filed in the Nevada Supreme Court — not including the backlog from prior years — and the Supreme Court has issued published opinions in only 3 to 4 percent of all cases. The net effect of this problem is that business owners are forced to litigate the same issues previously litigated because there is a lack of controlling law to guide them in their transactions and disputes. Question 1, appearing on this November’s ballot, is designed to alleviate this backlog and free-up time for the Supreme Court to publish more opinions. Members of the judiciary pray that voters will answer “yes.” But, the judiciary is not the only governmental arm that supports the creation of the court. In 2013, the Legislature unanimously supported the initiative to place the question on the ballot. In other words, 100 percent of Republicans and Democrats alike voted in favor of the ballot initiative to create a Court of Appeals. Governor Sandoval and Attorney General Cortez-Masto also support the initiative, and are listed as honorary co-chairs of the political action committee Nevadans for a Court of Appeals. Yet, with unanimous support across the aisle, polls show that support for the initiative in northern Nevada counties is not particularly strong, especially compared to the support seen in Clark County. This is troubling considering that 25 percent of all appeals originate in the northern counties. One explanation may be that voters in Northern Nevada are concerned about the cost to taxpayers. Just recently, Dan Eckles, the managing editor and sports editor of the Sparks Tribune, published an editorial entitled “State appeals court needed, but at what cost?” Eckles acknowledged, “There is little doubt Nevada continued on page 8 Northern Nevada Business Weekly |

APPEALS continued from page 7 needs a new court of appeals,” but he challenged the initiative based on the premise that it would be fiscally unsound to vote ‘yes’ without examining the budgetary figures. He concludes, “We wouldn’t hold it against anyone voting ‘no’ if supporters of the question don’t at least pony up some numbers on funding needs.” Mr. Eckles’ questions and concerns are relatively simple to answer: the benefits to taxpayers outweigh the costs, if any at all. In fact, the judiciary and the legislature have found a way to create and operate a Court of Appeals with absolutely no capital costs passed on to taxpayers because no facilities need to be built. The Court of Appeals will be housed in existing court buildings in Nevada, including the Nevada Supreme Court’s facility in Carson City and the Regional Justice Center in Las Vegas. The only potential cost to taxpayers are operational costs — slightly less than $1.5 million — for the salaries of three justices, their secretaries and six law clerks. Even these costs, however, are substantially mitigated by reversions to the general fund, which the Supreme Court has returned over several years. In fact, since 2008, the Nevada Supreme Court has reverted significant amounts back to the state general fund each year. In 2009, the Court reverted $2.5 million, and since 2009, between

$900,000 and $1.3 million each year. For that reason, among others, the 2013 Nevada Legislature unanimously approved the Court of Appeals budget subject only to passage of Question 1 by the voters. Accordingly, business owners in Nevada should embrace and advertise the Court of Appeals initiative, and should vote “yes” on Question 1. Creating and cultivating a stable and innovative business environment in Nevada is essential to ensure that northern Nevada businesses emerge and recover from the “Great Recession” on a sustainable upswing. There is no doubt that uncertainty and inconsistency in the application of commercial laws and enforcement of property rights dissuades potential business from relocating to northern Nevada and detracts from the growth of business already operating here. With the amount of attention recently garnered from the likes of Apple, Amazon, Tesla and other Fortune 500 companies, northern Nevada is no longer that little, insulated community we all grew up in. The emotional and financial costs associated with litigating business disputes repeatedly and over a prolonged period of time take their toll, and are simply not worth it when there is at least one very real solution to the problem. Business owners and northern Nevada voters in general would be wise to make sustainable judicial reform a priority in our state by voting “yes” to create a Nevada Court of Appeals. ●

A Fresh PersPective We prefer to view things from a different vantage point. One that allows a thorough assessment of the legal landscape, and enables us to anticipate challenges for our clients before they arise. One that gives us the foresight to serve their long-term interests, not just their immediate needs. Think of it as progress meets point-of-view. Contact us, and enjoy a fresh perspective.

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Watson Rounds Presents: Fables of Law

The Crow and the Duck.

Thankfully, the Crow relied upon Watson Rounds to protect and enforce his ideas.

Crow, dying of thirst, happened upon a pitcher of water. Alas, the water was so low that the Crow could not reach it. Having gathered all the rocks he could find, he dropped them into the pitcher, until the water had risen enough to drink.

And so, the unethical Duck was thwarted. The Crow looked upon him with a discerning eye as he said,

Upon passing by, a Duck saw this technique and attempted to later claim it as his own.

“True wit always has an answer.”

The moral of the story: always go with Watson Rounds.

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Northern Nevada Business Weekly |

Protect Your Bottom Line by Avoiding Data Theft By Bret Meich

usinesses utilize sensitive personal data to great benefit. Data often increase efficiency, enhance marketing, and uncover new opportunity. The same technologies that businesses employ in their operations, however, allow for inadvertent mistake and the occasion for criminal conduct. This summer’s widely-publicized Hold Security report revealed that hundreds of thousands of websites were compromised by Russian criminals, who stole more than one billion online credentials — usernames and passwords. Even technologically-advanced companies, such as Las Vegas Sands Corp. and Target Corp., fall prey to myriad technology accidents and crimes. These recent events have brought the topic of data misuse to the forefront, because such misuse can lead to significant corporate losses and may negatively harm one’s brand. Businesses of all sizes should make data security a priority. While the data intrusions at Target and Sands are notorious examples of hackers, offshore data thieves, and other external threats, the vast majority of data-loss events are the result of inadvertent or intentional “inside job” activity. In other words, if your organization experiences data loss, it is still most likely that an employee, not an external actor, caused the loss. Armstrong Teasdale, for example, recently counseled clients with respect to data losses arising from a laptop stolen from an employee’s car and a professional data thief who moved from company to company as a human resources employee for the purpose of stealing personal information. Even if there is no evidence of misuse of the lost data, the cost quickly mounts to provide legally-required notice and mitigation, such as credit monitoring. If the seriousness of the breach is sufficient to interest regulators, then the cost of the investigation, defense, and, potentially, future mandatory compliance and fines further add to the data-loss burden. Businesses should employ a sound data security strategy to account for the threat of internal and external data-loss events. Focusing on several key elements of a company’s data flow and storage can mitigate the threat. Start by asking questions regarding employee access, transmission and storage/disposal of company-held data. An organization should implement its data security strategy with appropriate policies, training, technology,

| Business Law Guide 2014

Businesses should employ a sound data security strategy to account for the threat of internal and external data-loss events.

and auditing. Data access policies should reflect authorized employees, allowable transmission, and appropriate retention and disposal. Likewise, hiring policies should include provisions for employees whose jobs allow access to sensitive information. Employee training should cover data security and retention policies, emphasizing the potential consequences of inappropriate data practices. The company’s information technology personnel should carefully review its internal data security. Finally, companies should implement procedures to record access and transmission of data, and routinely check for data-policy compliance. Cloud computing systems have their own data security implications. While cloud computing systems make sense for large and small businesses alike, the primary impediments to adopting cloud computing include security, interoperability, vendor lock-in, regulatory compliance, reliability, complexity, privacy and pricing. These concerns raise contract-drafting issues for cloud computing contracts. Because data security is the focus of this article, I will touch upon service level agreements (SLAs). SLAs should identify the infrastructure and security for the cloud service. When drafting a cloud service contract, one should define the required

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security parameters and monitoring in specific and measurable ways. Without these specifics, it will be hard to evaluate security and contracts deliverables. Consider whether there should be penalties for noncompliance. Boilerplate provisions addressing breaches of the contract are often too general to provide a meaningful remedy. For gaming companies, player-tracking systems warrant additional attention.

Player tracking data can be extensive, containing troves of personal information, including Social Security numbers, driver’s license numbers, home addresses, and myriad other valuable data. This data is subject to unauthorized internal and external access. The system administrator should carefully limit access, and department heads should regularly review the list of authorized employees. Additionally, internal and external audits allow businesses to test their compliance, allowing weaknesses to be identified before data-loss events occur. Finally, businesses should consider obtaining appropriate insurance coverage. While insuring against technology risks is a new, rapidly expanding field, such coverage could prove invaluable. This form of insurance can encompass numerous risk categories, including: 1) data breach coverage, which offers protection against expenses associated with responding to and mitigating a loss of thirdparty data; 2) regulatory action coverage, which protects against costs incurred in responding to and defending against regulatory claims; 3) outage coverage, which reimburses businesses for interruption losses related to system downtime; 4) data-loss coverage, which covers the cost of replacing the insured’s lost data; and 5) liability coverage, which may include content coverage for claims relating to information posted on a business’s website. Given that data security is a rapidly changing field, it is wise to get advice from legal counsel familiar with the relevant law. ●

Bret Meich is a member of Armstrong Teasdale LLP. He can be reached at bmeich@ armstrongteasdale.com or (775) 784-3206.

Northern Nevada Business Weekly |

2014 is a Year of Change in Wage and Hour Law By Molly Malone Rezac

his is becoming quite the year in wage and hour law. From new opinions from the Nevada Supreme Court to the Nevada Labor Commissioner’s workshops seeking proposed revisions on the minimum wage regulations, the law as we have known it is now in a state of flux. Similarly, on the federal wage and hour front, President Obama has issued executive orders and directives relating to both minimum wage and overtime. Employers need to stay abreast of these issues to ensure that they are always in compliance in their pay practices or risk costly claims. Nevada Constitutional Minimum Wage Amendment In 2004 and 2006, Nevada voters ratified the minimum wage amendment to Nevada’s Constitution. That amendment raised the minimum wage and set forth Nevada’s two-tiered minimum wage structure for all employees. Each year, the Labor Commissioner establishes the new minimum wage rates for the high tier and the low tier minimum wage. Employers who provide qualified health benefits to their employees are allowed to pay the lower minimum wage amount to their employees, while employers who do not provide qualified health benefits must pay the higher tier of minimum wage. Moreover, the minimum wage amendment sets forth its own definition of “employee” with respect to minimum wage and exempts only those individuals under the age of 18, employed by a nonprofit organization for after school or summer employment or trainees for periods of 90 days or less from the minimum wage requirements.

Molly Rezac is a shareholder with Gordon Silver in Reno, where she practices in the employment law group. Contact her at 775-343-7500 or through gordonsilver.com.

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However, Nevada’s statutes have also long provided for both a minimum wage and exceptions to the requirements to pay minimum wage. These exceptions were in place long before the minimum wage amendment. Specifically, NRS 608.250 provides that the minimum wage requirements do not apply to the following employees: (a) casual babysitters; (b) domestic service employees who reside in the household where they work; (c) outside salespersons whose earnings are based on commission; (d) employees engaged in an agricultural pursuit for an employer who did not use more than 500 days of agricultural labor in any calendar quarter of the preceding calendar year; (e) taxicab and limousine drivers; (f) persons with severe disabilities whose disabilities have diminished their productive capacity in a specific job and who are specified in certificates issue by the Rehabilitation Division of the Department of Employment, Training and Rehabilitation. Many employers continued to rely upon these exceptions to the minimum wage after the minimum wage amendment was ratified. Now, however, those employers must reevaluate the wage and hour policies. In Thomas v. Nevada Yellow Cab, the Nevada Supreme Court held that the 2006 Nevada Constitutional minimum wage amendment repealed all the exceptions to minimum wage found in NRS 608.250. Therefore, even casual babysitters are entitled to minimum wage. Employers cannot rely upon the exceptions found in NRS 608.250, and instead must pay all such employees minimum wage. Employers will need to put new policies in place immediately for these employees to ensure compliance with the law. Labor Commissioner Regulations Setting Forth Requirements for Employers Paying Lower Tier Minimum Wage Questioned In addition to the repeal of the minimum wage exceptions, there has been an increase in the number of lawsuits filed by employees alleging that they have not been paid the minimum wage that they were entitled to

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under the constitutional amendment. Specifically, these employees are alleging that they were entitled to the higher tier of minimum wage as they were not provided with qualified health benefits. This includes employees that were offered qualified health benefits, but declined the coverage. The lawsuits, including one brought against the Labor Commissioner’s office, claim that the regulations promulgated in response to the minimum wage amendment , and relied upon by most employers in determining which wage rate to pay, are defective. For example, NAC 608.102 sets forth the requirements to pay the lower tier of minimum wage. Under that regulation, employers may pay the lower tier of minimum wage if they offer a qualified health plan and the cost to the employee is less than 10 percent of the gross taxable income of the employee attributable to the employer. These lawsuits claim that this regulation, and the employers who have relied upon such regulation, are not complying with the requirements set forth in the minimum wage amendment. While the allegations in the lawsuits vary, many allege that employees may have been “offered” but not “provided” qualified health benefits but still paid the lower tier minimum wage, and argue that this is in violation of the amendment’s requirements. In addition, the employees argue that the Labor Commissioner regulations regarding the amount that may be charged to an employee for the qualified health benefits under the regulation is in violation of the amendment, and, therefore, these employees were always entitled to the higher tier minimum wage amount. These employees are also contesting being paid the lower tier

minimum wage during any waiting period required prior to the start of health insurance benefits. These cases are in their beginning stages so we do not know what the outcome will be, but employers may want to look at their calculations of payment of the lower or higher tier of minimum wage now. Moreover, in July, the Labor Commissioner held public workshops seeking comments on the current regulations; therefore, we are likely to see some proposed revisions to these regulations soon. Simply put, minimum wage law in Nevada is everchanging. Federal wage and hour law changes Federal wage and hour law is equally in flux. President Obama has continually discussed issues of minimum wage and overtime. In February, the President issued an executive order increasing the minimum wage for federal contractors from $7.25 to $10.10. This means that all companies contracting with the federal government must pay their employees a minimum wage of at least $10.10. Just a month later, the President issued a memorandum to the Secretary of Labor reiterating that the intent behind the Fair Labor Standards Act was to provide protections to most employees so that they received minimum wage and overtime. However, he argued that the “white collar” exemptions (exemptions for executive, administrative, and professional employees) to overtime under the FLSA have not kept up with the modern economy and, as a result, many employees are not receiving overtime or even minimum wage. He then directed the Secretary of Labor to propose revisions to “modernize and streamline the existing overtime regulations.” Therefore, the federal overtime regulations should soon change. Wage and hour law has been a hot issue for the past few years. Employers have seen more and more claims and lawsuits related to the payment of wages. With the likelihood of claims continuing, it is now more important than ever for employers to keep up-to-date and in compliance with both federal and state wage and hour laws. Reevaluate your company’s payroll practices continually to safeguard against such claims. ●

The Value of a Written Contract

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By Austin Sweet

ne of the advantages of conducting business in northern Nevada is that our relatively close community necessitates a certain level of accountability. Establishing a reputation for following through on your word can take you a long way in northern Nevada, while proving otherwise can ruin a business or career. Because of this mentality, many Nevada business-owners resist written contracts and prefer to rely on the “handshake deal.” However, reducing your agreements to writing is always a wise decision for a number of reasons.

relating to real property, contracts for the sale of goods worth more than $500, and contracts which cannot, by their very terms, be performed within one year. You should always put these types of contracts in writing or you may not be able to enforce them. The Statute of Frauds contains a number of exceptions and nuances. Rather than attempt to determine whether your particular agreement needs to be in writing, it is good practice to simply put all agreements in writing and avoid a problem with the Statute of Frauds.

Miscommunications happen and memories aren’t perfect Subject to a few major exceptions, which will be discussed below, oral agreements are legally enforceable contracts. In practice, however, oral contracts can be very difficult to enforce because they necessarily lack physical evidence of the agreed upon terms. In other words, it’s much easier to prove the terms of a contract if you can print the contract out and show it to someone. Without tangible evidence to show a judge or jury, any dispute will boil down to your word against theirs. This can become exponentially problematic when both parties honestly believe they are telling the truth, either because the parties misunderstood the agreement from the outset or because one of the parties misremembered the deal. Regardless of how strongly you trust the person you are dealing with, creating a written record of your agreement prevents miscommunication and protects against the dangers of human memories. Even good relationships between honest people can go awry when the two sides honestly remember the agreement differently. This situation can easily be avoided by simply writing down the terms of the agreement and giving both parties a copy. As the saying goes: “Trust, but verify.”

A written contract is only beneficial if it is accurate A contract is like an insurance policy – you hope you never need to use it, but if you do, it had better cover what you need covered, and it is worthless unless you put it in place before trouble arises. Simply having a contract is not good enough; it must be clear, accurately reflect the agreement, and include all necessary terms. Drafting a good contract while all parties are cooperating is much easier than attempting to interpret a vague, inaccurate, or incomplete contract after a dispute arises. Contracts need not be long, complex documents full of legal jargon. A multi-million dollar contract can be hand-written on a single sheet of paper, so long as the correct terms are included. Written contracts need to include all essential terms of the deal (price, terms, dates, deadlines, etc.) and everyone’s signature. Be sure that any critical element of the agreement is included in the contract – do not rely upon any promises from the other party that are not included in your contract. All good written contracts should also include provisions concerning how disputes under the contract will be resolved, such as whether you agree to arbitration, which state’s laws apply, and in which court any disputes

Not all oral contracts are enforceable The general rule that oral contracts are legally enforceable is subject to a few major exceptions, primarily encompassed under the Statute of Frauds. Contracts which fall under the Statute of Frauds are generally unenforceable unless they are written. The main types of contracts subject to the Statute of Frauds are contracts

Written contracts need to include all essential terms of the deal (price, terms, dates, deadlines, etc.) and everyone’s signature.

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should be decided. It is also important to include an attorneys’ fees provision, allowing the prevailing party in any dispute to recover its attorneys’ fees and costs if a dispute arises. Understand what your contract requires It is absolutely vital that you understand everything in your contract. It may be tempting to download a template off the Internet,

change parts of it to apply to your situation, and leave the several remaining pages of legal mumbo-jumbo because it “sounds good.” I have seen contracts between local businesses that require them to file suit in places like Florida. I have seen contracts that include superfluous provisions that have absolutely no applicability to the actual agreement at hand. I have seen contracts that include applicable, important requirements that neither party was enforcing because neither party understood their obligations. In some such cases, the parties would have been better off with no contract whatsoever than to have used a contract that included language that the parties did not understand. Having a contract with provisions you do not understand can actually impede your ability to enforce your agreement. For example, you may be in breach of the contract without even realizing it, opening yourself up to liability or providing the other party with defenses they might not otherwise have. If you are not sure what a provision in your contract means or requires of you, consult with an attorney before signing.

Understand what a contract can and cannot do You can’t make good deals with bad people. No matter how iron-clad your contract is, it will not protect you from the improper dealings of dishonest people. What a good contract can do, however, is deter the other party from manufacturing a dispute they are unlikely to win. A good contract can also maximize your ability to resolve any dispute as quickly and inexpensively as possible. A “loophole” in a contract may be enough for a defaulting party to drag a dispute through the legal process for several years at great expense to everyone involved, while a well-litigated dispute over an iron-clad contract can be resolved much more efficiently. While a good contract may not prevent a lawsuit, it can minimize the time and cost of a lawsuit. Consult with a lawyer In order to ensure that you have an accurate, complete contract that you fully understand, it is wise to meet with a lawyer before signing the agreement. Your lawyer can help you verify that your contract includes all necessary terms and appropriately applies to your situation, as well as explain to you all your rights and responsibilities. If you are concerned with the cost, considering drafting the contract yourself, then sitting down with your lawyer to discuss any revisions that need to be made. The Gunderson Law Firm, for example, will review any unsigned contract and offer our comments, concerns, and advice free of charge for our existing clients. If your attorney offers a similar service, do not hesitate to utilize it and protect yourself and your business to the best of your ability. ●

Austin Sweet is an attorney at Gunderson Law Firm, practicing business law directed at helping business owners stay protected and prosper. He can be contacted at (775) 829-1222 or asweet@ gundersonlaw.com.

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