Archive for January, 2015

Lawsuits and Technology: There’s an App for getting a Job – But are you an Employee or a Contractor?

January 29, 2015 Leave a comment

A recent article from the ABAJournal highlights a new emerging dispute in employee v.s. independent contractor law – you can check that article out here

Reasons for Business Owners to Properly Classify Workers

ln a previous blog post I talked about the consequences of business owners mislabeling employment status see here

Employee v.s. Contractor – Matters to the Worker
“Employees” enjoy protections under Federal and State law not afforded to independent contractors.

Take for example the Michigan Wage and Fringe Benefit Act – which requires Employers to pay employees every two weeks, or at a minimum on a monthly basis.  MCL 408.472. The Michigan law also imposes strict penalties for an employer found to have violated an employee’s rights.

New Technology – New Questions for Workers

It isn’t a surprise that technology has given rise to a dispute in this area of the law.

The article gives reasons why these “app-summoned” workers are grumbling about their “wrongful” status of independent contractor. Being labeled an Independent contractor presumes a level of autonomy – apparently not enjoyed by the plaintiffs in the lawsuits.

Could Technology Give Rise to a New Legal Classification?

Interestingly, some law professors’ solution is creating a new class: “Dependent Contractors” – a sort of hybrid of rights and duties. It will be interesting to see what comes of these lawsuits – a new classification for workers?

Questions? Comments?



Michigan Real Estate Law Update: Proposed House Bill to Allow Tenant’s Waiver of Trial By Jury.

January 26, 2015 Leave a comment

A Michigan House Bill was proposed last week that would allow a landlord in a residential lease to include a waiver of a trial by jury. You can see the proposed bill here

This proposed amendment would revise a portion of Michigan’s Truth in Renting Act, which only applies to residential landlord tenant rental agreements.

Allowing the waiver would certainly serve the interests of landlords/property managers, as well as the efficiency of court resources. As lawyers are well aware, a bench trial, particularly in residential landlord/tenant dispute, can be tried much more efficiently than a trial by jury.

The bill has been referred to the judiciary committee. It will be interesting to see if it comes out intact.

Questions? Comments?

Local Businesses: More on Crowdfunding

January 20, 2015 Leave a comment

Is Crowdfunding Right for Your Business?

An interesting article in Crain’s Detroit addresses crowdfunding and whether its right for businesses. Check it out here.

The article is meant for small and large businesses alike to consider whether or not crowdfunding is a viable source of funding for their respective businesses. The article addresses “rewards based” crowdfunding and “equity” crowdfunding, but let’s just consider “equity” crowdfunding, particularly, Michigan’s intrastate crowdfunding Exemption – the MILE Act. For more on the MILE Act, check out some of my prior posts.

Crowdfunding and Local Community-based Businesses.

One point that came out of the article was that crowdfunding, if it is a viable funding tool, is best suited for small local businesses.

I certainly agree that local businesses, who intend to stay local, are well-suited for crowdfunding. In fact, that was a goal of the Federal JOBS Act.

As the State of Texas has recognized in promulgating its own rules on intrastate crowdfunding:

“The legislative history of this federal provision [JOBS Act] suggests that the exemption was intended to apply only to offerings genuinely local in character, which in reality represent local financing by local industries, carried out through local investment.”  You can check out Texas’ Intrastate Crowdfunding Rules here

The Michigan Municipal League stated in the Crain’s Article that long-standing community-based businesses can benefit from crowdfunding, since those businesses would have name recognition in the community, and proven track record to stick around.

Crowdfunding is Met with Skepticism.

Not surprisingly, most of the attorneys interviewed react to crowdfunding with some skepticism.

“It’s such a gray area that a lot of attorneys just say, “I don’t know’ and take a conservative approach,” said Kevin Hitchen, co-founder of Localstake. “That’s why you don’t see a lot of businesses (using MILE). It’s restrictive.”

Indeed, as a lawyer, my job is to protect my clients from liability, it is hard to fully protect clients from the unknown.

As I’ve previously indicated, the State of Michigan appears not to be anywhere near ready to propose rules to help guide the MILE Act Implementation. Without this guidance, it certainly makes life difficult for Michigan business lawyers advising their client’s on MILE Act compliance.

However, I don’t believe that justifies labeling the MILE Act as a fad that will soon fade away. At a minimum, it is a tool that local entrepreneurs should consider for local (and lasting) economic development.

As I’ve previously written, I believe crowdfunding is a useful tool for social entrepreneurs who want to invest in a local community. Detroit, Grand Rapids, and other urban communities are good examples of communities ready for entrepreneurs to “take the leap” into intrastate crowdfunding.

Michigan is Not Backing Away From Local Crowdfunding

On October 21, 2014 Governor Snyder signed into law HB 5273 which created a “Michigan Investment Market” to local intrastate crowdfunded securities. You can check out the legislation here

The intention  of the “Michigan investment market” would be to connect buyers and sellers of local securities. You can review the New York Times article titled “A Way for Local Businesses to Grow” about the new law here

Questions? Comments?


Legal News Update Begs the Questions: are Universal Legal Forms a Good Investment for a Business Start-up?

January 9, 2015 Leave a comment

Happy Friday!

The ABAJournal reported today that LegalZoom “has gotten a green light to operate in the United Kingdom as an alternative business structure.”  You can read the entire article here

The ABAJournal also has an interesting extensive article about the value of these alternative legal service providers see that article here

I’ve previously commented on my own views of universal legal forms, and the complications that can arise from using those forms without obtaining legal counsel. You can check out my previous article here . That article highlights a case where an individual used a universal legal form that ultimately did not likely result in her intentions coming to fruition.

Regardless, People Use These Products.

Legal Zoom and others like it encompass a multi-million dollar industry. So people, a large part being small businesses, start-ups and entrepreneurs, are using these products.

Question: Is a minimal investment in these pre-made legal documents a good investment for start-ups?

First, I can understand why an entrepreneur might be drawn to buying such a product.

Entrepreneurs (particularly those involved in small business/start-ups) are more likely to utilize low cost legal forms as opposed to retaining legal counsel. For two reasons:

1. Entrepreneurs are more likely to take risk (e,g, – venturing into a business transaction without legal counsel = RISK);

Lawyers, on the other hand, are in the business of limiting liability for our clients. We are risk averse!


2. start-ups lack cash flow.

I have stated in previous posts good reasons for why I believe everyone (whether business, or consumer) should have a lawyer involved whenever a legal documents are undertaken.

At some point, the small business owner needs to make a cost-benefit analysis:

what is the cost of engaging a lawyer, and what is the risk if I do not? Is the risk worth it?

The problem here is that it is hard gauge the risk without seeking legal counsel (catch 22).

It’s no surprise that the legal industry is always considering whether alternative legal fee structures are worth considering. (e.g. – fixed fee v.s. hourly rate). The legal industry needs to make legal services more accessible, since there is an unmet need for legal services.

My exhortation to the start-up business owner: 

get a lawyer referral from a trusted source, and see if the lawyer will work with you regarding alternative fee structures. What could it hurt?

A lawyer who works with start-up businesses and entrepreneurs likely understands your competing business interests.

The lawyer probably also values the relationship with a growing business client that the lawyer can look forward to advising over the course of many years to come.
Thoughts? Questions?

Michigan Real Estate Law Update: Investors: If you Intend to Redeem, Better Record that Deed.

January 5, 2015 1 comment

Happy New Year!

A brief Michigan Legislative Update that affects real estate investors. HB 5795  was passed into law on December 29, 2014 and given immediate effect. The law amends the redemption from foreclosure statute. MCL 600.3140.

See the legislative analysis of the House Bill here

Purchasing Property at (and after) Foreclosure.

Under the prior language, anyone “lawfully claiming from or under the mortgagor or the mortgagor’s heirs, executors, or administrators” could redeem the property from foreclosure.

This effectively meant that an investor who missed the foreclosure sale could contact the homeowner (or their personal representative, if deceased) and purchase a quitclaim deed that would transfer the homeowner’s “redemption rights” in the property.

“Redemption Rights” One Stick in the Bundle of Rights.

As every lawyer who sat through Property Law in first year Law School was taught, Property Rights are akin to a “bundle of sticks” – multiple rights within that bundle, including, complete ownership (fee simple) possession, contingent rights, mineral rights, air rights, etc…and in the case of a homeowner, a right of redemption.

A quitclaim deed transfers “whatever” rights the homeowner had at the time of the transfer. In the case of a homeowner after foreclosure, this typically means only “the right of redemption” since that is the only stick left in the bundle.

When Do you have a Right to Redeem as the Owner of a Redemption Right?

The result of HB 5795, it doesn’t preclude a homeowner from assigning their interest, but it puts the burden of the “grantee” (or real estate investor who purchased the rights) to record the deed prior to redemption.

The practical effect is that it places no duty on a purchaser at foreclosure, or the register of deeds, to accept payment, unless they are presented with a “recorded interest.”

What’s the Purpose for this Amendment?

For real estate investors who pick up properties at foreclosures, there is nothing that irks them more than another investor who approaches them a few months after foreclosure sale and informs that they own the right to redeem the property via a quitclaim deed, and they intend to redeem.

All the investor’s time and energy in due diligence to investigate properties worth picking up, not to mention the amount of cash that was needed to purchase the Property at the foreclosure sale – all gone to waste.  When the investor expected to either rehab and flip the property, or make it into a long term rental investment, what does the investor get in return? a nominal short term interest payment on their funds.

It isn’t surprising that an investor is not too happy when they get the call asking for a pay off from one “lawfully claiming under the mortgagor” Now, rightfully, the investor could search the Register of Deeds and see if a quitclaim deed had been recorded. If not, it arguably gives them grounds to refuse a pay off.

Questions? Comments?