Startups, Small Business, and 7 Legal Trends from 2014

2014 has brought entrepreneurs, startups, and small business a wealth of new information about how to conduct business.  While the landscape of business in New York and the rest of America doesn't come with a one-size-fits-all philosophy, one overarching message resonates: lawyers and judges will battle over attempts to cut corners.

Litigation and lawmaking are the two primary sources of change in our legal system.  However, even the mom-and-pop shop can make decisions in the infancy of a business that can help prevent lawsuits in the future.  Here are some trends to pay attention to:

1. Lawyers and judges are going after employees misclassified as "independent contractors."

Fedex is but one company that faced litigation over the fact that workers were classified wrongly as employees. 1099ing someone is not something that you can just decide to do without considering how much control you exercise over a worker.

2. A franchisor may be held liable for the actions of a franchisee.

Franchise law is not taught in most law schools.  Too many franchises choose to navigate legal waters without sufficient guidance from knowledgable attorneys.  Disagreement over the legal wranglings among franchisors, franchisees, and employees are bound to create new headaches.  How much control a franchisor exerts over a franchisee can have dire consequences.

3. All kinds of businesses are having their employees sign non-compete agreements.

Even a sandwhich shop such as Jimmie John's got in on the non-compete action (perhaps to their PR detriment).  Perhaps employers are not consulting with an attorney prior to requiring an employee to sign a non-compete, but these contracts will not be found to be enforceable if they are not reasonable.  Factors such as the distance and duration of competing businesses affect the level of reasonableness.

4. Consumers will bring legal action to enforce authenticity.

Don't throw around terms such as "All Natural" and "Made in America" lightly.  If you make claims about your product that you can't back up, someone may just sue you over those claims.

5. Lawyers and judges can't seem to pin down the rules of copyright, trademark, and patents.

You have disagreement over whether copyright protection extends to a performer for her own performance(Garcia v. Google) or whether it extends to computer programming source code (Oracle v. Google--Google is in the middle of everything!).  You have deadmau5 responding to Disney's claim of trademark infringment with a copyright claim.  You have the question of whether copyright protection extends beyond human control.  You have questions about the future of the Digital Millenium Copyright Act.  Here are a few things to remember: "fair use" is a concept in copyright litigation, not trademark litigation. The questions of whether a mark is "confusingly similar" and possesses "secondary meaning" are important in trademark. And patent questions should be left to the patent attorneys!

6. Crowdfunding backers often don't get what they paid for, and insurance might be the best protection.

While it appears that entrepreneurs are not yet taking advantage of the new JOBS Act rules for crowdfunding equity investments en masse, crowdfunders who offer backers are too often offering rewards that are thereafter undelivered or of underdelivered quality.  Now at least one major crowdfunding site, IndieGogo, is exploring insurance to protect backers.

7. Cutting corners is getting riskier and riskier.

Whether it's hiring unpaid interns or trying to bypass safety regulations, public outrage and case law are pointing to a crackdown on the corner cutting that have been employed by small companies and conglomerates alike.  You know there are rules, and there are more online resources out there than have ever been out there before.  Ignorance of the rules, customs, and statutes isn't the defense it used to be.

Affordable legal services, information-on-demand, and a substantially smaller dependence on paper and transportation have made endless the possibilities for a single entrepreneur looking to launch a company. 2015 is sure to present new obstacles and challenges, but more and more questions will likely have legal answers.  Happy New Year!