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As Uber faces a storm of legal action, the ride-sharing company is readying to open operations in the Buffalo area.

With hundreds of Western New Yorkers signing up to drive for Uber, a look at the fine print of what they are signing up for may be in order.

Under a mandatory arbitration clause in the terms of use, drivers could be in for a surprise should something go wrong with their experience with the company. When drivers sign up to work for the company, they agree to several provisions when it comes to possible litigation with Uber, said former Magistrate Judge Carol Heckman, now a partner at Lippes Mathias Wexler Friedman LLP. She specializes in arbitration.

“First of all, they’re saying that any disputes between Uber drivers and Uber have to be arbitrated. They can’t go to the courts,” she said. “Drivers are waiving their right to a jury trial because arbitration does not have a jury trial and arbitration is final and binding. Any claims for class relief or collective action are waived, as well.”

Another aspect of the agreement is that any issues with the scope of the arbitration clause go to the arbitrator instead of the courts.

“What this achieves, from Uber’s point of view, is that they keep the number of reported cases on all of the issues to a very minimum,” Heckman said. “Arbitration is a confidential procedure.”

Uber and other ride-sharing services including Lyft open for business in Western New York on June 29. For Uber, it’s been a tumultuous time as several company leaders recently stepped down. CEO Travis Kalanick resigned June 20, a week after he started an extended leave of absence.

“This could go down as one of the best examples of how not to run a company, short of defrauding investors,” said Buffalo attorney Matthew Pelkey of Colligan Law LLP.

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When Uber opens for business in Western New York in a few weeks, the ride-sharing company will be bringing a host of legal and ethical issues with it.

In fact, the issues could be “existential,” said Matthew Pelkey, an attorney at Colligan Law LLP who works with local startups.

Issues range from workplace claims of harassment and discrimination to running afoul of the New York State Joint Commission on Public Ethics. The sheer amount of issues the company faces is “shocking,” he said.

“This could go down as one of the best examples of how not to run a company,” he said, “short of defrauding investors.”

The state ethics commission recently announced that it reached a settlement with Uber after the company failed to disclose more than $6 million in lobbying expenses in 2015-16.

Uber agreed to pay a fine of $98,000, according to the commission. The settlement is the largest reached under the commission’s compliance program.

According to reports about the fine, Uber disclosed $3.1 million in expenses when the actual number was closer to $9.4 million. Most of the spending was for an advertising campaign geared toward regulations in New York City, where Mayor Bill de Blasio pressed legislation to check the growth of the company’s app.

According to the settlement, Uber cooperated fully with the commission and attributed the nondisclosure to an error by a filing firm used by the ride-sharing company. Uber also made a mistake in reporting the expenses, the settlement said. The company has updated its filings with the commission.

In a statement, Uber said it no longer uses the third-party company to manage its state filings.

“We updated our reports because there were unintentional omissions from our initial disclosures,” the company said. “Uber NY has revised its processes and no longer uses the third-party filing firm who prepared these disclosure statements.”

Last week, Gov. Andrew Cuomo announced new regulations for the rollout of ride-sharing services across the state as of June 29.

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Joe Saeli will speak at a continuing legal education program co-sponsored by the Erie County Bar Foundation, the Erie Institute of Law and the New York State Bar Association.  Joe’s discussion topic is the Sale or Merger of a Law Practice – Transitioning to Retirement.

Date: Tuesday, June 20, 2017

Time: 9:00 a.m. – 12:00 p.m.

Location: Bar Association of Erie County, Sun Auditorium, 438 Main Street, Buffalo, New York

Register online at www.eriebar.org.

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Colligan Law is proud to announce that Partner Matthew Pelkey has been nominated as a “Community Catalyst” in the third annual Upstate Venture Ecosystem Awards, organized by Upstate Venture Connect and the Upstate Venture Association of New York.

“Upstate Venture Ecosystem Award nominations represent the entrepreneurial leaders throughout Upstate New York who are transforming our region’s venture community,” said UVC Founder & Venture Catalyst Martin Babinec. “They are the leaders and companies making Upstate the go-to destination for entrepreneurs.”

Community Catalyst is awarded to individuals who organize programs to bring together diverse startup ecosystem players in a local community and/or increase the amount of capital and number of active early stage investors in that community.

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By Matthew Pelkey

Starting a business comes with a lot of learning curves, including learning how to properly manage employees.

It is almost guaranteed that founders will run into some employment questions while growing their business. As legal practitioners we always hope that our clients will call us before making decisions with legal consequences, but alas, that is not always the case. And while every situation is unique (and you should always seek legal counsel to answer questions specific to your facts and circumstances) here are four common employment law pitfalls with startups:

• Independent contractors must be…[spoiler alert]…independent.

The old saying goes, if it walks like a duck and talks like a duck, it’s probably a duck. The same holds true for employees. For some reason though people tend to forget this rule when utilizing “independent contractors”. As a general rule, just because you give someone a 1099 and tell the world they are “an independent contractor”, even if they agree to it in writing, does not an independent contractor make. The true test for whether someone is an independent contractor is a far more nuanced, multi-factored test. The more factors indicating the exercise of control over a person, the more likely they are to be considered an employee.

The safest way to ensure that your independent contractor will not be classified as employee? Make sure the contractor is actually operating a business, has a proper entity formed, has an EIN, has workers compensation and unemployment insurance, and files their own payroll tax. The independent contractor should also have other clients and be able to freely compete in the marketplace.

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By A. Nicholas Falkides

Three contract clauses that can critically impact the outcome of contract dispute litigation are Jurisdiction, Venue and Attorneys’ Fees.  Yet these clauses are often overlooked, and sometimes left out, as parties focus on “the deal terms” and ignore what they consider the “boilerplate.”

Jurisdiction is the authority of a particular court to bind a particular party [such as a person, a business, or a government agency] to the court’s judgment.  Without jurisdiction an order or judgment rendered against a party is unenforceable, in some cases even after a jury trial.

Jurisdiction is important for several reasons.  First, the law may differ from one jurisdiction to another.  Second, the cost of litigating in another jurisdiction is often much higher than litigating in the party’s “home” jurisdiction.  Third, a party may have a “home grown advantage” in its local jurisdiction that it loses in a foreign jurisdiction.

Venue is the geographical location where a lawsuit is, or can be, brought.  Venue rules generally prevent a lawsuit from being brought in a location that has no connection to the parties or the dispute; and a lawsuit brought in the wrong venue is subject to involuntary transfer to a proper venue, or even dismissal.

Venue is important because it is usually more expensive, and more difficult, to litigate in a distant venue than it is in a nearby venue; and the cost difference often impacts a party’s litigation strategy.

An attorneys’ fees clause gives a party to a lawsuit – typically the prevailing party – the ability to recover its “reasonable” attorneys’ fees in the lawsuit.  Attorneys’ fees clauses are legally enforceable in New York.  While some New York courts refuse to enforce attorneys’ fees clauses on principle, their existence in a contract often gives a party leverage in settlement negotiations.

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By Robert Townsley

As summer is arriving, and with Memorial Day, 4^th of July, and the 2017 Nathan’s Hotdog Eating Competition to look forward to, it’s time to tackle some of life’s biggest questions. Is a hotdog a sandwich? If not, then what exactly is a sandwich?

Believe it or not, on April 13, 2011, the New York State Department of Taxation and Finance, Taxpayer Guidance Division actually published a formal Tax Bulletin on this matter.

According to the Tax Bulletin, “sandwiches include cold and hot sandwiches of every kind that are prepared and ready to be eaten, whether made on bread, on bagels, on rolls, in pitas, in wraps, or otherwise, and regardless of the filling or number of layers. A sandwich can be as simple as a buttered bagel or roll, or as elaborate as a six-foot, toasted submarine sandwich.”

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Nasir Ali has been thinking about the challenge of tech startups in Central and Western New York for a long time.

The entrepreneur and technology executive founded The Tech Garden, a nonprofit that promotes entrepreneurship in Syracuse, and an associated incubator that was one of the first such facilities between Albany and Buffalo. He is the founder and executive director of the Seed Capital Fund of Central New York, one of the earliest angel groups in Upstate New York. He is managing director of the StartFast Venture Accelerator, a Syracuse based program in which dozens of companies have participated since the inaugural 2012 class.

Finally, Ali is the co­-founder of Upstate Venture Connect, which seeks to conjoin the separate technology communities in Central and Western New York and raise their collective visibility.

Ali visited Buffalo Wednesday and took a few minutes to chat with Buffalo Business First about startups across the state.

Ali said growing technology ecosystems exist in various cities from Albany to Buffalo, but increased connectivity and visibility are crucial to attracting more talent and forming a collective front. He said that’s the reason for the UNY50 Leadership Network, but said there’s much more work to be done.

“Visibility is the single biggest problem our region faces,” he said. “All our communities have grown up in isolation with each other, which informs the way we think about our boundaries, and is also the way the state doles out its money. But the real competition is not between Buffalo or Rochester or Syracuse, it’s between those cities and the rest of the world, particularly the big metro areas that are attracting our best and brightest. We have to create great visibility so that people are aware there are a lot of great companies that are hiring where you can have fast growth, fast learning and fast advancement.”

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By Joseph F. Saeli, Jr.

Beware of the Pitfalls of Misclassification

Businesses sometimes engage a person’s services as an independent contractor, instead of hiring that person as an employee.  The main benefit of engaging an independent contractor instead of hiring an employee is avoiding the expense of FICA taxes, workers compensation insurance, and unemployment insurance tax.   The business is also freed from having to deduct tax withholdings and file payroll tax returns for that person.

The general standard for determining whether a person is an independent contractor or employee is the extent of supervision, direction and control exercised by the employer over the services provided.  There are a number of factors which are considered in making this determination, and the cases are often not clear cut.  The more factors which show the exercise of supervision, direction and control, the more likely the worker will be found to be an employee.

It is more difficult than ever to engage a person’s services as an independent contractor in New York State.  The New York Joint Task Force is comprised of several State agencies, including the Labor Department, Tax Department and Workers Compensation Board, and is charged with aggressively pursuing cases where workers are found to be “misclassified” as independent contractors instead of employees.  These agencies actively share information about misclassified employees.  Governor Cuomo’s 2016 Executive Order establishing the permanent Joint Task Force refers to misclassification as a form of “worker exploitation”.

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By David J. Colligan

Colligan Law belongs to an international law firm association called Lawyers Associated Worldwide (LAW).  Last year’s annual meeting was held in London, England and hosted by the Howard Kennedy firm of that city.  The LAW Annual General Meeting is an opportunity for member firms to get together with firms that they refer their respective clients to over the course of the previous year and speak to their colleagues about new trends in the law, situations encountered in the management of their law firms, and special capabilities of the individual law firms to represent unique clients.  Eight new law firms were introduced at that meeting that had joined since the last annual general meeting, including law firms from South Korea, the Czech Republic, Channel Islands, China, Minneapolis, Austria, Luxemburg and Viet Nam.

Each year presentations are made to the group about specific areas of interest to the members.  At this meeting, a panel discussion was held of how a law firm network like LAW can add value to the general counsel of a major corporation who needs to refer work to competent multi-jurisdictional participants.  There were several other presentations by experts on the economy, industry knowledge and law firm management.

One new feature this year was the first ever Junior Lawyer Network Meeting held simultaneously with the annual general meeting.  Colligan Law sent a junior attorney, Erin Gormley, to the meeting, and she was the only junior lawyer from the Americas Region attending this first annual meeting of junior lawyers, but there were almost twenty junior lawyers from the Europe and Africa Region and at least one junior lawyer from the Asia/Australia Region.

The city of London was a beautiful place to hold this meeting and the post-Brexit economy was doing very well and a lot of new construction was occurring in London while we were there.