Common Employment Pitfalls for Startups

Written by Colligan Law on . Posted in Articles, News

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.

Jurisdiction, Venue and Attorneys’ Fees: Three Critical But Often Overlooked Clauses in Contracts

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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.

Is a hotdog a sandwich? Yes, according to New York State law, it is.

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By Robert Townsley

As summer is arriving, and with Memorial Day, 4th 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.”

Buffalo Business First – Nasir Ali talks about startups in Upstate NY

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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.”

Independent Contractors in New York State

Written by Colligan Law on . Posted in Articles, News

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”.

Colligan Law and Lawyers Associated Worldwide (LAW)

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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.

An Uber Welcome to Upstate New York

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By Matthew Pelkey

Since Uber (and Lyft) will be sharing the roadways with us Upstaters in the coming months, it’s worth taking a look at the company’s recent shenanigans.

Uber. The name is almost synonymous with ridesharing and startup success. Until recently, it was perhaps even poised to become so successful that the brand name itself would take on a common noun for ridesharing and disruptive technology. Talk to any entrepreneur or programmer with a half-baked idea and no doubt the words “Uber of _____” have been uttered in describing how their startup is going to take over the world. And for good reason, Uber dominated the startup scene raising billions of dollars and experiencing much success in its regulation-bending land-grab.

Uber has always had a problem with profitability, but so did Amazon. Now it’s important to distinguish that Amazon sells goods whereas Uber is a service (which doesn’t scale as easily), but as long as it keeps showing a plan for profitability investors seem willing to roll the dice. Meanwhile Uber is growing its customer base and reaping the benefits of investors who keep pumping cash into the company on a scale which rivals the GDP of countries like Rwanda and the Republic of Congo (seriously…look it up). Profitability it would seem (or the lack thereof), isn’t going to stop Uber. It’s business model after all is built on complete global disruption of the taxi market.

Step 1: global domination. Step 2: figure out how to make a profit.

And why not? Taxi’s are probably about as popular as congress and we all love to throw around our capitalism lexicon— Free-markets! Deregulation! Disruption! Innovation! You get the idea. It’s easy to love the romanticized idea of Uber.

But times they are a changing and 2017 hasn’t been nearly as merciful to Uber. In fact, to put it bluntly, it’s been a terrible, horrible, no good, very bad start to 2017 for the once-poised Taxi-disrupting monopoly. Now on the plus side, 2017 finally gave Uber the green light to enter the Upstate New York market after spending millions of dollars on lobbying and public relations campaigns. But short of its conquest of the New York State legislature, Uber’s challenges seem to be mounting quickly. And since Uber (and Lyft) will be sharing the roadways with us Upstaters in the coming months, it’s worth taking a look at the company’s recent shenanigans.

Erin Gormley Speaks at Mount Mercy National Honor Society Induction

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Mount Mercy Holds Its National Honor Society Induction On Tuesday March 29th the McAuley Chapter of National Honor Society at Mount Mercy Academy hosted its annual induction at the Mercy Center Convent Chapel. Four new senior and twentyseven new junior members were inducted, joining 12 previously inducted members. Membership in the National Honor Society is based on excellence in knowledge, scholarship, leadership, service and character. The National Honor Society was started in 1921 and there are over 20,000 chapters worldwide.

The NHS members who were installed in 2016 explained the history of National Honor Society and explained what the five pillars of NHS mean. President Margaret Cronin presented the candidates for membership and Principal Margaret Staszak draped the NHS stoles on the inductees.

Erin Gormley of Buffalo, a member of Mount Mercy’s class of 2006 and a past NHS member was the guest speaker for the evening. Gormley graduated from the Northeastern University with a BS and The University of Pittsburgh Law School with her Juris Doctorate. She spoke of the importance of the principles of the National Honor Society in her life and encouraged the members to continue to strive to excel in all five areas.

The newly inducted members from Buffalo are: senior Brynn Covington and juniors Julia Acosta, Emily Burns, Olivia Cudney, Fiona Danahy, Colleen Keane, Julia Khoury, Megan Michalski, Margaret O’Malley, DesTiny Overton, Naomi Parisi and Alexis Sandor.

West Seneca residents who were inducted include senior Allyson Pfeil and juniors Mary Bala, Hannah Bray, Olivia Harrington, Siobhan Harrington, Paige Siebold and Allison Rogowski.

Senior Brianna Gawronski of Dunkirk and juniors Mary Barnes and Catherine Roth of Fredonia were also inducted. Senior Robyn Seibert of South Wales and juniors Paris Green and Emily Lewandowski of East Aurora, along with juniors Christina Billittier and Abigail Hillery of Hamburg, Shea Halpenny and Abigail Swiger of Lackawanna, Chloe Manikowski of Depew and Kathryn Marabella of Cheektowaga were also inducted.

The previously inducted members of the McAuley Chapter of the National Honor Society are seniors: Anne Bamrick, Hannah Colin, Colleen Finn and Samantha Lawicki from Buffalo; Samantha Budzinski and Clare Smokowski of West Seneca, Elizabeth Colton, Elizabeth Hughes and Jena MattinaChmiel of Orchard Park and Clare McKeone, Jillian English and Molly McLaughlin of Hamburg.

Original article can be found on the Mount Mercy website:

Medical Marijuana Expands in New York

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By Robert Townsley

Becoming a registered practitioner under the Medical Marijuana Program could provide pain management alternatives to opioids, grow your patient base, expand your practice, and increase revenues. New York State’s Medical Marijuana Program now makes it easier for practices to certify patients by adding more qualifying conditions (such as chronic pain)[1], increasing the number of medicinal manufacturers[2], and allowing nurse practitioners and physician’s assistants to certify patients.[3]

However, only one of three patients will have their consultation covered by insurance, once registered, practitioners typically receive up-front cash and can quickly recoup their costs with just a few booked appointments.[4] Navigating the registration process for the Medical Marijuana Program, qualifying for the program, and meeting ongoing compliance requirements are vitally important – and missteps can result in steep penalties. Legal counsel ensures a smooth and lawful integration of marijuana certification into your practice.

First Annual Critical Path Life Sciences Accelerator Program

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By David J. Colligan

The First Annual Critical Path Life Sciences Accelerator Program sponsored concluded Thursday, January 12, 2017.  As part of the final preparation of the eight startup companies who participated until the end of the program, a panel of investors was assembled to present their experiences as investors in various roles.  David Colligan of the Colligan Law Firm was selected to present his experiences as a lawyer for investors, both Angel and Venture Capital, as well as a lawyer for many startups.  Kevin Centofanti, president of Brooks Houghton Investment Bank, was selected based on his ability to assemble large pools of capital to finance rapidly growing startup companies.  Theresa Mazullo of Excell Partners was selected as Excell Partners runs several different venture capital funds that have many startup companies in their portfolios.  Lindsay Stencel of Launch NY was selected as she is a general partner of a venture fund in Columbus, Ohio and serves part-time as the seed fund manager for Launch NY here in Buffalo, New York.  Sharon Weinberg was on the panel representing Empire State Development’s new $10,000,000 fund to support entrepreneurs with actual funding.  Alex Zapesochny was on the panel because of his successful co-founding of Icardiac and other successful startups before that which had a successful run from startup to exit.

Each of the panelists were asked questions and responded to subjects of great interest to the Critical Path participants.  The panel discussed many issues and the issues were divided almost equally between “investment killers” and “real positives.”  Amongst the investment killers that were discussed were startups seeking to: penetrate a market that is too small an opportunity; having a sole founder or a small team; cap table problems; likeability of the founders seeking fundraising; length of time for life sciences to get to market; and reasonable valuations.  Amongst the subjects that were real positives, the panel discussed: big markets; experienced, diverse management teams; robust IP portfolios; strong due diligence binder; obvious exit opportunities; amongst other topics.