Independent Contractors in New York State

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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”.

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.

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.

Is the grass always… Oranger?: A DAY IN THE SYRACUSE STARTUP SCENE

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By Matthew K. Pelkey

Upstate’s startup ecosystem is booming. Our office is based in Buffalo, NY, but I recently had the pleasure of touring Syracuse’s startup scene and met with Nasir Ali from Upstate Venture Connect and Seed Capital Fund of CNY. I started the day with lunch in the beautiful and historic Armory Square, followed by tours of co-working spaces, stopped in to chat with the folks at Genius NY, had coffee with some finance professionals, and ate dinner at the newly renovated Syracuse Hotel—a renovation which rivals that of one of Buffalo’s most symbolic retreats, the Hotel Lafayette. Suffice it to say, it was a busy day, with so much to see in Syracuse, much of which mirrors similar developments being made in Buffalo and throughout Upstate.

Lobby of the Hotel Syracuse

Syracuse has its challenges, and in many ways, cities like Buffalo are far better-positioned to ensure sustainable growth for our future generations. I firmly believe that every community in Upstate New York can—and should—learn from one another to create a thriving, regional ecosystem. After all, while each community is unique, we all face similar challenges and legacies, from a thriving manufacturing past, now relegated to memories and inspiration. Here are a few takeaways that we can all learn from across Upstate New York’s startup ecosystem.

UberPITCH

Written by Colligan Law on . Posted in Articles, News

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By Rob Townsley

I work in a firm that usually provides legal services for startups and entrepreneurs, but pitching my own business idea in the UberPITCH startup competition last month was something I couldn’t pass up. UberPITCH, was a hybrid of the shows Shark Tank and CashCab. Call an Uber, and instead of a driver, a venture capitalist (VC) is delivered to your doorstep, and I had seven minutes to pitch my startup. The grand prize was five thousand dollars cash! And it was the first time Uber was in Buffalo, through a partnership with 43North.

After practicing my pitch in the morning and running it by a few colleagues at Colligan Law, I was ready to request my Uber and try to win $5,000! I opened the app and discovered that all the UberPITCH vehicles were in use and I would have to wait a while for my ride to arrive. It was a testament to the popularity of the mini startup competition, and also made me look forward to the day when the Uber is operating and available in Buffalo, with minimal wait times.

Critical Path Life Sciences Accelerator Program

Written by Colligan Law on . Posted in Articles, News

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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.

Court Ruling Ensures There’s No Turning Back on Scajaquada Traffic-Calming Measures

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By Matthew K. Pelkey

On Wednesday, the New York State Department of Transportation will hold what is likely its final public meeting on design changes to the Scajaquada Expressway – a project that has no doubt garnered controversy and heated discussions between officials and community stakeholders. But those pushing for further traffic calming measures may have just gotten a little help from the New York State Court of Appeals.

Turturro v. City of New York (December 2016) is a case involving a 12-year-old boy who was seriously injured when he was struck by a speeding car while riding his bicycle on Gerritsen Avenue in Brooklyn. Gerritsen was a 30-mph, four-lane roadway bordered by parkland. New York City officials had received many complaints about speeding but recommended additional police enforcement instead of traffic calming – a decision that ultimately resulted in New York City being held liable for the child’s injuries.

What is important about this case is the shift from simply relying on police enforcement to curb traffic and speeding problems, to now placing an affirmative duty on municipalities to study and implement traffic calming. If a government agency is aware of a dangerous condition and fails to study or implement traffic-calming measures, it may now be liable for resulting damages and injuries. Whether our state’s highest court realizes it or not, it may have just ushered in a new era of transportation design and put an end to prioritizing automobiles over people.

This shift in duty has the potential to fundamentally alter the DOT’s current design plans for the Scajaquada. It also likely ensures that the speed limit remains at 30 mph.

Why Do Cap Tables Kill Startup Companies?

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By  John A. Moscati, Jr. and David J. Colligan

As lawyers practicing in the startup space, our clients often come to us with less than perfect cap tables.  Some don’t even know what a cap table is.  A cap table is a spread sheet that shows the ownership of the company by class of owner, timing of investment and various rights held by owners of the capital stock of the company.  To an experienced investor, a cap table tells the story of the company.  Like all stories, it has a beginning, middle and end.  By reading a cap table and asking questions based on its content, an investor can see when the company started, who the founders were, when significant pivots occurred, how much capital has been raised, and when.  Unfortunately for many entrepreneurs, they have written the story of their companies by issuing equity and granting various rights to founders, friends, family, and early investors, without an appreciation of how potential future investors will “read” this story.

If a startup wants to create a cap table spreadsheet, we advise them to identify shareholder groups by class (i.e., founders, angel investors, friends and family, etc.); and to include number and class of shareholders or shares or units issued followed by percent of outstanding, and if applicable, percentage of ownership fully diluted.  Where applicable, footnotes should disclose any conversion right or other preferences and any options, warrants, option pools or other rights to acquire equity should be disclosed (and included in the “fully diluted” calculations).