By Associate Attorney Danielle Nodar

May is Small Business Month in Charlotte! As a small business, safeguarding the confidential information that makes you stand out from the competition is important to the long-term success of the business. Non-compete agreements are common tools used by businesses to help protect this kind of confidential and proprietary business information and allow for business to hire talented employees without worrying that the employee will take your idea and implement it elsewhere. These agreements generally restrict an employee from working for a competitor until a certain period passes and protect confidential information from being used by an ex-employee. However, with companies transitioning to a remote working environment and widespread unemployment, more businesses and lawmakers are re-evaluating the scope and legality of non-compete provisions.

Non-compete agreements are controlled by state law, meaning that each state has unique provisions for what is permissible in these agreements. In North Carolina, a non-compete agreement must meet the following requirements:

• In writing, signed by the employee agreeing not to do business.
• Made for valuable consideration. This means that the employee agreeing not to compete must get something of value for their end of the agreement. For new employees, the employment itself is the valuable consideration, and a promotion or bonus is consideration for existing employees.
• Must be made to protect a company’s legitimate business interest. These agreements cannot just restrict the employee’s ability to work elsewhere, but protecting confidential business information that you would not want to fall into a competitor’s hands, such as secret recipes or formulas, processes for production, or client information, have all been upheld as legitimate business interests.
• Must be reasonable in terms of time, territory, and the scope of activity being limited.

This last factor is oftentimes where a non-compete is deemed overly broad and overly restrictive of a former employee’s ability to find comparable work elsewhere. A court considers all these factors together when interpreting a non-compete provision and looks at the employee’s position along with the skills and knowledge obtained on the job in order to ensure that the company’s restriction is not wider than necessary to protect its legitimate business interest. Oftentimes, higher level employees with more access to trade secrets or confidential business information are more likely to be subject to a non-compete, so long as it is reasonable in time and geographic scope. If a court finds that a particular provision of a non-compete agreement is unreasonable, the court will strike that portion from the contract but enforce the rest.

With the changes in the employment landscape in the last year, there has been a growing movement to limit or even abolish the use of non-compete agreements. As more workers are forced to find new jobs, have moved to remote working environments, or move to a state outside of their employer’s home base, the question of how and when to enforce non-competes has been more present with business owners and lawmakers. As non-competes are governed by state law, it also makes it difficult for employers with employees residing in multiple states to be able to maintain enforceable agreements without careful planning. For example, some states have limited noncompete agreements to apply only to employees making over $100,000 a year, or to be valid only when a business interest is being sold.

There is also a push for the federal government to step in and put some overarching limitations on non-compete agreements that limit these agreements in cases where a narrow group of defined trade secrets are trying to be protected by a business. While it is too soon to tell if federal laws impacting non-compete provisions are on the horizon, it is important for employers to be mindful of the importance of crafting a narrowly tailored non-compete provision that works to protect their business while still allowing for fair treatment of former employees. Exploring other legal options that could be used to protect confidential business information is also crucial. If you have questions about how to best protect your business’ proprietary and confidential information, please call Jesson & Rains!

By Associate Attorney Danielle Nodar

There are numerous to-do items and deadlines business owners must keep up with in order to successfully run a business. However, many business owners forget that they must file an Annual Report with the North Carolina Secretary of State to keep their business in active and good standing with the state.

The Annual Report is used to keep the business records up to date with the Secretary of State. On the Annual Report, you will provide basic information about your business, such as the name and address of the registered agent, the principal address of the business, and the names and signatures of company officials. Most businesses formalized with the Secretary of State’s Office need to file an Annual Report, such as Business Corporations, Limited Liability Companies (LLC), Limited Liability Partnerships (LLP), and Limited Liability Limited Partnerships (LLLP). Limited Partnerships, Professional Corporations (PCs), and Professional Limited Liability Companies (PLLC’s) do not have to file an Annual Report. There is also a filing fee due with the Annual Report. For LLC’s and partnerships, the fee is $200 and for corporations, the fee is $25.

The due date for your business’s annual report depends upon the type of business, but April 15th is the deadline for most businesses. For corporations and partnerships (LLP and LLLP), the annual report is due to the Secretary of State’s Office the 15th day of the fourth month following the entity’s fiscal year’s end. For example, if your fiscal year ends on December 31, your annual report for that year is due on April 15th . All LLC’s must file the Annual Reports on April 15 each year after the date of creation.

Jesson & Rains is now offering a yearly plan for businesses that includes serving as our client’s registered agent and filing their annual report, among other things. This plan helps to ensure your privacy (if your business is ever sued, the lawsuit will be delivered to our office’s address); you will be less likely to fall victim to a scam (we will sort through and destroy junk mail); you will be more organized and have less paper (we will scan and forward your mail immediately to your attention after sorting); and we will ensure that corporate records and Secretary of State records are kept up to date.
 
We’re also offering an upgraded yearly plan that includes unlimited access to attorneys throughout the year.  No more billing for .1 emails or .2 telephone calls. We want to encourage people to contact us anytime they need us instead of being afraid to get a bill from us.

The consequence for not filing an Annual Report and/or paying the fee is that the Secretary of State can administratively dissolve your business. This means that you will lose the liability protection you enjoy by being a formal business, and a creditor can come after your personal assets. If you have questions about filing your Annual Report or want to learn more about the new business services offered by our firm, please reach out to Jesson & Rains!

          In North Carolina, a Plaintiff (the party filing a lawsuit) can seek an “Order of Attachment” in certain circumstances. Generally, this means that any property in North Carolina that the Defendant owns, including bank accounts, can be seized by the County Sheriff to satisfy any eventual judgment pending the outcome of the lawsuit. This can be problematic for several reasons: first of all, the Plaintiff may lose the case and not be awarded any damages and the property was seized unnecessarily! Also, at the beginning of a lawsuit, the number that a Plaintiff claims he or she has been damaged may not be a realistic number and is based purely on their opinion of the case. Having large sums of money seized during the pendency of a case (which could take years to settle) could cause a business to go bankrupt.

          Thankfully, an attachment order will only be issued in a few circumstances. The Defendant must be:

• Nonresident of North Carolina;
• A foreign corporation;
• A domestic corporation whose president, vice president, secretary, or treasurer cannot be found in North Carolina;
• A resident of North Carolina who is intending to defraud his creditors by leaving the state or avoiding service; or
• A person or domestic corporation who is trying to remove property from the state or dispose of property in order to defraud their creditors.

If you as the Defendant do not fit into one of those categories then, in general, an order of attachment cannot be granted against you or your business. However, if you do fall into one of those categories, any property you own in North Carolina can be attached pending the outcome of the lawsuit.

The Plaintiff must pay a bond to the Court which must be high enough to compensate the Defendant if the Defendant prevails in the lawsuit or is damaged by an improper attachment. Obviously that bond will greatly vary and is somewhat up to the discretion of the judge who is hearing the attachment order.

Fortunately, if you have received an attachment order, you do have options to dissolve or modify the order. To dissolve the order, you must show that something was done improperly in obtaining the order (for example, that you do not fall into one of the categories of people who can have their property attached). If you are unable to make that showing, you can try to have the attachment order modified—either the amount of the attachment, the bond, the terms, or both.

Attachment orders are just one more way that lawsuits can cause problems to the people involved. If you, or someone you know, receives a summons, attachment order, or notice of garnishment, the attorneys at Jesson & Rains, PLLC are ready to assist.

By Attorney Kelly Jesson

While surfing through social media, have you ever seen someone post a photo or video set to music and add the caption “I do not own the rights to this music”? We assume people are doing this in hopes of getting around copyright laws. We assume they think that, by disclaiming ownership, they won’t get in trouble, but that is incorrect.

A copyright protects an original work of authorship, whether in writing, video, or audio form. A person infringes on a copyright if the person uses the work without permission, even if they put out a notice that they don’t own the music. To be clear, simply using the work is infringement; not pretending you created it.

A copyright owner can seek damages if you use its work without permission. There is a narrow exception called “fair use,” but it only applies when people use a work for criticism, comment, news reporting, teaching, scholarship, and research. Most social media posts are not going to fit into this category.

Also, taking a picture from someone else’s website or social media and sharing it yourself is also copyright infringement. You may have heard of celebrities getting sued for posting pictures of themselves that someone else took.

Bottom line: If you didn’t create it, don’t post it without permission.  If you have any questions about getting a federal copyright for your original work, please give Jesson & Rains a call!

Our clients are busy and they sometimes forget to keep their information updated with the Secretary of State’s Office or file their annual reports; they pay for a registered agent who does nothing more than forward their mail; and they sometimes fall victim to scams like this and this. 

We’re offering a yearly plan that includes serving as our client’s registered agent and filing their annual report, among other things.  A description of the plan is attached to this email.  This plan helps to ensure your privacy (if your business is ever sued, the lawsuit will be delivered to our office’s address); you will be less likely to fall victim to a scam (we will sort through and destroy junk mail); you will be more organized and have less paper (we will scan and forward your mail immediately to your attention after sorting); and we will ensure that corporate records and Secretary of State records are kept up to date.
 
We’re also offering an upgraded yearly plan that includes unlimited access to attorneys throughout the year.  No more billing for .1 emails or .2 telephone calls.  We want to encourage people to contact us anytime they need us instead of being afraid to get a bill from us. 
 
This is a continued effort from us to offer flat fees instead of hourly billing.  Annual reports are due April 15, and they can be filed now, so this is a great time to switch over to having Jesson & Rains handle it.  Please contact us if you’re interested, and please forward to any busy business owners you think may need our help!

By Attorney Kelly Jesson

After a lot of delay on both sides of Congress and the President, we have a new COVID-19 stimulus law. The President signed the “Consolidated Appropriations Act, 2021” on December 27, which contains a lot of government funding measures in addition to the COVID relief/stimulus provisions. Below are some highlights – what we think individuals and business owners would like to know:

Foreclosure, Evictions, and Student Loans

        There are no provisions in the new law extending foreclosure forbearance or student loan forbearance. However, the President and government agencies have taken matters into their own hands since the first CARES Act was originally passed, frequently extending these deadlines. Currently, student loan deferment is scheduled to expire on January 31, 2021. FHA borrowers through February 28, 2021, can request forbearance of up to 12 months of mortgage payments.
        The new law does extend the eviction moratorium (for tenants with less than $99,000 annual income) through January 31, 2021, but again this can be extended by the government at any time. Lots of money was appropriated to the states for rental assistance programs.

Unemployment Benefits

        Pandemic unemployment assistance will continue for up to an additional eleven weeks if eligible, through March 14, 2021. If eligible as of that date, a worker who has not yet received the maximum amount of benefits may continue to receive benefits through April 5, 2021. Eligibility requirements did not change.
        Workers with at least $5,000 in self-employment income may be eligible for an additional $100 per week benefit as part of the Mixed Earner Unemployment Compensation.
        Federal Pandemic Unemployment Compensation (the extra payments of $600 per week) will be reduced to $300 per week but will continue for up to an additional eleven weeks if eligible, through March 14, 2021. Eligibility requirements did not change.

Tax Rebate

Many eligible individuals (eligibility requirements did not change in this new law) will receive another tax rebate in the following amounts:
        • $600 ($1,200 in the case of eligible individuals filing a joint return), plus
        • $600 for each qualifying child 
        • But the credit shall be reduced by 5 percent of so much of the taxpayer’s adjusted gross income as exceeds:
             • $150,000 in the case of a joint return,
             • $112,500 in the case of a head of household, and
             • $75,000 in the case of a taxpayer not described above.
        This means that a married couple filing jointly with no children will not receive any credit if their income is $174,000.

Paycheck Protection Program (“PPP”)

        Lots of exciting news here! Congress has allocated funds to a “second draw PPP loan program.” The available loan amount is the same, and the business must have been in business on February 15, 2020 (like before) to be eligible, but the second draw is only available to businesses with not more than 300 employees (first round was 500). Like before, there are special rules for seasonal businesses and those with more than one location. At least 60% of the loan must be spent on payroll, like before, to be forgiven; however, Congress did broaden the types of permissible expenditures.
        Forgivable business expenses now include covered operations expenditures (payment for any business software or cloud computing service that facilitates business operations, product or service delivery, the processing, payment, or tracking of payroll expenses, human resources, sales and billing functions, or accounting or tracking of supplies, inventory, records and expenses), covered property damage costs (related to property damage and vandalism or looting due to public disturbances that occurred during 2020 that was not covered by insurance), covered supplier costs (essential to the operations of the entity and made pursuant to a contract that existed prior to the covered period or perishable items), and covered worker protection expenditures (related to making customers and employees safe from COVID-19). Additionally, the forgivable health insurance expense clause in the CARES Act was amended by the new law to include other type of insurance, such as group life, disability, vision, or dental insurance. If a business has already applied for and received forgiveness for its first PPP loan, it cannot go back and amend the application to include these new expenses. However, if a business has not had its first PPP loan forgiven yet, it can go back and calculate money spent on these new permissible expenditures and include these on its forgiveness application for the first round of PPP loan.
        In order to qualify for a second draw PPP loan, the business must have suffered an at least 25% drop in gross receipts for a quarter in 2020 than the same quarter in 2019. If the business wasn’t in business in 2019, then it must have suffered a 25% drop from the first quarter of 2020 as compared to one of the other three quarters of 2020.
        Any amounts forgiven under the PPP will no longer be included in the business’s gross income. The new stimulus law also created a simplified certification process for forgiveness of loans no greater than $150,000.

EIDL Emergency Grants

        A business no longer has to pay back / deduct from the PPP forgiveness amount money it received as part of the emergency grant of up to $10,000. If you’ll recall, the SBA limited the grants to $1,000 per employee, and the money ran out at some point. The new law provides additional funding for these grants, and there is no language in the law limiting the grant to $1,000 per employee (although the maximum amount is still $10,000). To qualify, the business must: be located in a low-income community; have suffered an economic loss greater than 30%; and employ not more than 300 employees. In addition, the business must qualify as an eligible entity as defined in the CARES Act. If a qualifying business has already received a partial grant, it can apply for the remaining balance of the $10,000.  

EIDL Loans

Recipients will enjoy an additional three months of payments paid by the SBA, and some qualifying businesses may receive eight months. The maximum amount of payments is still $9,000 per borrower per month.

Other

The refundable payroll tax credits for paid sick and family leave, enacted in the Families First Coronavirus Response Act, have been extended through the end of March 2021. The CARES Act rules dealing with retirement distributions have been extended through April 30, 2021.