Making It Legal:

A common suggestion for effective networking is “Get involved.” So we join organizations and nonprofit groups with the hope that, as we serve in a leadership capacity, we are also piquing the interest of others who might want to use our services–or be willing to refer us to others who do. When the opportunity does come to deliver our services on a paying (rather than volunteer basis), it can seem like we’ve hit “pay dirt.”

But these kinds of opportunities are not as straightforward as they look. Board members in particular need to make sure that, if hired, they have followed the laws of their state concerning the conduct of nonprofit organizations.

Let’s say your business provides web design services. You serve on the board of your local chamber of commerce. The chamber happens to need a new website, and hires you to design and host it–for a fee.

Those kinds of transactions are known (not surprisingly) as “interested transactions” because the board member (you) has a financial interest in the outcome. Under many state laws, if a board or committee member has any financial interest in a business opportunity being presented to the organization, that financial interest should be disclosed to the board. This is different (although related) to having a “conflict of interest.”

Ideally, when you serve on a board, you put the interests of the organization ahead of your own. It’s in the organization’s interest to get the highest quality web design services at the lowest possible price. It’s in your interest to get paid as much as possible for providing the web design services. Therein lies the conflict.

The “conflict” doesn’t arise in performing the services; it arises when the opportunity is presented to the board. If you receive a financial gain but your proposal has been vetted fairly, there’s been full disclosure of the financial interest and the proposal has been deemed in the objective best interests of the organization to pursue (with other members having had the fair opportunity to participate and offer proposals of their own), it’s not a conflict. However, you will have to recuse yourself from the voting when the proposal comes to the board for a vote.

To protect yourself (and the organization), make sure there are minutes of the meeting where your proposal is discussed and a record of the vote taken.

I received an e-mail out of the blue recently about how to protect an idea. Not a plan, not a project, not something tangible . . . but a thought about a new approach to pet care. That’s about as much information as I have. Understandably, the entrepreneur was reluctant to disclose the idea because it hadn’t been patented yet (assuming patent protection was even appropriate). But she wanted to know how to get started.

It’s very hard to protect an idea, especially if you haven’t fleshed out any of the technology or marketing around it. You can create a nondisclosure agreement and try to get people to sign before you discuss your idea with them–but sometimes they will, and sometimes they won’t.

Your next steps depend on what you want to do with the idea. Do you just want to sell the idea to someone else or start a business around the idea? If the latter, the local office of the Service Corps of Retired Executives (SCORE) or a small business development center in a local university can sometimes provide counseling help. Both are programs established by the Small Business Administration to encourage entrepreneurship. And both are free. Also, if the idea is similar to something that’s already on the market, there may be reference books with business plans that can give you guidance about the steps to take.

But if you’re serious about making money from an idea, you need to be prepared to invest money in it–even if it’s just the investment in consultations with attorneys and accountants (both of whom have ethical obligations to keep what they learn confidential). The money you spend getting the advice for your particular situation will be well worth the time you would otherwise spend amassing possibly irrelevant information.

In a rare moment of bipartisan and bicameral cooperation, both the U.S. House of Representatives and the U.S. Senate introduced legislation geared to help protect the nation’s 27 million small businesses from computer hackers and information security breaches. Entitled the “Small Business Information Security Act of 2008,” the bills (H.R. 6206 and S. 3102, respectively) were introduced June 9. According to a press release from the Senate’s Committee on Small Business and Entrepreneurship, the bill would establish a Small Business Information Security Task Force to:

• Identify information security concerns and the services that address those concerns;
• Make recommendations to the SBA regarding how it can better assist small businesses to both understand cyber-security issues and identify resources to help meet those complex challenges; and
• Promote current programs and services that will help small businesses protect their customers’ valuable information.

“Inspired” by recent high-profile data breaches, bill sponsor Sen. Olympia J. Snowe, R-Maine, a ranking member of the Senate Committee on Small Business and Entrepreneurship, said in a statement, “Nearly one-fifth of small businesses do not use virus-scanning for e-mail, [more than] 60 percent do not protect their wireless networks with encryption, and two-thirds do not have an information security plan.”

Yes, it sounds very Arnold Schwarzenegger-esque, but most business owners face the point when they have to look an employee squarely in the eye and say, “You’ve been terminated.” Does the prospect make you uncomfortable? Probably. Should you avoid it and mollycoddle the employee in the hopes of a turnaround? Absolutely not.

There comes a point where no amount of training, pleading or cajoling will change an underperforming employee. And you need to be careful that you don’t give more “breaks” to, say, a young white male employee than you do to a female Chinese employee who’s over 40. Problem employees generate three major headaches:

• They may actively foment discord and try to sabotage the workplace (or sit on their butts and do as little work as possible).
• They may harm your relationships with customers and suppliers.
• They may play the “waiting game”–and the longer you wait to get rid of them, the harder it is to dislodge them.

All this may sound cruel and callous . . . but it’s a hard reality of building a business and needing to rely on employees. You can protect yourself in several ways:

• Have a careful screening process so that you choose someone with the skills and temperament that fit your company and the needs of the position.
• Set clear guidelines for how performance will be measured.
• Create a process for regular performance reviews.
• Generate written reviews for the employee’s file.
• Speak to an employment attorney or HR specialist to get guidance on how to steer clear of the federal and state laws against discrimination and other prohibited employee practices.

Copyright law developed over many years, from a time when the only way to distribute a book was to make physical copies through a printing press and sell them person to person. The core thinking behind the law was that the person who came up with the creativity should be the only one to benefit from it financially. But the internet has changed the way people receive their information–as well as the ease with which people can copy it and/or pass it off as their own. So the question now arises: If we can’t police the improper use of our creations as we once could, what’s the point of the old rules? Should we rethink copyright laws?

The question reaches a fever pitch (to the extent that a question actually can do so) when you consider the impact of the Google-YouTube acquisition. What kind of power does this give the “middleman,” as Michael Arrington puts it in his thought-provoking post. What would a new copyright/business model look like?

It probably passed unnoticed by most people, but the Supreme Court handed down a decision recently that raised more than just a few eyebrows in the legal community.

In the case of CBOCS West v. Humphries, a black manager at a Cracker Barrel restaurant filed suit under the Civil Rights Act of 1866 (now codified at 42 U.S.C. Section 1981), alleging he was fired after complaining about discrimination against other black mid-level managers. Whereas some civil rights statutes explicitly prohibit retaliating against an employee who is trying to assert his or her rights, Section 1981 was silent. It prohibits discrimintation on the grounds of race in making contracts, but says nothing about retaliation as a prohibited form of discrimination. So the narrow question before the court was: “Can someone bring a race retaliation claim using Section 1981?” The court’s answer was yes (by a 7-2 margin).

The result is surprising for a couple of reasons. First, it seems to run counter to the increasingly conservative trend of court decisions. In fact, just last year in Ledbetter v. Goodyear, the court faced an employee complaint of discrimination. The plaintiff employee had 180 days to bring a claim of sex discrimination to the Equal Employment Opportunity Commission. She claimed that there was a repeated pattern of unfair evaluations and (lesser) pay raises that existed for a period of time. However, since many of them predated the 180-day period, the court held that she could no longer base a claim on them. Based on that strict reading of the statute, civil rights activists were concerned about the decision-making trend of the court. The Humphries decision takes a much more liberal approach.

The second reason it’s surprising (sort of in line with the first) is that the majority decision seemed to weigh the legislative history of the Civil Rights Act and similar statutes more heavily than case precedent. Sure, the court found cases on which to hang its collective hat. But the approach taken to arrive at the decision was not one normally associated with a conservative court, which would tend to look at the strict language of the law: “Does the language specifically allow a claim? No. If that’s the case, it’s for Congress to pass a law amending it, not for the court to imply a right of action.” Rather, the majority decision took the position that it is presumed that federal civil rights statutes prohibit retaliation whether they say so explicitly or not. See the wiki on the U.S. Supreme Court for a cogent analysis of the history of the case and the arguments before the court.

In practical terms, what does this mean for employers? Quite possibly, that they’ll see a rise in retaliation claims. An effective way to prevent them is to ensure that your company has an employee manual outlining the appropriate procedures for airing grievances and proper training for managers in dealing with these kinds of claims.