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Liability for Improper Personal Expenses of Other Executives

CFO and corporate accountants must be aware that the improprieties of their superiors could lead to their own personal liabilities.  This is because Courts have found that corporate officers can breach their fiduciary duties to a company if they are involved in conduct that benefited their superior officers by approving or concealing improper expense reimbursements.  For example, in Hampshire Group, Limited v. Kuttner, C.A. No. 3607-VCS (Del. Ch. July 12, 2010), the litigation was initiated by accusations of self-dealing and lavish spending by the CEO.

One of the claimed improprieties arose out of the CEO’s reimbursed payment of the tuition of his assistant that the CFO and Accounting Officer concealed on the company’s books as a charitable donation to the school.

Although the claims against the CFO and Accounting Officer did not involve claims of self-dealing, and instead related to concealing the improper expenses of the CEO, the claims were asserted against them in their personal capacity.  As a result of these claims, the Court was required to determine, “whether they acted in bad faith for a purpose other than advancing the best interests of the corporation” to determine if they could be held personally liable.

In order to help prevent these issues, officers should take the following steps to address the risks associated with their fiduciary responsibilities.

1. Become familiar with their fiduciary duties, including the duty to report potential breaches of fiduciary responsibilities by other officers. Corporate officers who do not understand their duties to the company could underestimate their liability and lead the company to engage in needless risks.
2. Review the corporation’s Director and Officer (D&O) liability insurance to understand what is covered and the exclusions from coverage.
3. Understand the indemnification provisions in the company’s articles of incorporation and bylaws –– what is covered and the exclusions from coverage. Consider asking the company for an indemnification agreement that matches what directors receive.
4.   Seek the advice of counsel on potentially applicable provisions of the Sarbanes-Oxley and Dodd-Frank Acts, including officers’ mandatory “claw-back” obligations in certain instances where the misconduct of certain officers can result in liability of other officers, even of such other officers were not involved in or had no knowledge of the misconduct.  Such exposure should drive greater vigilance in overseeing corporate conduct.
5. Be aware that legal protections of and awards available to whistleblowers render it more likely than ever that misconduct will become known outside the company.

If you would like more information or to schedule an appointment, please contact Nicoll, Davis & Spinella LLP.  At Nicoll, Davis & Spinella, our team of lawyers experienced in employment, business affairs and compliance can help effectively meet your business needs, minimize your company’s risk and avoid the unnecessary liabilities many businesses unknowingly face.  Please consider our Outside General Counsel™ program as a solution to help effectively address your company’s compliance issues. Call us today at 201-712-1616 or contact us online to speak to an experienced business lawyer.

Claim Filed to Protect NJ-Based Food Service – Eat Clean Bro

Attorney Anthony Davis of Nicoll, Davis & Spinella LLP filed a trademark infringement lawsuit in the U.S. District Court for the District of New Jersey for the New Jersey-based food and meal delivery service, Eat Clean Bro, against a local competitor, Ketoned Bodies.

If you have driven on any major highways in New Jersey in the past year, you will have seen billboards advertising the fast growing and popular Eat Clean Bro meal delivery company.  It began in 2013 out of Freehold, New Jersey, and provides healthy, chef-prepared meals that can be delivered directly to customers’ homes or picked up right from their kitchen.  In the lawsuit, Eat Clean Bro claims that Ketoned Bodies, which is based and operated by Bryan Calcott out of Hoboken, New Jersey and provides a similar food service catering to consumers following a low-carb, “ketogenic” diet, has infringed on their trademark rights by naming their new meal delivery service, “EatKetoBro.”  Also, they state that the accused has been using the name for the service, their website, and online marketing techniques, which, they allege, is purposely misleading and confusing customers.  Eat Clean Bro owns the federal trademark Eat Clean Bro and the design  logo and slogan, “Powered By You Proven By You Eat Clean Bro.”  The competing company just registered their infringing company website in July 2017, and added the new site for their delivery service in the beginning of the month.  Nicoll, Davis & Spinella LLP moved quickly to protect its client’s rights and the reputation of its trademark.

For more information on this case and about trademark infringement issues, contact our attorneys at Nicoll, Davis & Spinella LLP at 201-712-1616 or contact us online.

Preventing Against Gender Identity Discrimination

Experts estimate that there are more than 25,000 transgender and gender non-conforming people that reside in New York City.   As a result, it is very important that New York City employers and landlords become familiar with their obligations when addressing the gender identity of their employees or tenants.  The failure to do so can result in hefty fines and discrimination claims brought against offenders.

The New York City Commission on Human Rights has been on the forefront protecting individuals’ expression of their gender identity and has issued guidance and enacted laws to protect against discrimination.  Under the New York City Human Rights Law, gender discrimination can be based on one’s perceived or actual gender identity, which may or may not conform to one’s sex assigned at birth, or on the ways in which one expresses gender, such as through appearance or communication style.  Gender discrimination is prohibited in employment, housing, public accommodations and discriminatory harassment and exists whenever there is disparate treatment of an individual on account of gender.  When an individual is treated “less well than others on account of their gender,” that is gender discrimination under the New York City Human Rights Law.

The Commission can impose civil penalties of up to $125,000 for violations, which can be doubled if the violations are found to be willful, wanton, or malicious.  Employers and landlords must become familiar with the guidance issued by the Commission that includes violations for the following:

• Intentionally failing to use an individual’s preferred name, pronoun or title.  For example, repeatedly calling a transgender woman “him” or “Mr.” when she has made it clear that she prefers female pronouns and a female title.
• Refusing to allow individuals to use single-sex facilities, such as bathrooms or locker rooms, and participate in single-sex programs, consistent with their gender identity. For example, barring a transgender woman from a women’s restroom out of concern that she will make others uncomfortable.
• Enforcing dress codes, uniforms, and grooming standards that impose different requirements based on sex or gender. For example, enforcing a policy that requires men to wear ties or women to wear skirts.
• Failing to providing employee health benefits that cover gender-affirming care or failing to provide reasonable accommodations for individuals undergoing gender transition, including medical appointments and recovery, where such reasonable accommodations are provided to other employees.

The foregoing are only a few issues that employers and landlords must address in setting policies to avoid gender identity discrimination.  It is suggested that employers and landlords become familiar with the latest guidance issued by the New York City Commission on Human Rights and seek legal counsel to interpret and review your current polices to ensure compliance and address other anti-discrimination issues.

If you would like more information or if your business has been named in a discrimination action, please contact Nicoll Davis & Spinella LLP.  At Nicoll Davis & Spinella, our team of lawyersexperienced in compliance can help effectively minimize your company’s risk and avoid the unnecessary liabilities many businesses unknowingly face.  Please consider our Outside General Counsel™ program as a solution to help effectively address your company’s compliance issues. Call us at 201-712-1616 or (212) 972-0786, or contact us online.

When to Consider an Applicant’s Criminal History

In 2015, the New York City Commission on Human Rights enacted the Fair Chance Act that would prohibit employers from asking potential applicants if they have been convicted of a crime until after the employer has issued a conditional offer to the applicant.  This law was passed to ensure that job applicants were evaluated on their merits and not be barred due to their criminal history.

As a result of the foregoing, employers may no longer place job advertisements containing the statements like, “no felonies” or “must pass background check”.   Moreover, employers can neither inquire about criminal history on job applications nor ask any questions about criminal history during job interviews.  However, once the employer makes the conditional job offer, it may inquire about the applicant’s conviction history.

If after reviewing an applicant’s conviction history the employer decides to withdraw its offer of employment, the employer must provide the applicant with a written explanation that connects the criminal history to the job duties and explain how it creates an unreasonable risk.   Furthermore, the employer must hold the job open for the applicant for three days in order to allow the applicant to discuss the issue and address any incorrect information.  To help employers in these situations, the New York City Commission on Human Rights has provided this Fair Chance Notice to send to the applicant.

If you would like more information on this issue or if your business has been named in a discrimination action, please contact Nicoll Davis & Spinella LLP.  At Nicoll Davis & Spinella, our team of lawyers experienced in compliance can help effectively minimize your company’s risk and avoid the unnecessary liabilities many businesses unknowingly face.  Please consider our Outside General Counsel™ program as a solution to help effectively address your company’s compliance issues.  For more information, call us at 201-712-1616 or (212) 972-0786, or contact us online.