Technology Attorneys
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Key Points in a SaaS Agreement

Software as a Service (‘SaaS’) functions on a delivery model wherein a third-party provider hosts an application that is offered as a service.  This is to differentiate between ON PREMISE solutions which are fast disappearing.

SaaS offers its users a ton of benefits, but it is best optimized when the provision of the service is governed by an agreement between the provider and the customer.

SaaS agreements CAN be clickthrough agreements on a website but here, we are talking about a direct SaaS agreement that you contract with a vendor.

A SaaS agreement is essentially a legal document that defines the terms of the provision and delivery of software services to customers. Well-drafted SaaS agreements eliminate the incidence of disputes between both parties in the course of the contract. To ensure that a SaaS agreement captures the expectations of the parties involved, there are key points that it must cover. Read to find out what they are.

Key Points To Cover In a SaaS Agreement

The following points must be captured in any properly drafted SaaS agreement for the agreement to serve its purpose

  • Technical Specifications: The technical specifications of the service being provided must be clearly spelt out. These specifications define the functionalities of and the expectations for the SaaS service. It also provides a means for measuring the performance of the SaaS service. Defining the technical specifications prevents disputes between both parties and helps if the need for customization arises. 
  • Intellectual Property Rights: With SaaS, the key element of intellectual property rights is licensing because it specifies the way content is to be used in the course of the subscription period. Provisions must be made for revocation or modification of the licence if the subscription expires or is cancelled. Other issues like the ownership, storage, transmission and access of data should always be clearly defined, and depending on the sensitivity of customer data, it might also be appropriate to address storage. Responsibility for the protection of data created using the SaaS service should be clearly defined here.

It is also important to note that while the SaaS vendor will own their own IP, you must be able to retain your IP and easily move it off of their database.  Also, in more complex business requirements, this SaaS will connect with other internal softwares, those ‘connectors’ should belong to you, not the vendor.

  • Payment Clause: This is the aspect of the SaaS agreement that outlines the preferred payment methods for the SaaS subscription. Are you paying per user/seat, monthly, yearly and CAREFUL OF THE AUTORENEWAL contracts or contracts you can’t cancel.

You should be able to cancel, move your data, etc.  SaaS vendors should rely on the value prop of their software to keep customers.

  • Limitation of Liability and Disclaimers: Like with all business transactions, issues of liabilities and commercial risks are likely to occur in the course of the SaaS subscription. For example, issues like operating system incompatibility, breaching of terms and conditions and third-party hosting, intellectual property infringement, among others, can generate confusion and dispute when not handled properly. Liabilities and disclaimers should be specifically addressed so that in the worst-case scenario, liability is shared accordingly.  Assess YOUR risk, and ensure that the vendor doesn’t completely limit their liability.
  • User Obligations: This deals with the obligations of the end-user about the expectations around the use of the software. Safe storage of personal information and update of the product and the notification in the event of security breaches where and when necessary are some of the user obligations that must be spelt out.

Takeaway

SaaS is a critical element of your business, make sure that the contract you sign with your SaaS vendor fits your business needs. 

Technology Contracts

Tailor Made to Suit Your Business

Key Points of an Independent Contract Agreement

Independent contractor agreements have always been a part of the IT tapestry.  Still, over the years, Department of Labor has been scrutinizing these relationships more and more.  Being vigilant in these factors as well as other legal considerations, means you can still leverage this relationship to get on demand specialized expertise and skills.

Often, when companies engage the services of independent contractors, they are quick to review the work they need done, come to an understanding, and get started as soon as possible, resulting in an oral agreement. Given the quick turnaround, they want to ‘keep it simple’.  But, it is so important to create a written contract, formally known as an independent contractor’s agreement. Here are the major reasons your tech company needs this contract.  Like any relationship, it will get tested when things come to an end.

Prevent Scope Creep by Defining Project Details 

When engaging an independent contractor, especially for the first time, ensure that your written contract contains a well-detailed discussion of the work scope. Be sure to include a description of the work to be done, specific deliverables, key dates or deadlines, and what an acceptable final product should look like. Writing down these details will prevent missed deadlines and incomplete work. There should also be an agreed-upon process to follow in the event of unplanned changes that are outside the scope of work. Ensuring that there is a process for addressing scope creep can help tech companies to avoid difficult interactions, conversations, and disagreements as work progresses. 

The agreement should also comprise an agreed bill rate and payment terms such as how and when payment will be made to an independent contractor and how you get an invoice. Payment must be entwined with concrete deliverables and discuss any possible additional costs or expenses that may be accrued.  

Ensure Legal Protection for Your Company 

Perhaps the most important function of a written consulting agreement is that it provides legal protection for your organization and the independent contractor involved. No one wants to incur the financial burden of a lawsuit, so it is in your best interest to include legal protections in the contract. Discuss insurance requirements, and ensure that the contractor understands what they need to provide and who (if anyone) must be listed as an additional insured. 

You also want to put into writing guidelines around ownership of intellectual property and confidential information such as financial data, business plans, and trade secrets, if applicable to your business.

Develop Work Classification Status

One of the most dreaded risks of engaging independent contractors is misclassification. Thankfully, a written agreement is a good step for establishing an independent contractor’s status. To avoid misclassification, let your contract clearly state that you and the independent contractor agreed to an independent contractor relationship. Ideally, it shouldn’t be a personal contract but one with their company that is incorporated with an EIN.  It should also include a statement from the independent contractor acknowledging that they are not entitled to any benefits provided to your employees and that they are responsible for paying their own taxes. It might also prove helpful to secure files that can be used as proof of self-employment, such as a business or professional license, proof of insurance, or business cards.  If in doubt, it is always best to check your state’s department of labor requirements and your attorney.

Conclusion 

Independent contractors are invaluable because they allow organizations to ramp up their skill pool without the overhead. Thereby helping the company save time and resources. However, the relationship between clients and contractors can only be successful when a well-thought-out and a well-detailed written contract is put in place. 

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6 Known Boilerplate Clauses and Why They Matter

Boilerplate clause are often the most overlooked and neglected clauses on a legal document. However, these clauses are by no means irrelevant and equally as important as the legal document’s essential parts.  In fact, your next dispute might turn on these very clauses.

Depending on which side of the contract you are on and the wording of the clause, you may get hard done if you ignore the boilerplate clause. Here are six known boilerplate clauses that you should be aware of and why they are important.

  • Indemnification Clause: Indemnity clauses serve to manage the risks associated with a contract. They define the context of legal action against the indemnified party. This clause also covers lawsuits, actions, damages, demands, liabilities, losses, damages, and claims associated with a contract. In addition, it also covers legal action on extreme cases like injury and/or accidental death in the contract.
    • The most important thing here, is who is the one with the most exposure.  Mutual indemnification clauses don’t always make sense.
  • Jurisdiction Clause: This clause defines the most appropriate form of dispute resolution. For instance, a lawsuit must be filed or the substantive laws to be invoked in the case of a contract breach.  Generally, the one presenting the contract will choose their location for the jurisdiction.  You CAN negotiate.  How about first to file chooses jurisdiction or maybe neutral ground or even just arbitration. 
  • Arbitration Clause: Arbitration clause provides the framework for resolving legal disputes and offers an alternative to taking issues court in the event of legal disputes. Arbitration clauses are of great significance because they make the arbitration of legal matters easier when properly drafted.  What you need to look out for, is it mandatory?  Who pays for the arbitrator, how many arbitrators and WHO picks them?  Most arbitration institutions will have their own enforceable language, otherwise that arbitration clause you have in your contract might be UNENFORCEABLE.
  • Force Majeure Clause: The French words” force majeure” roughly translates to “superior force.” It is a type of boilerplate clause that defines what happens when a “force majeure” event like natural disasters, for instance, occurs. Force majeure clauses are important because they define instances when parties can be relieved of their responsibilities, obligations, and liabilities if the incidents covered by a force majeure clause occur.  This is the clause companies turned to when the pandemic began, and to some surprise, maybe the pandemic did NOT excuse performance because it wasn’t included.  Isn’t it time to update your contracts?
  • Confidentiality Clause: Also known as non-disclosure agreements (NDAs), this clause states that certain information shared under the contract are not discussed with parties outside the contract. Breaching this clause (consciously or not) comes with consequences that are often financial as well as equitable. These can carry very heavy consequences, and in some instances should!
  • Choice Of Law Clause: Also known as the Governing Law clause, this boilerplate clause defines the substantive laws that apply in the case of a contract breach. It is particularly important because the breach might occur in different geographic locations. A choice of law clause defines the laws to be used in such disputes to avoid uncertainty and possible delay in getting justice.  You can find instances where the Venue and Choice of Law are different.  While, in theory, this can work, once you get into a Court, the judge has some discretion.

Takeaways

While the meat of the contract is important, often I see disputes turn on the boilerplate clauses since they are often skimmed and glazed over.  Lawyers will read contracts like you read a book, tying pieces and plots together to form the whole picture.  Let us lay the foundations for you.

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Best Practices of a Contract with Your Web Developer

Now more than ever, we live in a world where digitization has made web and application development essential aspects of just about everything: education, business, health and even law, among other fields.

Due to this, owning a web presence is just as important, if not more, as owning a physical one. This is why a lot of web/applications are contracted out to developers in order to ensure that the enterprise keeps up with the trend of digitization.

Independent Contractor Agreements are often part and parcel of web/application development. Or, your developer may have their own agreement that they’d like you to sign.  Either way, this legal document aims to ensure that your expectations and those of the web/application developer are fully captured.  As well, as any future rights in your intellectual property.

To get a well-written contract, you need to understand the best practices associated with it. Read on to find out what they are.

Create Milestones

Avoid handing over all the requirements to the web/app developer and letting them go at their own pace. Create milestones for the total lifecycle of the project. It helps with tracking and modularity. You can get a bird’s eye view of the functional parts of your project so you can easily identify issues and possibilities in the course of the development process.

Creating milestones can also help you tie the milestones with payment.  At each milestone, there is a stop of sorts where you evaluate the progress.  If you are satisfied, payment is made and then off to the next phase!

Pay attention to security.

It would be best if you established a secure means of transferring information and a level of access control your sensitive data. Please pay attention to the security measures and protocols that the web/application developer uses and how they plan on managing your data. Ensure that they understand your security concerns, and they possess the capability to handle them.

Proper Scope and Documentation

Since you will be working with a third-party ensure that there is proper scope and documentation. This prevents misinformation that can derail the project. Documenting your scope also ensures that there is clarity and transparency in the discussions. It also provides a reference point during and after the web/application development process has been completed.

Proper documentation will also ensure that you have the flexibility to move to other vendors or add anything additional to your product without needing a lot of knowledge transfer.

By setting out clear goals and scope, you reduce the amount of discussions around what is included in the engagement and what would be considered out of scope for the project.

Outlining clear expectations between you and your developer.

Fix the Money Matters

 This is where you decide on the financial aspect of the contract. Be clear on what you are willing to pay for your expectations. Determine events that might trigger payments like milestones. Discuss the impact on out of scope requirements, or issues that crop up unexpectedly. 

These out of scope or change orders might come with an hourly rate or a decided fixed rate as you move through the project.

Establish Clear Communication Channels

This is essential because proper communication channels facilitate understanding between parties, eliminates delays and increases the chances of creating a great project. Clear communication channels also ensure that you are in the loop about the process and that you can actively participate at all stages in the process.

Generally, this is called a PMO or a project management office which can be critical in larger projects where points of escalation may be needed as well as frequent meetings between stakeholders. 

Make Sure You Own it!

Did you know, that intellectual property belongs to the person who CREATES it?  NOT the person who bought it.  It is a common misconception that if you bought something that you own it.

You need to make sure that the contract clearly states that any intellectual property is assigned to you. 

Here, wording can get tricky between ‘work made for hire’ (and this isn’t self-explanatory, even I look up the statute every now and again to refresh my memory) and an assignment.

Here is a tip:  if you are getting a low quote than what you thought, it is probably because you are not getting the intellectual property.

Which means, you will not be able to take it anywhere else, to anyone else or in simple terms, do what you want with your website or other project deliverables.

Takeaway

Outsourcing your web/application need is imperative because of the benefits attached. Understanding the best practices involved in the contracting of your web/application development will help you go about it the right way.

 

Rather than do it yourself, why not engage an attorney to help you negotiate the right terms of the agreement.

Consult with Us on Your Next Contract

We have been servicing the technology industry for over 15 years

Recent Rise of Scams

As the current pandemic rages on, more and more companies are adopting remote working models and hackers trying to bank on consumer’s fears are churning out scams more than ever. Remote working offers many benefits to businesses but can also pose certain challenges, including security threats. While some businesses have a good enough cyber and network security system in place, many are not aware of the severe risks involved in connecting remotely. In this article, we shall be discussing some security concerns of companies offering remote work and measures to be taken to curb the threats.

 

Phishing Scams

 

Phishing attacks are one of the most common cybersecurity threats of working remotely and are widely recognized as the top cause of data breaches. The World Health Organization, Homeland Security, Global security centers, and the U.S. Secret Service have all warned of coronavirus-related phishing scams. Hackers exploit the coronavirus to send seemingly legitimate, deceptive emails with malicious links and attachments. Once the employee clicks on this malicious link, their system is instantly infected, and the hacker gains access to the employer’s device. Sometimes, the employees are taken to realistic websites where information about their credentials are requested. Many comply, comprising their logins. 

 

The solutions are not farfetched. Employees should be regularly reminded that legitimate groups do not request personal information. Also, they should verify any hyperlink before clicking on it and normalize pausing before responding. They should beware of any email insisting on immediate action, generic greetings or an unfamiliar sender are other markers. While bad spelling and grammar usually indicate phishing attacks, properly written communique can be just as dangerous.

 

Insecure Devices 

 

Often, the personal devices of employees are not secure and can pose the risk of unauthorized access to organization’s data. Hence, it is recommended that personal devices should be vetted by employer IT prior to being used for company work. Better still, the organization can ensure that employees are restricted to using only company devices. These devices meet the minimal security benchmark, their hardware is designed to work within a corporate network, and the software has been optimized to cater to the specific needs of the individual user within the company environment. 

 

Secure Networks

 

Home networks and free WiFi available at cafes, libraries, or other public places carry a steep security price tag. In other words, these networks have weaker protocols, unencrypted traffic, and are insecure. Cybercriminals target such environments, leaving cyber mines that activate when a user of interest uses the network. Hence, remote workers should ensure that they use secure network traffic. If the employee didn’t have access to secure WiFi, the company should provide Hotspot. 

 

Weak or Insecure Passwords 

 

Passwords are mandatory security protocols that protect the gateway to data and information. However, they become less relevant and incredibly easy to crack when they are simple or weak. Weak passwords are often short and guessable. Furthermore, if an insecure password is used across several platforms, it allows hackers to gain unauthorized access to multiple accounts in a very short period of time.

 

Conclusion

 

Finally, if you notice new programs that were not previously installed, your computer slowing down, strange pop-up ads on your screen, or you lose control of your mouse or keyboard, then your device might be under attack from hackers. Be sure to notify your company’s IT administrator so they can immediately mitigate risk. These threats can have damaging impacts on businesses. Therefore, employers must rapidly ensure the security of every device or system being used. 

Work From Home Policies

In the past, work from home was rare and unpopular because many employers believed their workforce could be easily distracted at home. However, the pandemic has fast forwarded this practice to almost become the norm in some sectors. Employers have begun to see the many benefits of the work from home model, which includes increased productivity and efficiency, protected public health (especially with the outbreak of Covid19), less need for office space, and so on.

 

Also, the enabling technologies for implementing work from home are increasingly more available and easily accessible. Employer’s now more than ever must create work from home policies to ensure productivity and prevent lapses in workflows across the various levels of operations.  It is also imperative to discuss the various ways the employee must comply with policy to ensure that company data is secure and uncompromised. 

 

Determine which roles can be done remotely

 

It is crucial to know from the onset which roles can shift seamlessly from the office to the home because some functions within the organization demand physical presence. For instance, a forklift operator cannot function from home, whereas a software developer can easily perform their duties from anywhere via a laptop and internet connection. Also, investigate those roles that are office-bound, or warehouse-bound and find out what functions can be performed remotely by those in these roles. 

 

Decide what rules and company policies should be followed

 

It is critical for employers to clarify which rules, regulations, and policies of the company still apply to work from home and what is new for those that work from home. Because these employees will want to know exactly what is expected of them in this regard. Usually, all standard company policies and resources such as code of ethics, attendance policy, professional code of conduct, sick leave, and the confidential agreement still apply. 

 

Establishing metrics to measure the success of your remote model policy

 

Metrics and goals should always be a part of day to day work no matter where your employee has their ‘office’.  So, I won’t get into that here because I also feel that there is a level of maturity and responsibility that goes with work from home.  It goes towards the concept of Results Oriented Work Environment; ROWE, that was introduced a few years ago.

 

Items to Consider in Updating Policies:

 

Technology:  Employees need to make sure they have the right technology to complete their tasks.  If there is a work from home budget allowance, specify what kind of technology they should have.  Often, cheap comes with poor security so you should allow for software, subscriptions and hardware in that budget that have security as a priority instead of free software that leaves your data vulnerable.  Also, make sure that they have their own secure, Wi-Fi connection, using a free or mobile hotspot might not give the security or speed your employee needs.  This is particularly important for REMOTE workers since they are mobile, their internet connection may change from day to day. 

 

Access to work systems.  We have come along way since Citrix Remote Access and I still cringe to think about how S L O W Citrix was.  But happily, with the advent of Dropbox, GDrive and Office 365.  Enterprise solutions allow you to control how your employees access company data.  Again, this is where free can get you in trouble.  An enterprise solution will also allow you to REMOTE WIPE a device if (or should I say when) your employee misplaces a laptop or phone.  Or, if you need to terminate employment.

 

Tech support.  Pro-actively offer the assistance of your internal tech support to ensure that the technology and hardware that your employee is using is fast, effective and secure.  This is not the time for self-help measures.

 

Client confidentiality.  While security and connectivity are important, consider that now, your employee may not have a designated workspace at home.  Important documents maybe be available for anyone to read if their workspace is, let us say, the kitchen table.  BE CLEAR that all documents should be securely held where third parties cannot view or access.  Or, that no printing is allowed or encouraged.  After all, haven’t we come so far with paperless offices?

 

 Communication.  Your Policies should also include HOW you want your employees to communicate with clients and internally.  Data retention policies need to be adhered to regardless of medium.  Encourage the use of internal tools like Microsoft Teams, or Google Meet to control the data retention and security.  The use of texts is now a normal day to day work occurrence but your employee’s should be aware that even that should be subject to data policies and act accordingly.  A best practice should be communicated to your employees.  

 

It is important to be clear about how and where you want your employees to work remotely or from home. 

 

The goal here is to discuss security and policy that will help your company stay compliant with IT security and other regulations such as privacy.  And moreso, how education is so important that your employee understand the why behind these policies.

 

Conclusion

 

 

A work from home policy is essentially an agreement that outlines everything needed to allow employees to work from home without causing any disruption to company goals and procedures, and these tips will help employers do just that.  While the above are general guidelines, every company has specific needs.  Talk to us today to help you update your policy!

Work From Home vs Remote Work

Remote Work and Work From Home are not the same...

Work from home is remote work BUT remote work is NOT work from home.  Understanding the difference and implementing compliance and policy will make all the difference in your business.  The current pandemic has forced the hands of many businesses to adopt these, what have been in the past, unorthodox work methods.

 

Many people understand remote work as working from home, and they are not wrong per se. However, remote work has a broader meaning. It is work that doesn’t take place in a traditional office—in other words; a remote job means you won’t be driving to the same physical business or office building Monday through Friday and staying there for the duration of an eight-hour shift. Keep in mind that a non-traditional workplace can be anywhere with high-speed internet access like any co-working space or even a coffee shop. While work from home is a subgroup of remote working environments, there are huge differences between the two options, as you will get to understand in this article.

 

Work from Home 

 

Working from home means that you have a full-time job and flexibilities that allow you to work from home when needed. For some employees, it means being able to balance the demands of others who depend on your help with the demands of paid work. This practice has become more accepted as organizations continue to evolve and understand the ever-changing needs of their employees, especially when it comes to schedules. For instance, an employee may have a medical appointment on a particular day, and it’s more productive for her to work from home if the commute from her home to the doctors is just a short distance away. 

 

However, if you choose to work from home, you must put systems in place to be successful—things like a dedicated home office space, a defined work schedule, and clear boundaries for friends and family. No matter how flexible your schedule is, you need to plan ahead and know when you’re going to work. After these arrangements are established, your home can become an ideal workplace, even while juggling domestic tasks.

 

Remote Work

 

Remote working, on the other hand, is synonymous with a digital nomad, a person who can work from any place in the world, with his/her digital devices and access to a fast internet connection. As a remote worker, you can connect with your employer or teams digitally while seated at Café or sunbathing in a resort halfway across the world. Also, a remote worker may never have to meet their employers physically, due to their variable location and most likely won’t be required to attend company events or training in person. However, a remote worker must always be reachable and available for online meetings in case vital information is needed to be passed or for necessary discussions. 

 

Of course, remote working also means that you don’t have a set office time, and your schedule and hours remain yours to develop, and you can move from remote workplace to remote workplace as you see fit. Organizations often employ the services of remote workers, who already have good working experience, for smaller projects since little to no training is required. 

 

While work-from-home opportunities entail commuting from your bedroom to your office—pants optional and pajamas welcome—working remotely outside the home has more ‘x’ factors built in.  Working from home means that your environment is static.  Same internet, same desk, same space to keep your laptop. Working remotely involves traveling from your home to wherever you choose to work and being in a public or semi-public environment.  This can pose many risks since internet connection can be compromised, human error increases exponentially to leave your technology unsecure or even lost!

 

This being said, it is extremely important that while the trend may be work from home that can blur to remote work, you, as a business, need to ensure that you have the right technology, practices, protocols and security in place to ensure that your employee’s choice of venue does NOT leave your company vulnerable.

 

H1B Transfer: Layoffs and Getting a New Employer

H1B layoffs greatly disrupt the plans of foreign nationals who work in the U.S. with an H1B visa. In the past, there was no grace period for H-1B workers to find new employment or even to sell or otherwise dispose of personal property. However, with new regulations that took effect on January 17, 2017, foreigners who found themselves in this situation were given a 60 day grace period after their employment is terminated.

How to Go About A H1B Transfer

In an even of H1B layoff, here are some steps to take:

  • Relax: Try as much as possible, not to panic. After all, you still have a valid visa, and your stay is still legal. Although you are out of a job, your stay cannot be termed “unlawful presence.” This is because the date on your I-94 document rules the question of “unlawful presence” for purposes of the three and 10-year bars. So since the date on your I-94 document has not lapsed, then you are not accruing unlawful presence.
  • Hunt for A Job: This is key. Your job search must start as soon as theH1B layoff occurs. Make job hunting a full-time job. It is important that you invest time and energy into getting a job during this period of time.
  • Stay Legal: Try as much as you can to maintain legal status. If your H1B was revoked by your former employer as at the time of your H1B layoff, then it is imperative that you file for a B-1/B-2 change in status as soon as you can. You will need financial evidence of your ability to stay in the country. You will need an itinerary that outlines your intent to leave the country at the end of the new status. In the event that your H1B status was not revoked as at the time of the H1B layoff, try to find a new employer then file a change of employer petition. However, if finding a new employer and getting a change of employer petition filed within thirty (30) days becomes impossible, then it is advisable that you apply for a change of status to B-1/B-2 visitor status.

Finding New Employment

H-1B workers are sometimes allowed to work with a new employer without waiting for their H‑1B petition to be approved. However, they must meet the following requirements:

  • Legal admission to the United States
  • Previous ownership of H-1B status and no illegal work since their last lawful admission to the country.
  • The filing of a non-frivolous H-1B petition by the new employer

Conclusion

H1B transfers can be daunting for foreign workers. Most of these challenges stem from not being able to know enough about the process. Hopefully, with the directions in this article, you should be able to navigate the situation.

Force Majeure Clauses

Bet you never read one until now…

               Force majeure clause.  It’s one of those boilerplate paragraphs that no one reads until, you know… now.  It’s one of the first things I was asked, as an attorney, about the pandemic and contractual obligations on a contract.

               A force majeure clause (“force majeure” is French for “superior force”) it is a contractual provision that excuses performance in the event of extraordinary, unforeseeable, and unavoidable circumstances which prevents one or both parties from meeting obligations defined in a contract. It serves to excuse parties from contractual duties due to forces beyond their control.   Generally, it accounts for natural disasters, social unrest, etc. 

               At the moment, there are arguments on the classification of COVID-19 as a force majeure event; however, this is difficult to define. What is important to note is that this novel virus has changed workplace dynamics globally. Travel bans, curfews, and quarantines have forced millions of employees all over the world to work remotely.

Force Majeure and COVID-19

               In the wake of COVID-19 many companies’ struggle to fulfill their contractual obligations because of supply chain management issues, lockdowns, the need to downsize workforces, and the embargo on travel or the movement of goods across the interstate or international borders. In extreme and unexpected circumstances like these, contractual force majeure clauses might be used to justify voiding contractual obligations, especially when such scenarios are overlooked in the drafting and negotiation process.

               Amidst the coronavirus pandemic, many employers are now faced with major disruptions to their business operations. Boardrooms are now forced to make difficult decisions that affect their employees: hiring, layoffs, furloughs, and compensation.

               Employers who do not have remote work models are currently being forced to create them. These flexible working policies, which include the use of technology, enable their employees to work from home efficiently. Health concerns in the face of the pandemic make this imperative.

               Several of the tough decisions taken by business management will implicate written employment contracts and collective bargaining agreements that contain “force majeure” clauses.

Force Majeure and Remote Work

               Lots of employee contracts do not make provisions for remote work. Yet this is a compulsory outcome in the wake of the coronavirus. What’s more interesting is the definition of what a force majeure event is at the moment.

               A lot of force majeure clauses are not expressly clear on terms like “pandemics,” “epidemics,” or “quarantines” as events that might trigger said clause. Yet in some quarters, a natural disaster may qualify as an “act of God” that is beyond the control of the party in question. The question then remains if COVID-19 can be defined as an “act of God.”  Interpreting the terms of the force majeure clause in this context is tricky and will have a lot of grey areas. For instance, justifying loss or using reasonable efforts to continue to execute the terms of a contract may include allowing employees to work from home or the facility to provide services remotely. In the event that the contract can be performed remotely, this option may prevent the force majeure clause from being activated

Conclusion

               A little foresight can help you through some tough scenarios.  Boilerplate clauses are not there for the sake of beefing up a contract.  While many do have standard language, they are just as important, if not more than any other term of a contract.  Make sure you review them properly. 

Contracts and the Art of Tea Leaves

Take a seat, show me your contract and I’ll tell you about yourself.  I may even be able to tell you your future.  Legal psychic?  Maybe or maybe I have read enough contracts in my career that there are indicators, tells, and if I couldn’t, then I wouldn’t be a great advisor.

 

I really do enjoy reading and drafting contracts.  To me, a contract is a story unfolding and every contract has a spirit.  Most recently, I created an agreement for a client and as I was drafting the contract, I was visited by the ghost of contracts past.  All the good and bad that have happened with every contract before this one shaped this contract.  (I’m looking at you evergreen clause that traps businesses in services they don’t want…)

 

At this point, I’ve lost some with this narrative, but those of you that stayed can appreciate that I have a personality just like my clients do.  It is my job, to reflect that personality and the culture of the company in every contract I touch.

 

Here are a few things I’ll look at when drafting a contract:

  1. First, is it the right contract? I know this goes without saying but some lawyers either don’t understand the deal or try to make a square fit in a round peg.  For instance, you don’t want a license agreement when you are really entering into a reseller agreement.  Also, sometimes you may have two different transactions with the same parties.  IT’S OK to have two separate contracts.  Why bind yourself to both when maybe only one transaction will actually be successful?
  2. How one sided is the contract? Is it all about the take and no give?  Fun fact, bigger companies tend to have more fair contracts than smaller companies.  I can read a long contract and have two comments and then read a 10 page contract that I completely mock up.  Why?  Big companies understand that it takes a lot of time to negotiate every point.  They want a mutually beneficial relationship and don’t look to make money on damages.
  3. Which brings us to the next point, liquidated damages. BE CAREFUL here.  They are often inflated and have no direct corollary to actual damages, and more than likely will not hold up in court.
  4. Boilerplate paragraphs aka ‘standard paragraphs’ which may, in title, be standard in contracts but their terms are anything but. Jurisdiction, venue, attorney’s fees, even assignment clauses.  A business dispute will absolutely turn on these so called standard paragraphs and I have gotten to many settlements because the standard paragraph overcomplicated the dispute.  (I will delve into more of these in later posts because jurisdiction is a fun one.)
  5. And of course, the substance of the deal to make sure it is reflected correctly and the right warranties, limitation of liabilities, IP rights, etc are memorialized. Also, that the contract has the right cash flow for the business holder because that is imperative for operations.

 

Every contract embodies the spirit of who you are as a company.  It is about leverage and negotiating power.  If you make your contract fair and concentrate on the art of the deal, you set the stage for a healthy business relationship; hopefully a long term one.

 

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